January 14, 2003 11:54 AM PST

Search engines get 'Gatored'

The Gator online advertising network is testing a new paid search product that lets rivals poach on each other's territory in one of the Net's hottest new marketing venues.

Search Scout, launched in December, triggers a pop-under window when Gator members search on a site such as Google and Yahoo. The window lists search results tied to keywords purchased through competing search services.

A small "info" tag on the results says they originate from "top search engines." During the test phase, Gator is using results from paid search kingpin Overture Services, Terra Lycos and FindWhat.com.

Like previous products from Gator, Search Scout allows advertisers to reach members of the Gator network when they are visiting competitors' sites--a feature that has already drawn lawsuits in the context of banner and pop-up advertising.

"This is a hot topic because there are a lot of people opposed to pop-ups and pop-unders," said Craig A. Pisaris-Henderson, CEO of FindWhat. "This could be perceived as taking away revenue from the requested site. On the other hand, advertisers are loving and demanding that you get this traffic."

Gator did not return phone calls or e-mail requesting comment for this story.

Redwood City, Calif.-based Gator delivers pop-up and pop-under ads to millions of people who presumably agree to receive ads in exchange for use of its online wallet software, which keeps track of passwords and shopping data for multiple sites. Gator says it has about 25 million active users of the software, with about 500 advertisers targeting messages to those people, often at times when they're visiting rival sites.

Gator's practices and those of its advertisers have drawn much controversy in Internet publishing and e-commerce circles, sparking numerous lawsuits, including those from shipping company United Parcel Service, news agency The New York Times and direct marketer L.L. Bean. Gator's latest tactic takes the battlefront to search engine marketing--one of the hottest, most lucrative businesses on the Web today.

Search engines such as Overture and Google are becoming increasingly flush with attention--and cash--from advertisers aiming to reach people hunting for specific products and services at the search engine. Overture and Google, the two top companies in the marketplace, as well as a slew of smaller players, get paid when people click on an advertiser's listing in related search results; and the dollars generated have turned many companies, as well as partners like Yahoo, into profitable concerns. As a result, competition for high-profile partners and "clicks" has become increasingly cutthroat. Last year, for example, Google won contracts to provide commercial search results to America Online in the United States and EarthLink, taking away from Overture's business.

Danny Sullivan, editor of industry newsletter SearchEngineWatch.com, pointed out several potential pitfalls of Gator's Search Scout, including alienating Overture's established advertisers. He said that because advertisers of Overture and other services expect to reach people contextually through search--for instance, when they are in a particular mindset--they could be disappointed to realize that they are delivering pop-under ads that people often open well after the fact.

"If someone did a search on Google, they likely don't expect to get a bunch of results coming from Overture," Sullivan said. "From the advertiser's point of view, there may be concern that these kinds of ads will not perform as well for you. From users' standpoint, they are probably not excited about getting a pop-under window because they're often not welcome."

What's more, rivals may not take kindly to the ads, Sullivan added.

"The biggest issue is probably going to be the legal one," he said. "You would imagine that Google would not be too happy about this, and they might jump into a lawsuit."

Though Google declined to comment, the company has publicly denounced the use of pop-up windows. It also offers a feature in its search toolbar that lets people block pop-ups. Yahoo also declined to comment for this story.

For its part, Overture acknowledged that it is testing a relationship with Gator on its search-related pop-unders, but the company said it does not comment on tests. It did say that it's always looking at new distribution partners.

Pisaris-Henderson said that FindWhat, a publicly traded company, has a limited test running with Gator on its pop-unders, but he said that Overture is providing the bulk of the results. He noted that the company is mindful of infringing on the intellectual-property rights of Web sites.

Tom Wilde, global manager of search services for Terra Lycos, said that the company sponsored the Gator search results much the way it might purchase a banner ad, except that query listings are more targeted and effective.

"At a high level there's a new trend in contextual marketing, which is basically providing more relevancy to a user and increasing the value of the interaction," Wilde said.

"In the old days on the Net, the industry would serve up a banner that may or may not be targeted and hope it would bring a branding effect," he said. "Now the Net has become a more direct marketing channel; keywords have been the most robust targeting mechanism on the Net."

Getting "Gatored"
Gator came into the spotlight mid-2001 for its practice of selling pop-up ads that are delivered to customers visiting rival Web sites, what was then known as getting "Gatored." The company also sold banner ads that obscured those sold by online publishers. While such tactics grew popular with many Fortune 100 advertisers, some Web sites moved quickly to restrict the practice.

The Interactive Advertising Bureau, for one, criticized the company for selling banner ads that obscure those sold by online publishers, saying they were destructive to the ailing market. Gator quickly sued the IAB, alleging "malicious disparagement," but the two parties eventually found common ground when Gator agreed to stop selling banner overlays.

In June 2002, a group of publishers including The New York Times and Dow Jones sued Gator, alleging that its ads violate their copyrights and steal revenue. A month later, a federal judge in Virginia ordered Gator to temporarily stop displaying pop-up advertising on Web publishers' pages without their permission.

Nevertheless, the company has said it has reached profitability through its ad network. Gator said in November that revenue grew 32 percent from the second to third quarter of 2002.

Advertising industry experts say that Gator's tactics, along with those of other ad-supported software companies such as WhenU.com, can be taboo because they raise several unresolved legal issues that could tarnish an advertiser's image. Layers of software that direct consumers to new applications and Web pages raise questions about who owns the desktop--the customer or the publisher. Backlash from either side could land an advertiser into a public-relations nightmare, ad executives fear, at least until the issues are ironed out.

On the one side, sites like Washingtonpost.com say that Gator and others are trading on their publishing backs, taking revenue away from a site they've built. On the other side, software providers and even civil libertarians say that people have the right to run any application they choose on the desktop and if that means that they see targeted ads atop a requested Web page, then so be it.

Other ad executives say that Gator's new service plays into the explosion of paid search.

"Search is a highly efficient targeting vehicle--it works for advertisers, especially those who are trying to sell products online," said Adam Gerber, media director for ad agency the DigitalEdge. "So it doesn't surprise me that people are trying to develop it more than it already exists."

 

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