Why is the search engine Google being sued in the US

Asks Patrick

A. Google is being sued by Overture Services it was announced on 5 April (2002) because Overture believes that Google is illegally using its patented technology, which allows advertisers on search engines to out-bid each other for top billing positions in search results. Overture has not disclosed the amount of damages it is seeking. A spokeswoman for Google has denied the charges.

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Q. What does Overture do

A. Overture (formerly known as GoTo) is a leading company in pay-for-performance searches on the Internet - the fastest growing method of online marketing to date. This system allows advertisers to bid against each other to capture keywords related to their business on a cost per click basis - what this means in reality is that when you conduct a search on an affiliate search engine the results you receive first are determined by how much the companies involved bid to be placed at the top of the list.

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An estimated 80 per cent of all web traffic is generated by search engines, and 75 per cent of all search engine users click on the top five results generated by the search engine - which means that if your business is at the top of the list it is likely that you're going to generate a lot more business than your competitors.

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The case being brought against Google is significant because Google is known for its unbiased and unpaid for listings. Although Google does carry advertising, its adverts are distinct from its search results. Its premium sponsorship scheme enables its advertisers to purchase keywords to target potential customers - advertisers' text-based ads then run alongside Google's own index, on the right hand side of the page.

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Google also runs a similar system known as AdWords targeted at small businesses, with the adverts again appearing separately from the Google's search results. It has been reported that Overture's law suit alleges that Google's AdWords Select service, which allows organisations to bid for an improved search placement, infringes on Patent 6,269,361 that covers the features and innovations surrounding Overture's bid-for-placement products and pay-for-performance search technologies.

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Q. How does this type of advertising actually work

A. Basically an advertiser buys a set of key or target words that relate to their business e.g. Boots the Chemist could theoretically purchase words like "chemist", "pharmacist", "prescription drugs", "cosmetics" etc. When a user of an affiliated search engine types in any of these keywords, Boots' position on the list of search results would be determined by how much it has paid for a placement, and that fee would be compared to how much a rival would have paid - and their positions would be determined accordingly.

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Q. Who are Overture's customers in the UK

A. Overture lists search engines such as AltaVista, Excite, Freeserve and Yahoo among its affiliate partners and it has 3000+ advertisers in the UK alone that include Tesco, Lloyds TSB and Dixons.

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Q. Do any other companies offer pay-for-performance (also known as pay-for-placement) search listings where advertisers bid against each other online

A. Overture's main rival in the UK is Espotting, which offers a similar service and lists among its customers Orange, Ford, eBay and Procter & Gamble. It has 4000+ advertisers in the UK alone.

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Q. How fast is performance-based advertising on search engines set to grow

A. According to the leading market analysts Forrester Research, 84% of online media expenditure will be performance based by 2003, with the amount of searches on cost-per-click search engines like Overture and Espotting rising to 52% of all online searches (both companies specialise in charging advertisers to appear in prominent positions on search sites such as MSN, AOL, Ask Jeeves and Lycos).

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Q. Why are companies like Overture and Espotting doing so well

A. Overture and Espotting, and their brand of advertising, are doing so well because they have gone back to basics to make e-commerce work for them - most companies have become increasingly cautious about online advertising since the dotcom crash in early 2000, but at the same time know that the Internet has become even more popular - and they are more willing to part with small amounts of money (and are prepared to increase it in when bidding for placements) for search engine placements than they are on multi-million pound campaigns. At the same time some search engines have relied upon this income to grow and/or keep afloat.

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Q. How popular is Google

A. In January 2002 Nielsen/NetRatings announced that Google (along with Ask Jeeves and Wanadoo) recorded the biggest gains in audience figures during January 2002, attracting an increased 12-13% rise in worldwide audience figures. In comparison MSN reported a 5.3% rise, Yahoo reported a 3.58% rise, per cent jump and Amazon saw a 4.26% decrease in audience figures. The survey looked at six million people across 29 countries.

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By Karen Anderson