Google change could stir more advertiser angst

Google's love-hate relationship with the advertisers that pay its bills could hit another rocky patch following its latest AdWords policy change.

Google announced Thursday night that starting next month it would begin allowing certain companies to purchase advertisements that use trademarks--even ones they don't own--in the text of their ads on Google search results. Previously, Google hadn't allowed anyone but the trademark owner to use a trademark in the text of an ad, but the search giant reversed course, saying "we believe that this change will help both our users and advertisers by reducing the number of overly generic ads that appear across our networks in the U.S."

But the move could anger companies who are already sensitive about the use of their trademarks as keyword triggers in searches, the subject of two lawsuits pending against Google. According to an industry group called the Alliance Against Bait and Click, which includes companies such as 1-800 Contacts and Starwood Hotels, "this (policy change) further exposes the self-interest guiding Google's advertising policies, which permits dishonest marketers to mislead consumers," it said in a statement.

In some ways, the decision makes an awful lot of sense. Some third-party resellers, for example, were not allowed to use the trademark for goods they were authorized to sell in their Google ads if the trademark holder objected.

Google compared the policy shift to turning its ads into the online equivalent of a grocery store ad circular in a Sunday newspaper, where no one raises a trademark eyebrow if Safeway advertises a sale on 12-packs of Coca-Cola. Google said it would limit the use of trademarks in text ads to three types of companies: resellers, component sellers (buy memory for Hewlett-Packard laptops here!), and information providers.

That brings Google's policies in line with those of Yahoo, which allows trademarks to be used in text ads with similar restrictions. In the past, advertisers have been more willing to sue Google over trademark disputes because the search giant said it wouldn't allow trademarks in the text of ads, but such trademarks would appear anyway from time to time on certain ads, said Dave Kelly, a trademark lawyer with Finnegan.

"This policy is better than what they were doing before," Kelly said. "This means there is an editorial policy and the number of misleading ads should be smaller than under their policy before."

Still some groups, such as the Alliance Against Bait and Click, believe it's possible that the move could grant deceptive advertisers looking to trick searchers onto click farms or e-mail harvesting sites an additional weapon to deploy.

For example, a company could theoretically sell just a single iPhone case on its Web site, advertise under searches for "iPhone cases," and redirect ad clicks to sites that mostly sell competitive smartphones or consumer electronics gadgets. Or, it could force a visitor to provide his or her e-mail for more information before revealing that flashy iPhone case.

More money
What's more likely, however, is that companies interested in preserving their brands could be forced to pay more in Google's ad auction process to make sure their legitimate ads appear on those searches.

Winning Google's keyword auction process involves a combination of the maximum amount an advertiser is willing to pay per click as well as an ad quality score. Without the ability to use a trademark in the text of their ads, third-party retailers were forced to write generic ads that likely didn't see as high a click-through rate as ads with the trademark, hurting their quality score.

But if the playing field is leveled on the quality score side of the equation, then the maximum bid has to go up. AdAge reported that branded advertisers now feel they'll have to increase the maximum amount they are willing to pay per click in order to ensure ads with their trademark appear above ads from companies that don't own that trademark.

Financial analysts who follow Google agree. "Advertisers will likely bid more if the ad can have product names and brands that will help drive CTR (click-through rate) conversions," said Ben Schachter of Broadpoint AmTech in a research note Friday. Combined with Google's announcement last week that advertisers in many parts of the world can now bid on keywords that involve trademarks, Schachter said "these two changes will be positive revenue drivers when allowed and into 3Q and beyond, however, we believe trademark holders will undoubtedly, and loudly, raise legal challenges."

Kelly, who has followed issues with Google and trademarks very closely for years, isn't so sure.

"Although the updated policy may not affect those trademark owners who want to sue Google simply because they object to the act of Google selling their trademarks as keywords, it should reduce the amount of litigation over the appearance of Google's keyword-triggered sponsored ads," he said. That's because Google is now responsible for reviewing the content of the ads to make sure trademarks are being used properly.

In what is likely not a coincidence, the decision comes following a quarter in which Google's cost-per-click numbers (the average cost that advertisers are willing to pay for a click) fell for the second-straight quarter while overall click-through rates remained flat. Issues around Google's trademark policies on search keywords have also heated up in recent weeks, with an appeals court's decision to reinstate the Rescuecom case and a new lawsuit filed this week over Google's practice of allowing anyone to bid on search keywords containing trademarks.

Some of Google's partners will hate this decision, and some, such as retailers, will like it. Either way, Google should benefit from the sale of more relevant--and more expensive--advertising.

[kenstech_com]

These advertisers are short sighted. First of all, it's not necessarily best to be in the number 1 position on google adwords for your search term (your copyright name for example). Often number 3,4, and 5 will convert better because of click happy surfers who have no intention of buying anything (though you have to test for your particular market). Second, people who are using the copyrighted name as a bidding keyword aren't taking money from the name holder. In reality they are giving that company more exposure and more sales. In fact I expect this tempest will die out in a few years as that fact becomes obvious.

Ken
http://www.kenstech.com

[monkeyfun14]

Uhm why not?

Why should a site like kohls come up in the advertising area before nike?

If I were to search Nike in the search box.

[Pete Bardo]

Hey, Ken, it's a trademarked name. You can't copyright a name. As for the other whiners about this new policy, it's not really Google's responsibility to police the use of trademarks in AdWords. Just as TV networks aren't responsible for trademark infringements by their advertisers. Not all uses of someone else's trademark constitute infringement. That's what make it a matter for the courts. Why would anyone expect Google to police and/or prevent the legal use of trademarks, anyway?

[eltoro2827]

if only they can get their services to work without outages.

[_Jae_]

At first I was worried, until I realized it was talking about advertisements, not search results. Then I wondered that this wasn't the policy from the start. For *advertisements*, I'd rather see Kohl's sales than Nike's website in the ads. I want Nike's website in the search results.

[clynx]

Another reason I like and use Google. When is the US going to do this with patent owners. USE IT OR LOOSE IT.

[limefan913]

As an AdSense publisher, I'm thrilled about this. Revenue dropped pretty harshly (read cut to 1/4th) after they restricted trademarks. I'm hoping bidding will become more competitive for keywords, leading me to make some cashola. :)

Hurrah money.

[flickrz]

Google should tell those advertisers, do whatever you can. We are the search. We don't care what you think as long as user experience is not being affected and we are gaining market share.

[AudrinaLowe]

Google needs to be careful here in that it's not the only gig in town anymore. Advertisers have the choice of a growing presence for online advertising in yahoo and msn along with a host of second tier operators. Yes Google is the biggest, but if it carries on upsetting those that pay the bills, it's going to loose out in the long run. If nothing else its actions will encourage it's loyal users to try other options....be careful!

<a href="http://www.discountdigitalcameraheaven.com/Discount-Nikon-D5000-Digital-Camera.php">D5000</a>

[Renegade Knight]

You are mixing loyal users and advertiers. Advertisers flock to where the users are. If Google keeps the users happy with search results that work for them. Advertisers will follow.

There are more options. That will keep everone doing a better job for us all.

[ewhisper]

First off, it seems every news system got the first part of their article wrong.

You could not use a trademarked keyword in an ad copy only if the trademarked holder had asked Google to not allow it. The default is that it could be used (in the US, Canada, UK, and Ireland - this list was just expanded).

In many ways this makes sense. If you open a Best Buy flyer, do you want to see generic products or the ads for Apple iPods and Dell computers?

There are so many pending lawsuits, that this might change yet again.

[Bob Kakis]

This is ridiculous! I had spent $5,000 in legal fees to get Google to stop allowing my trademark to be used as an Ad Word. Now, it was all for nothing.

I wish Google would die. Better yet, I am going to start calling my company Google - See how they like it!

So what about brands like Virgin - They have a full spectrum of wares and services - How will Google police that? Trademarks can encompass many, many products and services, not just pop or a shoe!

[paintshield]

Google are playing a very dangerous game here given that trademark infringement is a CRIMINAL offence in the UK and they would potentially be facilitating a criminal act (not just a civil matter) I cant wait to see who might be first to cotton on to that one and haul their backsides into criminal court!