FTC Updates Search Engine Ad Disclosure Guidelines After “Decline In Compliance”

In 2002, the US Federal Trade Commission issued landmark guidelines to search engines, to ensure they were make a clear distinction between their paid and unpaid listings. Now, the FTC has updated those guidelines, saying it has seen a “decline in compliance” since they were first issued.

The FTC posted the news today on its site, along with letters that were sent to over 20 general-purpose and specialty search engines. The move comes just over a year since I wrote to the FTC noting that there were several compliance issues I was seeing with search engines and its guidelines.

In particular, the letters have gone out to AOL, Ask, Bing, Blekko, Duck Duck Go, Google and Yahoo as general purpose search engines and 17 “of the most heavily trafficked” shopping, travel and local search engines, the FTC said. The FTC, when I asked, said it is not releasing what those 17 other services are, nor what sources were used to determine them. They likely include services like Kayak, Yelp and Nextag.

Every search engine got the same letter as the “sample” letter that’s�shown�on the FTC site, which starts out:

After the 2002 Search�Engine Letter was issued, search engines embraced the letter�s guidance and distinguished any�paid search results or other advertising on their websites. Since then, however, we have �observed a decline in compliance with the letter�s guidance.New Guidance On Visual Cues, Label & More

The original guidelines were designed to ensure consumers could know what was an ad or sponsored listing from “organic” or “free” or “editorial” or “natural” results on search engines. The updated guidelines still say the original�principle�of making this distinction applies but gives fresh advice on dealing with new issues that have come up since 2002.�From the FTC press release:

The updated guidance emphasizes the need for visual cues, labels, or other techniques to effectively distinguish advertisements, in order to avoid misleading consumers, and it makes recommendations for ensuring that disclosures commonly used to identify advertising are noticeable and understandable to consumers.

The letter notes that over time, natural results have become harder to distinguish from ads, citing an SEO Book survey from last year that found, in general, about half the time people didn’t recognize when ads were present on search results pages.

Better Background Shading And/Or Borders For Ads

From the letter, concern background shading around ads may be “less visible” or “luminous” and effectively undetectable by consumers, when the purpose was designed expressly to distinguish ads with such shading. As a result, the FTC has suggested:

More prominent shading that works across monitor and device types, orA prominent border, orBothText Labels Above Or To Left Of Ads

The letter generally says that in addition to visual cues like borders or backgrounds, search engines should have text labels that use�unambiguous language that indicates what’s an ad, is large enough to be noticed and is located in an area where consumers will see it.

Search engines commonly do have such disclosure, but clearly, the FTC thinks these can be improved. In particular, it advises that:

Text labels “in front” [the FTC tells me this means "above" the ads] or in the upper-left hand cornerThe same terminology throughout “ads” rather than “ads” in one place and maybe some other word elsewhereSiri, Is That An Ad? Voice Disclosure Required

Very interesting is a requirement that if a search engine delivers results via a voice interface, the FTC wants that voice to tell you if it’s reading an ad:

Further, if a voice interface is used to deliver search results, a search engine should make an�audio disclosure that is of an adequate volume and cadence for ordinary listeners to hear and comprehend itFacebook Graph Search, This Means You, Too

The original guidelines were applicable to any search engine, not just the major search engines that got letters back in 2002. The same is true for the updated guidelines. If it walks, talks, act and feels like a search engine, then these guidelines are applicable to the service, regardless if the FTC has been in touch directly.

That also means that if search results come out of social network, those also have to follow the rules. Facebook Graph Search is an example of this, which provides “natural” listings based on what people are liking on Facebook. The FTC warns that if such listings also include ads, those must be distinguished:

For example, if a social network�were to stream recommended restaurants based on what a particular consumer�s social contacts�have enjoyed, it should clearly distinguish as advertising any information feeds included or�prioritized based in whole or in part on payments from a third partyThe Limbo Of Paid Inclusion Disclosure

In my letter to the FTC last year, I pointed out that its paid inclusion guidelines seemed to be either ignored or open to�reinterpretation�by search engines. Paid inclusion is where companies pay to be included in a search engine, but where payment doesn’t help them rank better — as is the case with paid placement.

Those original guidelines remain in force. However, it’s notable that the FTC didn’t raise any concerns about how disclosure could be improved specifically.�One caveat: the second paragraph of the letter says this

The principles underlying the�2002 Search Engine letter remain the same: consumers ordinarily expect that natural search�results are included and ranked based on relevance to a search query, not based on payment from�a third party.�Including or ranking a search result in whole or in part based on payment is a form of advertising. To avoid the potential for deception, consumers should be able to easily�distinguish a natural search result from advertising that a search engine delivers.

I’ve bolded the key parts. In 2002, the FTC distinguished between two types of paid search advertising:

Paid Placement: listings had to be delineated and�segregated�from non paid listings, along with nearby disclosurePaid Inclusion: listings could be mixed with unpaid listings and disclosure had to be done in way on the search page, not necessarily next to the listings

If paid placement and paid inclusion are now considered one-and-the-same, the updated guidelines could be interpreted as requiring specialty search engines like Google Shopping, Nextag and Bing Shopping to place an “ad” disclosure next to many or all of their listings. As for the background and border requirement, they might have to put a background or border around the entire search results.

The Bottom Line: Search Engines Need To Clearly Disclose

As it turns out, however, this is not likely to be the case. In talking with Mary Engle, associate director for advertising practices with the FTC, she stressed that none of the FTC’s guidance is meant to be absolutely specific. The guidance is offered as general recommendations, but it’s down to each search engine to ensure however it does so, that it is ensuring that consumers clearly understand the role payment plays in its results.

So with paid inclusion, it’s not necessarily the case that each and every listing has to have the word “ad” next to it, if consumers can instead reasonably understand that all the results showing are there because of payment.

“Can they [the consumer] tell this is all paid inclusion. If the answer is ‘no,’ that’s a problem and they [the search engine] needs to fix it,” Engle said. “Putting a little tiny word ‘ad’ on the page isn’t going to be sufficient.”

Ultimately, the search engine has to figure out what it believes is right. If the FTC disagrees, then it has to take action and prove things aren’t as good as they should be:

“The bottom line, and certainly if we were very going to bring any type of enforcement action, it would be our burden to say if that’s deceptive,” Engle said.

Disclosure Is In The Eye Of The Beholder?

I asked�Engle what prompted today’s move, if it was an official response to my letter of last year. She told me that the FTC had received that letter, plus a letter that came four months later from the SEMPO group�and another one from a travel industry group (which group, she didn’t say). That, along with the FTC’s own observations, she said, made the agency feel a review was in order.

She also said that today’s review was “your answer, in a sense,” to the questions I raised in my letter.

That letter was prompted because, as an expert in the search space, I was finding it difficult to tell myself if the search engines were complying with the FTC’s disclosure guidelines. The lack of better specifics or guidance on paid inclusion makes me feel things aren’t that much better with this refresh. On the flip side, I understand the FTC’s desire that search engines make a good faith effort to disclose, rather than getting lost in specifics that aren’t always applicable.

With that, it will be interesting to see if the letters going out and new guidelines help the search engines clean up their acts, in areas where they are weak. We’ll be revisiting that in the near future, using our own judgement to see if disclosures seem to be done in the spirit of the guidelines. Stay tuned.