Who Says Users Don't Want Competitors' Ads in Search Results?
from the complex-markets dept
A couple of years back we noted that the Utah legislature was considering legislation that would have banned companies from buying search ads related to their competitors' brand names. EFF and others said the law was likely unconstitutional, but the legislature passed it anyway. The legislation was such a disaster that last year the Utah legislature repealed it. Incredibly, despite all the negative publicity the 2007 bill received, and despite assurances from legislators that they'd learned their lesson, the backers of the legislation haven't given up. This year they introduced yet another bill restricting keyword advertising that passed the Utah House but died in the Utah Senate a few days ago. Given the tenacity of the bill's sponsors—1-800-Contacts is reportedly the leading backer of the proposal—the proposal may very well come back in future years.
Proposals to regulate keyword advertising have come in for a lot of criticism, but one person who's willing to defend the Utah proposal is Harvard's Ben Edelman. He argues that the Utah bill is necessary to avoid consumer confusion. He suggests that when consumers search for a trademarked term (say, "Hertz"), they're expecting to see search results related to that company, not to the company's competitors. He argues that if a consumer really wanted results from a variety of different companies, she would have chosen a generic term like "car rental" rather than a specific brand name. But James Grimmelmann points out a couple of problems with this reasoning. First, it shows an awfully low opinion of the intelligence of the average consumer. More importantly, there are circumstances where a consumer wants to see ads for a firm's competitors. For example, a consumer may be considering buying a particular company's products, but might want to check out that company's competitors before making her decision. Searching for that company's name is a quick and easy way to find out which other companies consider themselves to be in the same market. In contrast, the customer may not know which generic terms precisely describe that company's market. In Grimmelmann's example, it might be easier to ask for all companies in the same market as "Godiva" or "Hershey's", rather than having to describe precisely which segment of the chocolate market we're interested in.