Are Google’s search results deceptive, or can consumers identify ads on their own?

When consumers search the web, it’s getting harder from them to tell the regular “organic” search results from the paid advertisements that appear nearby. Critics suggest people are being bamboozled, and that regulators should force Google and others to do more to identify what’s an ad and what’s a search result.

Is that a fair conclusion? While no one likes deception, any move to regulate must also take account of the increasing sophistication of online consumers, and the changing nature of search results and the web itself. Meanwhile, it’s unclear how much power the FTC — the agency in charge of stopping deceptive advertising — has over search results in the first place.

Here’s a look at the debate and what might happen next.

Fade to white

Once upon a time, it was easy to tell “real” search results from the results that advertisers paid to place on sites like [company]Yahoo[/company] and [company]Google[/company]. As you can see, the ads appeared in colored boxes, often purple or blue ones, that looked very different from the rest of the webpage (arrows added):

Search results

The graphic appears in a recent paper by Ben Edelman, a Harvard researcher whose work formed the basis of a Wall Street Journal article this week that drew attention to ongoing evolution of paid search results.

As the Journal notes, the once-conspicuous labeling of ads has been replaced in recent years by little “ad” icons or discreet outline boxes, which might lead consumers to confuse the paid results and organic results.

Tricycle ads

To get a sense of the long-term evolution of the ads, here’s another graphic from Edelman (who is a consultant for Google competitor [company]Microsoft[/company]) that shows how the background for Google’s paid search results have gone from bright colors to pale ones, and then to white — the same color as the regular results.

Screen Shot 2014-10-15 at 3.17.51 PM

The right side of the chart shows how, until 2003, ads on the side of a Google page had colored backgrounds. The left side shows how the top of the page ads evolved from blue to pale beige, before fading to white in 2014.

The question, however, is if any of this matters.

Consumers tricked?

An executive with Groupon reported in August that when Google changed its ad appearances, the changes produced a spike in paid-ad clicks for the online shopping site. This suggests that the new ad formats were more enticing — or else that consumers were fooled into clicking on ads that they mistook for high ranking search results.

But the Groupon author’s report also contained another important piece of information: consumers, after three months, reverted to clicking on natural results and paid results in the same proportion as they did before Google made the change.

This suggests that consumers either grew fatigued of the new ad format, or that they were no longer fooled. Either way, the outcome suggests an inherent intelligence and adaptability on the part of consumers, who appear capable of discerning ad content from regular content in online forums just as they are able to do with magazines, television or other forms of media.

Indeed, the current fad for so-called “native advertising” and “sponsored stories” — making online ads resemble the content around them — has even been embraced by once staunch opponents of the format, including the New York Times. In this context, are consumers really unable to tell which these results for “Hawaii vacation” are paid, and which are not? (Note this screenshot contains only 2 “real results.”)

google screenshot

Google, meanwhile, has made another argument for regulatory restraint by noting the role of traditional search engines is declining in the first place — a factor that could make the need for agency action less pressing. As Google Chairman Eric Schmidt noted this week, many online shoppers are now starting their search on the retail site [company]Amazon[/company] instead of Google or Bing, and social media sites are often replacing search engines as a place to find information.

Larger trends do not, of course, give free rein to Google or other search engines to practice deception, raising the question of what (if anything), the FTC should do about the appearance of online ads.

What’s deceptive, what’s unfair

The Federal Trade Commission, charged with policing unfair advertising practices, appeared feckless in the Journal report, with noted search expert Danny Sullivan even calling the agency a “toothless tiger.”

Such criticism may stem from the agency’s decision to send letters to search companies, including Google and Yahoo, in July 2013. The letters called out the collapsing distinction in the appearance of search results versus paid ads, and warned that search engines’ failure to distinguish between the two could be an “unfair practice.”

The letters, however, appear to have had no practical effect since, as Edelman’s reports show, paid results are bleeding evermore into the rest of the results.

According to a person familiar with the agency’s thinking, the FTC believes that consumers (for now at least) are still able to discern between the ads and the results. But if the distinction collapses further, the person added, the agency is ready to sue the search engines, most likely under the “deceptive” legal analysis associated with its so-called Section 5 “unfair and deceptive” power.

Meanwhile, the FTC has been sending out apparent warning flares to the online ad industry as a whole, including new rules for social media and “small screen” ads, and conducting ongoing inquires into native advertising practices.

When push comes to shove with the search engines, however, the FTC may have a tough case. Its challenge is reflected in the agency’s long-running antitrust investigation, which ultimately came up dry — in large part because Google made a strong case that its search results are simply a form of expression that is protected by the First Amendment.

The person familiar with the agency, however, said the First Amendment wouldn’t be an issue in any formal challenge to paid search results.

This suggests the final straw for “deceptive” will be when a search engine decides to make its paid ads distinguishable altogether. In the meantime, it will be up to consumers to fend for themselves.