New Media the Political Economy

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    New Media? The Political Economyof Internet Search Engines

    A paper presented to

    The Communication Technology Policy section

    2004 Conference of the International Association of Media &Communications Researchers (IAMCR)

    Porto Alegre, Brazil, July 25-30

    Elizabeth Van Couvering

    London School of Economics and Political Science

    Department of Media & Communications

    Houghton Street

    London WC2A 2AE

    [email protected]

    Key words: Internet, search engines, advertising, spam, mass media, politicaleconomy

    mailto:[email protected]:[email protected]
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    Abstract

    This paper presents a structural analysis of the Internet search engine market. Search engines area core element of the Internet media system, topping the Nielsen NetRatings Top 10 list of

    online properties in every market measured and generating advertising revenues of billions ofdollars each year. Using a search engine is the most popular online activity after reading email. Apolitical economy approach is used to identify the relevant parties in the system, their ownership,their exchanges, and the constraints to which they are subjected. The market is shown to besimilar to other media markets in that it is both highly concentrated and global in scope, andfunded primarily by advertising. However, there are several important differences. First,although traditional media conglomerates operate online, they do not control the most powerfulactors such as Google and Yahoo!. Second, the advertising market is structured differently.Advertising is normally linked to words entered as search terms by users, and this keyword-basedadvertising is syndicated to other search engines, large and small, primarily by Google and

    Yahoo!-owned Overture, increasing their influence. Third, the situation is complicated by newcommercial actors called search engine optimisation companies who operate within a grey market

    often in opposition to search engine companies, to strengthen the rank of their clients in searchengine results. Recent studies within the computer science discipline have shown search engineresults to be systematically biased in favour of commercial sites, popular sites, and US-based sites.With no public service mandate and little regulation, the study raises the question of whether thecurrent system of search provision online serves the public good.

    Introduction

    The political economy of communication focuses critically on what structural issues in mass

    media ownership, labour practices, professional ethics, and so on mean for products of those

    mass media and thus for society more generally. Within the new media field, analysis from apolitical economy perspective has been relatively lacking, with the exception of studies of the

    Internet infrastructure1. So is it the case that these factors no longer matter within the area of

    Internet content? Can we take at face value the idea that the Internet makes it easy for anyone

    with access to basic technology to have a voice in the new Information Society?

    It can be argued that the Internet is not a mass medium in the classical sense; that the thousands,

    or even millions of sites visible on the Web are not the result of an industrial production process,

    and that nor do they represent a common substrate of everyday life, in the way that Silverstone,for example, characterises television:

    Watching television and discussing television and reading about televisiontakes place on an hourly basis: the result of focused or unfocused, consciousor unconscious attention. Television accompanies us as we wake up, as webreakfast, as we have our tea and as we drink in bars. It comforts us when weare alone. It helps us sleepWe take television for granted in a similar way tohow we take everyday life for granted (Silverstone, 1994: 3).

    1For example, the distribution of access and more recently skills and competences, also known as the digital divide has been one

    area that has received considerable attention (see e.g., Lazarus & Mora, 2000; Mansell, 2001; Norris, 2001)

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    It can even be argued that the Internet does not conform to a basic definition of mass

    communication, such as that offered by Thompson, who says that mass communication is: the

    institutionalized production and generalized diffusion of symbolic goods via the transmission and

    storage of information/ communication. (Thompson, 1990: 219). While information and

    communication are certainly transmitted and stored, can we really take seriously the argument

    that my friend Joes blog about his daily life represents either institutionalized production or

    generalised diffusion? Perhaps for this reason, research that approaches the study of Internet

    content from a political economy of communications perspective is rare.

    In this paper I suggest that in accepting the argument that some online content is small-scale

    craft production, scholars are neglecting the study of an important new medium of mass

    communication as an industry. It would be similarly easy to argue that desktop printing makes

    everyone a publisher, and thus that there is no need to focus on the economics of the newspaperindustry; or that as video editing and handheld cameras come within the reach of many,

    Hollywood and television networks need receive no further attention. Such a line of argument

    would be rightly dismissed in those contexts, and a discussion of the Internet along those terms

    deserves a similar dismissal.

    In considering the Internet as a medium of mass communication, there is at least one clear set of

    large industrial players akin to the television networks or the Hollywood studios, and those are

    the search engines. Four large players dominate the search engine market: AOL, Yahoo!,

    Google, and Microsoft/ MSN. Not only do these companies dominate the search-engine market,

    it can be argued that they dominate the Internet advertising market as a whole. In 2003, the

    Internet Advertising Bureau reported that the top 10 ad-selling companies accounted for 70% of

    US online advertising revenue of $7.3 billion (PricewaterhouseCoopers, 2004). The big four

    alone contributed $3.4 billion (see Table 1) although as this is total revenue United States revenue

    will be somewhat less2. If 75% of their advertising revenue is earned in the United States, a

    conservative estimate, then between them these four earn 32% ofalladvertising dollars spent

    online, not just those spent on search engines or portals3.

    It can even be suggested that the big four search engines dominate Internet content around the

    world. They come in the top 10 Nielsen/ /NetRatings listings in all of the markets that Nielsen

    surveys, apart from Japan (lacking Google) and Hong Kong (lacking Google and AOL). The

    figure below, derived from the Nielsen/ / Netratings data for the month of March 2004, shows

    the enormous reach of these sites globally:

    2Advertising revenues are not broken out by country in the financial reports. However, Google received 26% of its revenue overall

    from international sources and Yahoo! 17%. MSN international revenues are not reported separately from Microsoft overall, nor are

    AOLs international revenues.3Although long-term figures are not available, in the week of May 3 to May 9, 2004, Portals and search engines were responsible for

    39% of all pages with advertisement viewed by the online public (Nielsen/ /NetRatings, 2004).

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    0%

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    Microsoft Google Yahoo! Time Warner

    Figure 1: The big four search engines, global reach %, March 2004

    Data source: Home/ Work Panels from Nielsen// NetRatings (*Home panel only, **MSN only,

    not all Microsoft)

    It is easy to see from the graph above how this industry, similarly to the Hollywood studios and

    the television networks, is concentrated in the hands of a few large players. As further sections

    of this paper will show, it has other similarities, for example a heavy reliance on advertising

    revenue and a preponderance of American actors.

    This paper presents a preliminary investigation of the search engine market, in terms of its

    ownership, its revenues, its structure, the products it sells, its geographic spread, and the policies

    and regulations which govern it. A related theme is a critical evaluation of the ways in which the

    search engine market distinguishes itself from previous mass media. The paper is structured as

    follows. First, it considers the general economic structure of the search engine market in terms

    of business models and sources of revenue; second, it describes and compares the advertising

    products sold to traditional media products; third, it discusses the phenomena of search engine

    optimisation and search engine spamming; and fourth, it considers the infrastructure currently in

    place to regulate search engine content.

    The Public Sphere and the Public Good

    In a 1997 article, Roland Bettig talks of an enclosure of the electronic commons. He

    explicitly links historical processes, which deprived the common worker of the land that they

    cultivated and changed them from peasants to wage labourers, to current processes of

    development of the Internet. He cites three consistent structural tendencies which shape the

    development of communication technologies. These are first, marketplace concentration;

    second, expanding intellectual property rights; and third, the growing commercialisation of

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    information and cultural output, including the introduction and increase of online advertising

    (Bettig, 1997: 139-140). These, he argues, are combining to consistently undermine the

    liberatory potential that may be inherent in the technology (Bettig, 1997: 54).

    By taking this line of argument, Bettig is working within the tradition of political economy inrejecting the notion that the market alone should be the arbiter of the structure of the media

    industry, as might be appropriate for other types of products. Instead, he is operating with an

    assumption that the mass media are sites of public interest and public discussion, or, in short, of

    thepublic spherewhich Habermas (1992) details as an essential element of a rational and

    democratic government.4

    Many other less radical treatments have shown how the Internet is affecting the processes that

    govern normal news media increasing the need for speed, altering the balance of funding,

    changing the way journalists report news, adding alternative viewpoints (refs). Again, the

    Internet is seen within the paradigm of the media as public sphere, rather than the media as

    market. The political economy perspective, however, is that the medias effectiveness in fulfilling

    its role in the public sphere is intimately connected to how media industries operate.

    The political economy of communication has focused on the study of the historical, political,

    economic, and material constituents of the communications industry within capitalist societies,

    whilst viewing them at the same time as integral to fundamental economic, political, social, and

    cultural processes in society (Mosco, 1996: 71). The study of the mutual constitution of

    communication and late capitalist society has become more and more important as we enter an

    age where speed appears to bring places closer together, drawing us into globalization and a

    space of flows (Castells, 1996). Processes of communication, particularly electronic

    communication, are fundamental to the current transformation of capitalism; and this is reflected

    in names such as The Information Society or The Knowledge Society. A political economy

    of communication, therefore, challenges the pure economic logic of this transformation and

    enables us to enquire, critically, about the relation of that transformation to social class, gender,

    race, and place; and more fundamentally, as Golding and Murdock stress, about justice, equity

    and the public good (2000: 73).

    Two common metaphors for search engines are the library catalogue or the Yellow Pages index

    of phone numbers. In other words, search engines, viewed from a nave perspective, bring us

    objective results from the whole Web based on our query. The reality is that they are shaped at

    every stage by commercial processes. The significance of this paper derives from a concern with

    4This is not to say that the media as market perspective is opposite to the media as public sphere perspective. Rather, it is argued

    that by virtue of their function in the public sphere, the media should not be treatedsolelyas a market.

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    what that might mean for those of us concerned with constructing an information society that is

    equally accessible to all.

    Search Engines as Media of Mass Communication

    Taking to Thompsons definition of mass communication as the institutionalized production

    and generalized diffusion of symbolic goods via the transmission and storage of

    information/ communication (Thompson, 1990: 219), we have on the one hand, symbolic

    goods texts, images, sounds, etc. and on the other hand commercial or institutional

    production, transmission, and storage. This section focuses specifically on the institutional

    production and diffusion of search engine results, describing and contrasting them with similar

    processes in other forms of mass media.

    Thus, in this section and more generally within this paper, we are comparing search engines to

    other forms of mass communication. As noted in the introduction, it is possible that not

    everyone will agree with this characterisation. Because media markets are often characterised by

    their technology of distribution radio, television, the press, cable television it is difficult to say

    whether or not a new technology is also a new medium. Some have argued that the Internet in

    general is a medium by implicitly including it in general studies of mass media (for example,

    McQuail, 2000). However, many media scholars, while acknowledging this possibility, have

    specifically excluded it from the body of their recent theorizing (for example, Couldry, 2003).

    Others have noted that a major feature is the commercial exchange between businesses (Mansell

    & Steinmuller, 2000) and a major strand of research has argued for its function as a means of

    self-expression and a new form of community. Therefore, this study takes the view, strongly

    suggested by Miller and Slater (2000), among others, that the Internet is too wide an analytical

    category to be of practical use for in-depth study. Rather, the Internet is a technological

    infrastructure that affords a range of uses. This paper therefore makes no argument for the

    Internet as a whole being a mass medium. Instead, it concentrates primarily on search engines,

    and argues for their place alongside other mass media, while noting that core differences do exist.

    Bu si n ess m ode l s

    Economically speaking, it is widely recognized that mass media in general operate in what is

    known as a dual product market. They produce, on the one hand, cultural commodities for

    individuals. These products are normally quite tangible books, newspapers, films, magazines.

    They also produce a second product for their advertising customers. This product is the audience

    (see Smythe, 1995). The percentage of revenue from each product class is different for different

    types of media vehicle (Croteau & Hoynes, 2001). Books, for example, derive almost all their

    revenue from individual consumers, while advertising makes up an average of 80% of anewspapers total income, a substantial fraction of which comes from classified advertising

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    (Sparks, 2000), although this differs from country to country as newspaper subscription is more

    common in some areas than others. Commercial television derives all of its revenue indirectly

    through advertising and sponsorship while public television, on the other hand, has the state as

    its primary support.

    How do search engines fare when compared to these other more well-known media enterprises?

    The answer is complex. Table 1 shows the percentage of revenue from advertising for Google,

    Yahoo!, AOL, MSN, AskJeeves, Lycos, Lycos Europe, and LookSmart5in 2003, derived from

    their annual financial reports6.

    2003 Total Revenue(Terra Lycos 2002)

    2003 AdvertisingRevenue

    % from Advertising

    Yahoo! $1,625,097,000 $1,326,905,0007 82%Google $961,874,000 $916,603,000 95%

    AOL/Netscape $8,600,000,000 $767,000,000 9%MSN $1,953,000,000 $563,000,000 29%Terra Lycos 621,971,000 267,448,000 43%LookSmart $156,229,000 $140,886,000 90%AskJeeves $107,292,000 $102,767,000 96%

    Table 1: Percentage of 2003 revenues due to advertising

    This table shows a wide variation, between 95% for Google at number two in terms of

    advertising revenue and 9% for AOL/Netscape at number three.

    The explanation for this variation, I suggest, is as follows. The search engine business, as it has

    developed, has split into two somewhat overlapping camps. First, we have those who operatesearch services as their primary business (which includes Google, AskJeeves, and LookSmart).

    This is what I refer to as thesearch model. Second are those who also provide people access to the

    Internet via dial-up or broadband(which includes AOL/Netscape, MSN and Terra Lycos). This I

    refer to as theaccess model. Finally, Yahoo!, the largest company in terms of advertising revenues,

    operates on a middle ground of diversified services which include partnerships with access

    providers and direct-to-subscriber services such as premium email and web-hosting services8.

    Whether this points to the wider development of a mixed model is still unclear.

    This division has important implications for the structure of the market. Companies in the first

    category operating with thesearchmodelare heavily dependent upon the search services to bring

    5Revenue figures are unfortunately not available for Excite (privately held until March 2003, when it was acquired by AskJeeves).6Google figures are derived from their S-1 filing for Initial Public Offering (IPO).7Includes $1,199,733 in display ads, sponsorships, text-links, paid-performance, paid-includsion, search syndication and transaction

    revenue sharing. Also includes 127,172 in listings fees from jobs, autos, real estate and other small-ads services.8

    Lycos Europe, a purely European provider which operates lycos.de and lycos.co.uk among other sites, shows a similar pattern,making 52%, or 43,360,000 of its83,674,000 revenues in 2003 from advertising. Lycos Europe depends heavily on its email and

    web-hosting businesses.

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    traffic9and, with it, advertising revenue to their websites. Control of search technology is thus

    core to their businesses, and in recent years has meant that these companies have acquired a

    range of companies providing these technologies. To refresh their search capabilities against the

    threat of Google, AskJeeves purchased the well-regarded search engine Teoma, in 2002. Yahoo!

    purchased search provider Inktomi in 2003. It also purchased Overture (formerly GoTo) in

    2002, an advertising provider which already owned AltaVista and FAST, two big names in search

    technology. Google and now Microsoft appear to be betting on their own internal technical

    capacity, although this may change.

    Businesses operating in the second category, with theaccess model,have found search less crucial

    and have been content, in recent years, to license their technology from providers operating with

    the search-based model10. This practice is known as white-labelling. Access-based models sell

    servicesto customers the connection via dial-up or broadband, email addresses, space for theirown website and domain names, among other things w ith advertising as a secondary income

    stream. The archetypal company in this area is AOL, which developed as an online service

    provider in the early 1990s with a closed network, before the Internet was widely available. It still

    remains by far the largest earner.

    This dual-strategy industry has a parallel in cable television, in which cable channels such as

    Discovery or TNT book and earn money through advertising, while cable operators such as

    Comcast or Adelphia earn money through direct subscription (Carroll & Howard, 1998) to the

    network.

    Figure 2 shows the white-labelling of search results between the major search providers and

    distributors. Each circle in the figure represents a search-related website. Larger diameter circles

    are owners, smaller circles touching them are subsidiaries. AOL/ Netscape and MSN are publicly

    traded on the New York Stock Exchange since they are owned by Time Warner and Microsoft,

    respectively. Yahoo!, AskJeeves, and LookSmart are traded on the NASDAQ exchange. Terra

    Lycos is traded on the Madrid exchange. At the time of writing, Google was in the process of its

    initial public offering, and will also be traded on NASDAQ.

    The thickness of the line around the circles indicates the volume of search traffic on the site. In

    2003, Yahoo! terminated its contract for search results provision from Google, and MSN did the

    same from LookSmart, and is widely expected to drop Yahoo!-owned Inktomi when its MSN

    search is prepared.

    9Traffic is a somewhat technical term that refers to both page views and user clicks and is roughly equivalent to a term like

    audience in other mass communication industries.10In 2003 however MSN terminated its relationship with LookSmart and Microsoft has begun to develop its own web search

    technology, possibly with the intention to integrate web-search capability into its next operating system (Hu, 2003).

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    Google

    AOL

    Yahoo!

    MSN

    Ask

    Jeeves

    Look

    Smart

    Overture

    Lycos

    HotBot

    Netscape Open

    Directory

    Teoma

    Inktomi

    Alta

    Vista

    All TheWeb

    Excite

    Figure 2: Search site ownership and white-labelling of search results, April 2004

    Figure 2 shows us that there are, at present, two major providers of search results (Google and

    Yahoo!) and possibly another in the wings (with Microsofts MSN Search). The minor providers

    (AskJeeves and LookSmart being the most prominent examples) are probably targets for

    acquisition.

    If these acquisitions were to occur, it would be continuing a trend of consolidation that began inthe late 1990s and accelerated after the dot-com crash of 2000. In 1998, for example, in a highly-

    cited article, Lawrence and Giles listed six major search engines upon which they based their

    calculation of the coverage of search engines on the Web. These were: AltaVista, Excite,

    HotBot, Northern Light, Infoseek, and Lycos. Historically, each of these engines was a separate

    company, operating separate technology. Today, none of these search engines is still an

    independent company (with the exception of Lycos), and none of them operates their own

    search technology.

    One factor encouraging this consolidation is certainly the scale that search engine providers need

    to attain to be competitive. Search provision is a capital-intensive industry. The sheer size and

    scale of the Internet have meant that companies that want to compete in searching the Web in

    real-time must invest hugely in hardware, software, and connection capacity. One senior

    program manager at a major search provider who has had a long career in the industry reflected

    on this:

    The scale problem is still there, although a bunch of people say its not a big

    deal any more. Theyre kind of right, and theyre kind of wrong. Its not a bigdeal if youve got a bunch of money. People have figured out how to solvethe scale problem, which is to throw a bunch of machines at it and partition

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    your indexYou can still scale effectively. But now, it costs you a ton ofmoney. This is why ever since 2000, 2001, most of the search research doneat the universities is what I call Metacrawler-esque, which is people notbuilding a search engine but doing something on top of a search engine,because they just cant afford to build their own. Which is a shame, becauseyoure not getting these big engines coming out of academia any more.11

    Which set of players is more powerful in the market? The answer is very dependent upon traffic,

    the commodity that fuels the online advertising industry. Large access-based search distributors,

    such as AOL or Terra Lycos, generate their own traffic, primarily through the use of default

    home pages for their access subscribers, and by providing other services such as email or chat

    which ensures regular visits from subscribers. Other distributors, like traditional and local media

    outlets such as CNN, gain traffic from huge offline promotions on their other media products.

    This traffic gives large distributors a strong bargaining chip with the search providers, for whom

    traffic is the major commodity. Search engine providers give such large traffic sources majorreductions on the purchase of such services, in exchange for being able to advertise directly to

    the distributors customers. In the words of the managing director of one large search site:

    [W]hats happened is that people are now selling search results tied to adeal on paid-for placement, so youll get the paid-for placement quite clearlylinked, indicated its a paid-for placement, its not part of the search results,hidden away, its clearly separated, but they will sell the two as a package, so asa distributor of search one can make quite a lot of money out of it, one wontnecessarily be paying for the search or paying a very subsidised rate, plus onewill be paid for the paid-for search.

    This dynamic reimbursement by the large search providers for advertisements on a distributors

    site is extremely important when in comes to evaluating the relative positions of distributors

    and providers. Advertising run by search providers can be a major source of income for both

    small and large distributors, a factor which helps to consolidate the influence of the two major

    search providers on the market as a whole, as we shall see below.

    In this section we have seen that the search engine industry is dominated by large companies with

    one of two complementary business models: either asearch model, dependent upon advertising for

    revenue; or anaccess model, dependent upon the sale of services, particularly Internet access, to

    consumers. Companies that operate with the search model aresearch providersand own their own

    technology. These companies sell results and advertisements to those operating with the access

    model, who aresearch distributors. Other companies are also search distributors, most notably

    other online media companies such as CNN or the BBC.

    11In addition to documentary analysis, this paper is based on data collected from seven interviews with engineers and others at search

    providers and search distributors, including Yahoo!, MSN, AskJeeves, Lycos Europe and Nutch as well as former employees ofExcite and Webcrawler. These interviews are part of an ongoing research project. The author would like to thank the interviewees

    for their kind participation in the research.

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    Adv er t i si n g i n t h e sea r ch eng i n e con t ex t

    From a discussion of the overall industry structure and business models, we now turn to

    advertising in the search engine context. Advertising, of course, is characteristic of media

    business models in general. Does search engine advertising differ from other advertising, and if

    so, how? Both search providers and search distributors have advertising as a major source of

    revenue, as we saw in Table 1. This section focuses on how advertising is displayed and delivered

    in the search engine context. In particular, we note the co-existence of more traditional

    advertising products, similar to those found in offline newspapers and magazines, and a wholly

    new kind of search-linked advertising that has no direct analogue in other media. This second

    type of advertising (search-related advertising)is controlled primarily by search providers such as

    Google and Yahoo! and gives them further influence on the overall online media market. The

    information in this section was developed from a review of financial statements of Google,

    Yahoo!, AskJeeves, Terra Lycos, Microsoft, and AOL/Netscape.

    Traditional advertising products

    Search engines, in common with other online media properties, offer a range of what we will call

    traditional advertising opportunities to their clients. The term traditional refers to the fact that

    they have close analogues in other media, particularly press media. The three traditional types of

    advertisements aredisplay ads, sponsorshipsand listings. These are summarised in Table 2 below for

    easy reference.

    Tactic Description PaymentTraditionaladvertisingDisplay advertising Advertisements appearing in

    banners or buttons on anypage of a search engine. Thiscan be displayed either in aparticular channel (e.g.,finance) or on any page of thesite as a run-of-site ad.

    On a cost-per-thousandimpressions (CPM), a cost-per-click (CPC) basis, or much morerarely, a cost-per-lead (CPL) orcost-per-sale (CPS) basis.

    Sponsorship A long-term advertisement ona page, often in a differentlocation than normal display

    ads.

    Either on a time basis or on arevenue-share basis. Forexample, a search engine

    company might get a share ofrevenue for each sale it passes toan e-commerce sponsor.

    Listings or classifiedadvertisements

    A small-ad in a directory, forexample a lonely-hearts ad in adating channel.

    Per item, on a time-basis.

    Table 2 : 'Traditional' search engine advertising products

    See figures 3 and 4, below, for examples of each type of advertisement.

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    Figure 3: Sponsorship and display advertising on Yahoo!. Note sponsorship logo on upper right

    hand and NASCAR display ad on right hand side. Fromhttp:// sports.yahoo.com,last accessed 31

    May 2004

    Figure 4: Yahoo's classified advertising service, fromhttp:/ / classifieds.yahoo.com,last accessed

    31May 2004

    The differences between these formats and press advertising formats are typically in four areas:

    http://sports.yahoo.com%2C/http://classifieds.yahoo.com%2C/http://classifieds.yahoo.com%2C/http://sports.yahoo.com%2C/
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    1. Pricing models. Press ads are sold in terms of the circulation of the newspaper or

    magazine and the size, position, and colour of the advertisement. Online ads are often

    sold in a similar fashion, depending upon the number of times the advertisement is

    viewed (analagous to circulation figures). This is referred to as cost-per-thousand or

    CPM. But they can also be sold based on theresultsof the of the ad12, on what is called a

    cost-per-click (CPC) basis, or even cost-per-lead (CPL) or cost-per-sale (CPS) basis.

    Some deals, particularly sponsorship agreements, can also include as payment a share of

    revenue of sales originating at the search engine.

    2. Format. Colour and size are often the only variables in press advertisements, whereas

    online advertisements may also vary in terms of the technology they use: they can be

    static pictures, dynamic animations, or even respond interactively to user actions (rich

    media ads). Figure 6, below, shows a page including an interactive advertisement fromtravel provider Orbitz.

    3. Placement on a page. Like press ads, online ads are charged differently depending upon

    their placement on a page. Online advertisements can also open in a separate window

    either above or below the window the user is currently viewing, or when the mouse

    passes over a particular image; this type of placement also affects the rates charged.

    4. Targeting. A press advertisement may run on a particular page, for example the front

    page or the sports page. This is also true of advertisements on websites. Website

    advertisements though may also run randomly, based on automated rotations through

    various pages (known as run-of-site).

    Despite these differences, all three of these types of advertising the display ad, the sponsorship,

    and the classified listing have analogues in other mass media, particularly newspapers and

    magazine. They also characterise other online media sites such as the online version of

    newspapers and magazines. In this respect, therefore, there is nothing to distance search engines

    from traditional mass media vehicles, and much that suggests they are closely related.Interestingly in terms of advertising they seem much more closely related to print media than to

    electronic media such as television and radio, whose ads are typically limited in format and sold

    by timeslot.

    Search-specific advertising products

    While some advertising on search engine sites is similar to advertising in other mass media,

    particularly print media, a large and growing category ofsearch-specificadvertising is not. In this

    12Determined by placing a cookie on the users browser when the ad is viewed, and checking for that cookie when a purchase is

    completed.

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    section we focus on search-specific ads, sometimes called keyword search advertising.

    According to the Internet Advertising Bureau (IAB), this type of advertising is currently driving

    the market. In the 2003 yearly review conducted by PricewaterhouseCoopers for the IAB,

    keyword search revenues rose from 15% of the total US online advertising market in 2002 to

    35% in 2003, while display ads dropped correspondingly from 29% to 21%

    (PricewaterhouseCoopers, 2004). This section will discuss the mechanics of search specific

    advertising and reflect on the implications for the industry.

    Essentially, there are two types of search-specific advertisements, which are summarised in Table

    3:

    Search-specific advertisingPaid performance An advertisement linked to a search term

    for example, the sponsored result forExpedia that might appear when youtype travel.

    Run on an auction basis todetermine cost-per-click.

    Paid inclusion A fee paid to the search engine toinclude the site in the search index.

    Per item.

    Table 3 : Search-specific advertising formats

    In contrast to most online media, search engines can offer advertisers more than a generic

    traffic stream. Because users of a search engine site are actively looking for certain information,

    search engines are able with confidence to sell specific ads to advertisers. In this respect, search-

    specific ads are reminiscent of ads placed in the Yellow Pages. By linking the search query term

    that the user types in with the advertisements that are displayed, search engines have found a way

    to help advertisers break through the clutter of the mass market and target precisely who they

    are looking for. This type of advertising is known aspaid performance.

    Paid-performance ads caused a huge controversy when they were introduced (Rogers, 2000),

    because they called sharply into question the assumption of search engine objectivity by including

    paid results in the same list as free results. Paid results are now shown on every major search

    engine results page, although they have become more visible and less controversial due to

    labelling by search engine providers they are now usually, though not always, indicated by aterm such as sponsored results. See Figures 5 and 6 for an example of paid-performance ads

    from Google and AskJeeves.

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    Figure 5: Paid performance ads on Google (indicated bysponsored link

    ) are included at the top

    and right hand of the page. Fromhttp:/ / www.google.com, last accessed 1July 2004.

    Figure 6 : Paid performance ads from Ask Jeeves, indicated bysponsored contenton the Orbitz

    ad and 'featured sponsor' and 'sponsored resultson the two bottom sections. From

    www.ask.com,last accessed 1July 2004.

    Paid-performance ads are typically sold not on mass-market cost-per-impression basis, but on a

    cost-per-click basis. This charging method is unique to Internet advertising. The cost for each

    click on a paid-performance ad is determined based on an automated auction system, which

    adjusts the price upwards depending upon how many advertisers are bidding on the particular

    search term. Thus a term like flights might be much more expensive than a more explicit and

    less common term such as flights to New York.

    One senior manager of a search distributor reflected:

    http://www.google.com/http://www.ask.com/http://www.ask.com/http://www.ask.com/http://www.google.com/
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    Everybody talks about paid-for placements and Overture and Google havingpioneered this sort of paid-for search result, which frankly [is] just not true.[W]e were doing it back in 1997. We called them kitty links. We wouldhave three kitty links for any search result as well as a banner. And the kittylinks and the banner were paid-for placements, I mean thats exactly what itwas. So, everybody was doing that it wasnt invented by Overture andGoogle. What they invented was being much more focused at it. Anddistributing more widely so they got critical mass.

    Indeed, distribution of paid-performance ads has proven to be a critical part of the search

    providers business model. Since a paid-performance ad must be linked to a search keyword, the

    rise of paid-performance advertising as a major online advertising vehicle has served to

    strengthen the position of the search providers. At present, there are two major paid-

    performance advertising networks: AdWords, owned and operated by Google, and Overture,

    owned and operated by Yahoo! since October 2003. MSN currently receives its paid-

    performance advertising from Overture, as does Lycos. Google, on the other hand, providespaid-performance advertising to AOL and AskJeeves. Each operator also provides paid-

    performance advertisements to a range of smaller sites. In 2003, Google made approximately

    26% of its revenue through paid-performance advertising operatingon other sites. While Yahoo!

    does not disclose Overture revenue directly, in the financial year 2002, prior to acquisition,

    Overture reported $667.7 million in revenue. Assuming no growth in 2003 (a conservative

    assumption as second quarter growth was up 74% year-on-year from 2003 to 2002), paid-

    performance sales from Overture would account for slightly less than half of Yahoo!s entire

    advertising revenue of 1,327 million in 2003.

    The second type of search-specific advertising ispaid inclusionadvertising, which is invisible to the

    customer. Paid inclusion advertising requires a short technical explanation to understand. When

    search results are displayed on a page, they are generated by a computer program called a search

    algorithm. The search algorithm does not search the actual Web itself; instead, it searches a

    previously collected database of sites called the index. The index is generated by another

    computer program, called a spider which automatically follows links on the web and records

    details about the pages it finds. This is called crawling. Today, the web is so huge that nospider can crawl the whole thing. Thus, some sites may never be included in the index. Some

    search engines therefore offer a service that guarantees that the spider will crawl a site an

    advertiser submits, and include it in the index. Since this index entry looks exactly like an index

    entry from a normal spider crawl, and since search results are generated from it in the same way,

    it is invisible to the customer. It is not clear from the company reports how much revenue is

    generated from paid-inclusion advertising13.

    13Google does not accept paid-inclusion ads as a matter of policy.

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    In this section we reviewed the specific types of products that search engines offer to advertisers.

    We have found that in many respects they resemble offline media, particularly print media.

    However, we note that advertising based on search keywords, a different charging structure (cost-

    per-result), and different distribution structure in the shape of large advertising networks like

    AdWords and Overture represent a strengthening of the search providers position with respect

    to other online publishers and distributors. This type of syndicated advertising distribution

    network seems to be a unique feature of the search engine marketplace that has no direct parallel

    in other mass media, which tend to have localised advertising markets.

    Extra-search activities

    The last section discussed paid-performance and paid-inclusion advertising. However, some

    enterprising companies would rather be included in search engine results for free. This section

    discusses search engine optimisers and search engine spammers, both of which work on behalf of

    clients to increase their prominence in search engine rankings.

    In order to understand why search engine optimisation and spamming are viable business

    strategies, and why search engines in particular have spawned these industries, we turn to two

    related observations about how the Internet media business works.

    The first point to consider is that links within web pages have an economic value. We have

    already seen that advertisers will pay sites for clicks from an ad (whether display or paid-performance). This type of payment can extend to something known as a referral fee, where a

    share of product purchase price is passed to those who send a customer to an e-commerce site.

    The closest parallel to this is the coupon distributed by manufacturers in local papers, but online

    the phenomenon is much larger. We have seen that search engines themselves use the referral

    fee as an additional source of revenue, in all types of advertising including display, sponsorship,

    listing, and paid-performance14. Thus, sites on which users are likely to click a lot onto other

    sites that pay for a click or for a referral have a valuable source of income.

    The second observation is that search engines are the online media properties with the highest

    traffic, and therefore the most potential clicks. It is known that most searchers do not go beyond

    the first or second page of search results (Spink, Jansen, Wolfram, & Saracevic, 2002). Thus, the

    way to capture traffic from search engines directly is by attaining a high place in the rankings of a

    relevant search. From this it follows that placement within the results rankings assumes great

    importance economically. This is true whether the site is making money directly from commerce

    conducted on its website, or from advertisements and referral fees.

    14Unfortunately the amount of revenue gained in this fashion is not reported separately from other advertising revenue.

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    These two factors together have led to the birth of the search engine optimisation (SEO) and

    search engine spamming industries. Although they are often linked, we will characterise SEO

    and spamming separately. Simply put, they are the legitimate and illegitimate side of the same

    business. In the next section, we first characterise legitimate search-engine optimisation, and

    then move on to discuss search engine spam.

    Sea r ch eng i n e op t i m i s a t i o n

    When the publishers of a web site are seeking to attract more traffic to the site, where do they

    turn? Very often, they look to increase their ranking on major search engines for relevant queries.

    Amazon.com, for example, may wish to come top of the list for the search books. As

    companies who seek good press coverage may turn to a public relations agency, the online

    company may turn to a search engine optimiser (SEO). The SEOs function is in fact very

    similar to that of a public relations firm in a traditional media context. The business of the searchengine optimizer is to structure and refine the web pages of their client so that they appear high

    in the results rankings for an appropriate search query.

    That is to say, rather than purchasing on a pay-per-click basis an obvious advertisement linked to

    keyword search, the client purchases, via the SEO, a long-term placement in the main search

    listing, which they believe to be more stable and more valuable in the eyes of users, as recent

    marketing research has shown that people are increasingly ignoring some online advertising

    altogether (Drze & Husherr, 2003). The search engine optimization process is more risky and

    often more expensive than keyword advertising, but if done well it may result in a much greater

    flow of traffic. Many companies, of course, both optimise and advertise. As with public

    relations, revenues generated from this process do not flow to the search engines themselves, but

    to a range of small optimization companies. Also unlike the search provision business, but like

    public relations firms, search engine optimizers tend to be relatively small and localized, requiring

    know-how but little investment in technology compared to search provision.

    The SEO and public relations business do have one large difference, however. In the world of

    print media, the editor or publisher has the final say about what goes into the newspaper or

    magazine. A search engine, being an automated process, has no such direct say. Therefore, what

    comes at the top of the list may not be exactly what the search engine provider would like. This

    leads the discussion neatly into search engine spamming, the subject of the next section.

    Sea r ch en g i n e spam

    If the legitimate actions of SEOs on the pages of their own clients may cause them to rise in the

    search engine listings, what about dubious or even fraudulent practices? For the purposes of this

    paper, search engine spamis defined as follows:any content on the Web that is intended specifically to deceive

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    a search engines indexing or ranking programs15. Search engine spam has a long history, and in fact has

    been one of the driving forces in search engine development. An engineer who was involved in

    creating one of the first search engines in 1993/1994 told me:

    Ourconcern was, well, you want to make sure that the pages you serve arehigh-qualityBecause before too long, you got people who tried to cheat thesystem in various ways. We called them word spammers. That actually tookan extraordinary amount of time from us. For a small team that wasdamaging, you know, we couldnt work on the next generation search becausewe were dealing with those issues.

    In the early days, spammers used relatively simple techniques such as black text on a black

    background to fool search engines into ranking their pages more highly. But spam developed

    quickly. Another engineer who worked on a search engine in the mid-nineties told me that

    coping with spam, mostly detected by user complaints, was the day-to-day work of the

    engineering team:

    We definitely would see the spam get smarter. For example, we startedseeing things that were obviously not readable but that were generatedautomatically: nonsense text that was designed to fool things that were tryingto look for nonsense text. So they got very clever. So its a tough one, it is anarms race.

    When Google launched in 1997, it was said to be unspammable, largely because instead of using

    primarily page content as the basis for its ranking, it used the link relationships between different

    sites as a way to distinguish authoritative content (Brin & Page, 1998). This innovation, calledPageRank, has come to dominate modern search engines. But Google and the rest of the search

    engines are as vulnerable to spam today as they were in 1994, for example by techniques such as

    the link farm in which a network of heavily cross-linked sites is set up in order to boost the

    rankings of all the sites included (Perkins, 2003). See Figure 7 for a screenshot of a sample link

    farm. These link-farm sites then sell paid-performance advertising related to the original search

    query.

    15This definition follows Perkinss (2003) quite closely. He defines search engine spam as Any attempt to deceive a search engine's

    relevancy algorithm. He also defines what spam is not: Anything that would still be done if search engines did not exist, or anythingthat a search engine has given written permission to do.

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    Figure 7 : A sample link farm page. This page, a result from searching 'travel to Eritrea' on

    Google, has no content but rather a series of links and ads related to the initial search terms,which would be paid for on a cost-per-click basis. Fromhttp:/ / travel.world-

    directory.net/dir/ 1/ 27.php, last accessed 1July 2004.

    The paradox that is clearly demonstrated by Figure 7 above is that while search engine relevancy

    teams battle against spam in the interests of bringing a high-quality result to the user, their own

    advertising formats paid-placement ads are at the heart of a this new generation of spam.

    Paid-performance ads provide easy revenue generation for spammers who may operate hundreds

    of link-farmed sites. As content-free, link-farmed sites increase their presence in the top 10 or 20

    search results, user satisfaction with search engines is bound to decrease.

    Thus, search engine results are being subjected to a concerted assault in the name of free

    enterprise. This longstanding arms race, as discussed, consumes a great deal of the time and

    attention of the search engine providers, as they constantly tune their indexing and ranking

    algorithms to try to exclude the new tricks of the spammers. It may even hamper or prevent the

    development of alternatives. A case in point is the service Nutch(www.nutch.org). Nutch is an

    open-source search engine, founded specifically in response to concerns about bias in

    commercial search engines. A standard criticism of Nutch is that it will simply be swamped with

    spam, having done the spammers work for them. Here is the Nutch reply:

    Won't open source just make it easier for sites to manipulate rankings?

    Search engines work hard to construct ranking algorithms that are immune tomanipulation. Search engine optimizers still manage to reverse-engineer theranking algorithms used by search engines, and improve the ranking of theirpages. For example, many sites use link farms to manipulate search engines'link-based ranking algorithms, and search engines retaliate by improving theirlink-based algorithms to neutralize the effect of link farms.

    With an open-source search engine, this will still happen, just out in the open.

    This is analagous to encryption and virus protection software. In the longterm, making such algorithms open source makes them stronger, as more

    http://travel.world-/http://www.nutch.org/http://www.nutch.org/http://www.nutch.org/http://www.nutch.org/http://travel.world-/
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    people can examine the source code to find flaws and suggest improvements.Thus we believe that an open source search engine has the potential to betterresist manipulation of its rankings. (The Nutch Organization, 2004)

    The issue remains unresolved while Nutch is still in a formative stage.

    This section has distinguished between legitimate SEO and illegitimate spamming practices. In

    practice, because the laws are weak and both customers and optimisers may be ignorant of the

    effects of particular practices, the distinction is less clear. Legitimate business owners can become

    spammers almost by accident. One engineer working on search engine relevance at a large

    provider related the following story to me:

    I grew up in a [western US city], and one of the things my family would do, iswe would go down to Southern Utah to stay at a couple of places. One ofthem was called the Hey-di-hi Inn16Well, I ran across their site about a

    month or two ago, and just kind of looking at it because I thought it was kindof fun, it caught my eye, so I sat down to play with it. It turns out that theyrespamming. And I actually called the guy, and what I found out is that they,along with you know, a zillion other tourist places in the Four Corners Area Arizona, New Mexico, Utah, Colorado all of them are basically hosted bythis companywhich was an outfit out southern Utah. And you know, thiscompanys been around for ten years, which is pretty much as long as theInternets been around. So they sound reputable, theyve established goodbusiness relationships with all of these mom-and-pop motels, horse rideplaces, balloon ride places, everything, everything that needs reservations.What they provided was a generic reservations system. So, use our system,well do your reservations, so for all these places its just great. And in

    addition what this company has branched out to is various forms of linkspamming and keyword spamming. Now, its not really hard-core, theyre notthe worst of the bunch, but what theyre doing is pretty clearly spam. Itspretty obvious. And thats not a good thing to do. By the same token, eventhough our friend at the Hey-di-hi Inn is spamming, its not what Mr Smithwhos owned the place for 30 years he doesnt know what hes doing. Itsnot a lot of spam. And as it turns out, heydihi.com is in fact the right URL forthe Hey-di-hi Inn. So even though youre spamming, youre still theauthoritative source. If you want to stay there, thats still where you want togo.

    The search engine is now faced with a quandary: what if a quality source, an authoritative source,

    is also a fraudulent, deceptive source? What does a good quality result consist of in this case?

    In this section on search engine optimisation and spam, we have highlighted a dynamic that is

    unique to search engines: search content and search advertising has, in essence, escaped from the

    control of search providers and is being put to use against them. It is as if the pages of the daily

    newspaper had risen up against the publisher. In this respect, at least, there is something new

    about new media.

    16Not the real name of the inn.

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    Regulation and Public Service

    In the preceding sections, we have concentrated on the business models and operations of search

    engines. We have highlighted the growing concentration of the major search engine providers,

    and the ever-increasing activity of the SEOs and spammers. What, we may wonder, has beenthe public response to these questions? In this section, we examine the actions of governments

    to regulate the provision of search engine results.

    McQuail (1994: 171-173) draws our attention to the three contrasting models of regulation of

    different media systems: thefree pressmodel, thebroadcastingmodel and thecommon carriermodel,

    each derived from a different perception of how the idea of the public good can apply to media,

    which are recognised to have a public function in society in addition to a commercial function.

    The free press model aims to ensure diversity of content by preventing interference by the state

    in matters of content and distribution. The broadcast model aims at achieving high quality and

    representativeness through public regulation of content and distribution. The common carrier

    model aims to achieve universal participation, normally in a peer-to-peer medium such as the

    post or telephone. McQuail summarises their features as follows:

    Free press Broadcasting Common carrierRegulation of infrastructure None High HighRegulation of content None High NoneSender access Open Closed OpenReceiver access Open Open Closed

    Table 4: Three regulatory models compared (from McQuail, 1994: 173)

    The Internet is an interesting mixture of regulatory models, reflecting the different origins of its

    infrastructure (coming from telecommunications) and its content (from existing commercial laws

    and existing laws regarding print media and intellectual property). Different elements of the

    Internet system are regulated differently within these regimes. For example, there has been an

    increasing tendency in both Europe and the US, for example, for Internet service to be

    considered in universal service provisions17- in other words, linked to McQuailscommon carrier

    model. But in content, thefree pressmodel is prevalent: for example, in the US context, content

    online is constitutionally protected by freedom of speech, as any newspaper or magazine would

    be. Commercial law not included in McQuails scheme, is also important, for example in

    enforcing contracts and ensuring that copyright protects other types of proprietary content , such

    as music files, videos, or computer programs from duplication (Lessig, 1999). Trademark laws

    are increasingly used to protect domain names and web site designs (Par, 2002). Interesting,

    17The FCC, for example, while not directly regulating Internet access, supports schools and libraries in getting Internet access with

    the Universal Service Fund. Again, while Internet access is not mentioned in the EUs Universal Service Directive (2002/22/EC), the

    European Commissions eEurope 2005 plan (2002/263/COM) has e-inclusion or providing access for everyone in order to

    combat social exclusion as a general aim.

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    McQuailsbroadcast model, including elements of public-service programming, is noticeable by its

    absence.

    How do search engine websites fit into this tangle of regulation? As with much Internet

    regulation, this is a vexed question, because the issue of jurisdiction often arises. However, as themajor search engines are based in the United States, we will concentrate here on United States

    law. Within the US, search engine results (as with other forms of Web content) are protected by

    the constitutional guarantee of freedom of speech. Thus search engines are entitled to publish

    whatever content they like, and the presumption is that the Internet user is free to read or not

    read the results as they choose, just as they would be with any magazine, newspaper, or book.

    The issues of paid inclusion and paid-performance advertising, however, have attracted some

    government notice. In 2002, in response to a complaint, the Federal Trace Commission (FTC)

    issued a letter to search engines regarding paid inclusion and paid performance from their

    Division of Advertising Practices. The letter said, in part:

    if your search engine uses paid placement, you make any changes to thepresentation of your paid-ranking search results that would be necessary toclearly delineate them as such, whether they are segregated from, or insertedinto, non-paid listings. Moreover, the staff recommends that if your searchengine uses paid inclusion programs that may distort rankings or placementcriteria, you clearly describe how sites are selected for inclusion in yourindices. Also, consumers should be able to easily locate your explanation of

    the paid inclusion program you use, and discern the impact of paid inclusionin search results lists. (Federal Trade Commission, 2002a)

    The FTC, however, took no formal action in response to the complaint. Based on our

    observations, paid performance ads are indeed indicated, but paid inclusion remains obscure to

    the user. The FTCs letter was issued by its Division of Advertising Practices, which protects

    consumers from deceptive and unsubstantiated advertising, and in this case is acting to prevent

    advertising from being misleadingly perceived as editorial content. In this sense, the FTC is

    treating the search engine results very much as it would treat any other mass medium, in the

    interests of consumer protection.

    Search engine results, then, are quite lightly regulated by a similar regime to the one that regulates

    print media, with similar protections for the consumer, and without the guarantees for the citizen

    that are embodied in the public service model of broadcasting. The concern is with freedom of

    expression and freedom of trade, based on the view of many competing voices and a competitive

    marketplace.

    The next section brings the paper to a conclusion, bearing in mind our initial concern about

    whether the current system of search engine results provision serves the public interest.

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    Conclusions

    This paper has shown that search engine companies are the major players in the Internet media

    space, with international if not global reach. It has compared them to other media of mass

    communication, without arguing that the Internet as a whole is a new medium of masscommunication.

    This mass communication industry, like others, is very highly concentrated. This paper has

    shown that there are four major distributors and only two major providers of search engine

    results. These two, Yahoo! and Google, supply both search engine results and advertisements to

    search engine distributors, large and small, through white-labelling activities and through the

    growth of their paid-placement advertising networks. While much search engine advertising is

    analogous to advertising in the print media, these advertising networks are a new development

    without parallel in other media forms. They syndicate advertising to a variety of large and small

    sites and pay only for results in the form of clicks or sales.

    Another unique feature of the industry is the relationship of the search provider to the owner of

    the content listed in the results. As a result of search engine optimisation and spamming

    practices, it is not only the search engine providers who determine the relevancy of the results.

    Instead, SEOs and spammers are engaged in an arms race with search engine providers, a

    hard-fought and longstanding struggle for control of the results. At stake on the one hand is the

    economic value of links, and on the other hand the quality of the results.

    Where does this leave us? From a variety of computer-science studies we know that search

    engine results tend to be biased in certain directions. Specifically, large sites are over-represented,

    as are sites with a higher number of links to them, and American sites, probably by virtue of have

    been online longer and therefore more likely to have higher numbers of links pointing to them

    (Kleinberg, 1998; Kleinberg & Lawrence, 2001; Lawrence & Giles, 1999; Vaughan & Thelwall, in

    press). Computer-science commentators have tended to ascribe this tendency to features of the

    technology. This paper suggests that economic factors may also be at work. Some of theinterviewees have indicated the use of old-fashioned editorial practices, such as blacklisting

    particular sites. However, we remain as yet unclear as to why certain sites are favoured over

    others.

    In September of 2002 the FTC issued a Consumer Alert related to the earlier letter it had served

    on the search engine providers. This said, in part: its a savvy surfer who knows how search

    results are sorted and ranked. (Federal Trade Commission, 2002b) Indeed. It seems that no

    one knows very much about this. One of my interviewees, the head of engineering at a large

    search provider, said: Thats ultimately every search engines secret sauce how relevance is

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    done. The FTCs alert also said: You have a choice. Before you decide which search engine to

    use, consider whether the use of payment programs for placement or inclusion is important to

    you. (Federal Trade Commission, 2002b). In fact, as this paper has revealed, the choices are

    currently quite limited. All major search engines accept paid-placement ads and some require

    that distributors accept them as well.

    Finally, the international scale of provision and the concentration of power away from the hands

    of small distributors means that there may be little incentive for providers to make special

    provisions for smaller countries who, in turn, may not be able to provide their own services for

    lack of capital.

    There is thus some reason to doubt that the current provision of search services, with light

    regulation according to the free press model, serves the public interest in the information society.

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