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Companies Sue Over Banner Ads

A practice in the Internet advertising industry involving search engines and the sale of keywords linking to competitor banner ads recently sparked two lawsuits, with many more expected to follow.

The controversy centers around allegations that targeted banner ads were purchased by competitors of two famous companies that direct search engine users to a different company or brand.

Estee Lauder Inc. and Playboy Enterprises Inc. recently filed separate lawsuits contending that their names are trademarked and should be protected against the practice of competitors and unlicensed companies purchasing their names as keywords on a search engine.

Estee Lauder has sued Excite and its subsidiary Webcrawler. When the company's name is typed in those engines, ads for CosmeticsCounter and Fragrancecounter appear. Neither company has been licensed to sell Estee Lauder merchandise.

Playboy filed a similiar suit in California last week, against Netscape and Excite. The Netscape search engine directs users to porn sites, such as Lust Highway which offers free X-rated photos while Excite directs searchers to other sites, such as Obesession.com, another adult-oriented Web site.

Several more similar cases are in the offing, a direct threat to search engines, who rely mainly on advertiser revenue. Targeted keywords sell for roughly $40 per thousand displays, non-targeted banner ads go for $25 per thousand impressions. The Internet advertising business is indeed lucrative: on February 10, the Internet Advertising Bureau reported $1.3 billion in revenues for 1998.

Internet advertising players are watching these cases closely.

"Potentially this could be very dangerous for search engines. We're not talking about an insignificant amount of money for the search engines. As a guess, I'd say search engines get 20-30 percent of their total revenue from keyword ad sales. Maybe 5 percent of total sales come from trademarked keywords," said Drew Ianni, advertising analyst at Jupiter Communications.

On the front lines of this issue is a site launched last October called Namestake, a division of Thomson & Thomson. The company offers trademark, domain name and competitive services to clients, who include Estee Lauder and Playboy.

Using the site's free bannerStake banner search engine, a user can search the ads that appear on 12 search engines. A random sampling showed interesting results. For example, a search on the word "amazon" yielded a barnesandnoble.com banner ad on the Lycos search engine.

"We call these cyber parasites," said Namestake spokesman Suzanne Kawadler. "It's a form of cyberterrorism. They siphon traffic away from your site."

"What this is really about is protecting intellectual property and trademarks," said Nick Copley, namestake's director of business development. "Trademarks exist to protect consumers. Consumers trust a brand name and companies want to keep that trust. If somebody is advertising products they're not licensed to sell, that is a problem."

The search engine controversey is similiar to earlier days when domain names were bought by individuals and then sold to companies for enormous amounts.

"Search engines make millions selling keywords and can have a keyword sold out for several years," Copley said. "The trademark holder should be able to buy back the name."