By Leslie Walker and Brian Krebs
Washington Post and Washingtonpost.com Staff Writers
Sunday, April 30, 2006
Google Inc., which runs the largest ad network on the Internet, is making millions of dollars a year by filling otherwise unused Web sites with ads. In many instances, these ad-filled pages appear when users mistype an Internet address, such as "BistBuy.com."
This new form of advertising is turning into a booming business that some say is cluttering the Internet and could be violating trademark rules. It also has sparked a speculative frenzy of investment in domain names, pushing the value of some beyond the $1 million mark.
Google specifically bars Web addresses that infringe on trademarks from using its ad network, but a review of placeholder Web sites that result from misspelled domain names of well-known companies found that many of the ads on those pages come directly from Google.
"It seems very hard to reconcile Google's support of this activity with their "Do No Evil" motto," said Ben Edelman, a researcher at Harvard University who has done extensive research into advertising on unused domains.
Google is defending its business practices, saying that it removes participating sites from its ad network if a trademark owner complains that those sites are confusingly similar -- even though close misspellings don't necessarily prove that a legal infringement has occurred.
"Unless it is confusing to somebody, trademark law doesn't apply," said Rose Hagan, Google's chief trademark lawyer.
The Silicon Valley search giant is the largest but not the only ad network showing ads on placeholder Web pages -- Yahoo and Australian firm Dark Blue Sea run similar services.
This form of online advertising relies on "type-in traffic," the users who type the information they're looking for directly into the address bar of the Web browser instead of using a search engine to scour the Web. Industry analysts estimate that roughly 15 percent of all Web traffic originates this way.
That has created a demand for a practice known as "domain parking," which involves owners of a domain name "parking" that name with a firm that creates placeholder pages and then invites Google or other Internet ad networks to fill them with ads. When Web surfers arrive at those sites and click on those ads, Google and Yahoo get paid by the advertisers for that click and share their revenue with the owners of the domain names.
Opinion is split on whether these type of ad pages are good or bad. Some say they are nothing more than junk pages that frustrate people. But others, including those who speculate on potential traffic of a specific domain name, argue that the pages are helping people find information related to what they're looking for.
"We want those pages to function as alternatives to search engines,'' said Matthew S. Bentley, chief strategy officer for Sedo, a large parking service that manages more than 1 million unused addresses placed with the Google ad network.
The parked ad pages are mostly unattractive, but Sedo, Google and Yahoo have all said that they are working to improve them by adding more information. In most cases, it's the parking service that handles the creation of the ad sites.
"It's such an easy process," said Ron Jackson, publisher of DNJournal.com, an online publication that covers the industry. "In two minutes, I can set up a thousand domain names."
The practice has sparked a speculative scramble to register unused names and test their ad potential. Because purchasers can change their minds within five days and avoid paying the $6 registration fee for the name, many investors enter the names in Google's ad program for a quick test and quickly drop those that don't yield enough clicks to cover the domain registration fee.
Of the 30 million dot-com names registered worldwide last month, more than 90 percent were dropped, according to domain name registrar GoDaddy.com. As a whole, the Internet has only 54 million active .com and .net addresses, according to VeriSign Inc.
Jackson said he has bought 6,600 domains and uses several different ad services to earn revenue on them. "I know quite a few guys making over a million dollars a year from advertising on their domains," he said. "It's like a 24-hour money-printing machine."
David Steele, an intellectual property lawyer at Christie, Parker & Hale and a professor at Loyola Law School in Los Angeles, said the practice amounts to someone making money off someone else's trademark without permission.
"Trademark law is designed to protect consumers so they can quickly identify what they want and get it," Steele said. "If everyone has to spend a whole bunch of time wading through all this lookalike crap online, then the value for Internet consumers is going to be seriously reduced."
John Meyers, general manager of Yahoo's ad service for parked domains, said Yahoo is strict about weeding out addresses that violate its guidelines, which prohibit celebrity names, typos of trademarks and references to illegal activity. Yahoo developed a software filter to identify domain names in its network that violate those rules so they can be removed.
But Hagan, Google's trademark lawyer, said that software formulas aren't smart enough to identify trademark infringements.
"It's subjective when you look at domain names to decide how many letters off does it have to be to form a trademark or conjure up that trademark," she said.
Google won't disclose how much revenue it is earning from ads on these types of sites, but chief executive Eric Schmidt said in an interview last week, "It's a lot of money."
The company also doesn't break out how much money it earns from showing ads on its own sites compared to partner sites, which include rival search engines such as Ask.com, thousands of news sites and blogs, and millions of vacant domains. Wall Street analysts, however, estimate a little less than half of Google's $6 billion in revenue last year came from ads shown on partner sites.
The Post, using a software tool created by the Microsoft Research division, found hundreds of active Web sites showing Google ads at addresses that appear to be misspelled variations of well-known company names, known as "typo-domains." Their owners are known as "typosquatters."
The Post generated roughly 100 random misspellings of "www.earthlink.net" and found 38 sites using variations of the Earthlink name "parked" at a Google-owned service called Oingo.com. All 38, which includes "dearthlink.net" and "rearthlink.net," serve Google ads.
Likewise, nearly a dozen sites with variations of "Verizon Wireless" were showing Google ads, with some linked to the company's official VerizonWireless.com. That suggests that Verizon Wireless may be paying Google for ads on typosquatter-owned sites.
Verizon Wireless spokesman John Johnson said the company has a successful track record of getting such sites shut down and takes "a particularly dim view of typosquatters."
"Do we think any traffic is good traffic as long as it ends up at our site? Clearly many of these sites are siphoning off traffic by tricking people who have tried to obtain information about Verizon Wireless," Johnson said. "This is never a good thing for our trademark or our company, and it's certainly not a good thing for customers trying to reach us on the Web."
Washington Post staff writer Yuki Noguchi contributed to this report.