E-commerce in Brazil, like many other Internet activities in that country, is maturing quickly. Between the first half of 2005 and 2008, e-commerce revenues as reported in e-bit’s “Web Shoppers” study nearly quadrupled to reach BRL3.8 billion ($2.2 billion). According to Valor Economico, in 2007 alone the market expanded by 43%. In terms of the number of individuals buying online, the figures are almost as dramatic, with 2.6 million buyers in 2003 rising to 9.5 million in 2007.

More likely than not, adult Internet users in Brazil have purchased something online, according to a December 2007 study by Symantec.

Brazil’s 79% of users who have purchased online is in the upper reaches of worldwide rates, comparable to such advanced Internet players as Japan (82%), the UK (79%) and Germany (78%). In contrast, only 63% of US Internet users have made an online purchase. Simply put, Brazilians who use the Internet tend to use it for everything, including e-commerce.

Online buyers in Brazil are huge media consumers. Books, magazines and newspapers ranked as the top e-commerce categories with a 17% market share in 2007, according to e-bit.

Almost one-half (49.47%) of Brazil’s online buyers use a credit card to make their purchases, versus 39.06% who use a banking ticket to buy online. Other payment methods, including debit or electronic transfer, and payment on delivery, were each favored by less than 10% of respondents to an Ipsos Public Affairs survey.

Females, who make up almost one-half of Internet users in Brazil, are a key factor driving the explosion of e-commerce. A study from e-bit reported in Business News Americas found that online transactions by females increased nearly 10% since 2000.

According to industry reports, in five years, more than 30% of mobile phone subscribers in China will be reading books and newspapers through their phones. The combination of greater 3G adoption and a marked increase in made-for-mobile content will drive mobile entertainment revenues to almost $48 billion by 2010.

Reports additionally forecast that 90% of Chinese newspapers would have digital editions by 2013. Perhaps it’s not an exaggeration to say that print media will move to mobile phones, especially when every other type of digital content already has.

With an estimated 600 million mobile users, according to iResearch - China has seen its mobile search users grow to 61 million at the end of 2007 and will hit 117 million by 2008 and pass 200 million by 2010.

The world of 3G connectivity is expected to change the way how interaction-technology functions, how we shop, how we share information, and in general how we use handheld devices. The how(s) remaining to get explored seem at this point, almost infinite.

Nothing represents the changing of the guard as much as how the Big Three Portals have fallen from grace. Don’t get me wrong: from an operational standpoint, Yahoo! (YHOO) is a fine property, but that company is a bit of a… how do you say, disaster.

MSN is there, trekking along, costing Microsoft (MSFT) billions in losses over the years without really making a push for #1. Sort of like all other MSFT products not named Windows or Office, basically.

Meanwhile, Time Warner’s (TWX) AOL is drifting along, buying up more and more assets - some smart, some not - but now putting itself up for sale. While the company sold a 5% stake of itself to Google (GOOG) for a $1B sum - valuing itself for a tidy $20B - word is that it might be content with a $15B offer… which means either Yahoo!, MSFT, News Corp. (NWS), or Comcast (CMCSA) would show an interest.

While some will be quick to say the portals lost to social networking sites such as Facebook and MySpace, make no mistake about it, they lost to search. Revenues matter, everything else is noise. Google has the web ecosystem in the bag, and considering that Google’s YouTube is more dominating in video than Google is in search - and that video is the next high growth opportunity after search’s decade - then you have to wonder how much more hurting Google can put on the Web.

When you consider how leadership in search helped Google propel itself to King of the Web, you sort of understand why MSFT just shelled out $100M for something that basically can be summed up as Wikipedia site search.

It has long been assumed by many investors that acquiring Valueclick (VCLK) would be the first step in “plan B” for Microsoft (MSFT) if its bid to take over Yahoo (YHOO) was unsuccessful. When MSFT’s Steve Ballmer recently ruled out a slew of acquisitions of smaller internet players after pulling its bid for Yahoo, ValueClick’s stock seemed to lose some of its “takeover bait” premium over the next couple of trading sessions. Since that time, the sell off in ValueClick shares has intensified and the stock has set new 52 week lows three times over the last week as rumors swirl that it is now hunting for some strategic acquisitions of its own. As might be expected, investors appear to be pricing in 1) concerns over dilution that might accompany any acquisition 2) typical “sell the buyer, buy the seller” arbitrage or 3) that an acquisition is signaling the switch of management efforts to acquiring instead of being acquired.

Much of the chatter regarding ValueClick acquisitions has focused on the possibility of their acquiring a company that would gain them entrance to the “Pay Per Click” [PPC] advertising space, the very high margin business that the Google empire was built upon where advertisers bid for placement in search results that are offered when consumers seek information on specific keyword search terms. This business was invented by Goto.com, which became Overture.com and was acquired by Yahoo and is now Yahoo Search Marketing. This space has been dominated by Yahoo and Google (GOOG), with Microsoft making a late run to gain a foothold in this space and round out “the big three” in the PPC space. While there has always been a “second tier” of companies trying to gain traction in the pay per click space, none have been able to come close to challenging “the big three” for various reasons.

While we are not in a position to know if there is any substance to the rumors, it does seem that the recent upheaval at Yahoo might make a historic opportunity for the right company to make waves in the pay per click space. If a Yahoo/MSFT deal were to reemerge or if Yahoo moves forward with its plans to outsource much of its premium PPC business to Google, the combination of the #2 and #3 players or the #1 and #2 players in this space would leave the door open for another company to slip into the #3 position. While we don’t think there is any magic associated with being the #3 player in PPC search, we do think that there are quite a few deep pocketed advertisers out there who view both Microsoft and Google as their most feared competitors and would like to see their advertising dollars flow to someone else, particularly newspaper publishers, magazine publishers, TV, radio and other legacy media companies.

Another factor that could make for a historic opportunity to enter the PPC search fray is the current market valuations of the second tier players. Just over a year ago, all companies in the online advertising space (but particularly the owners of ad networks) were being bid up to new trading highs after the frenzied buying of many of the other players ((ie.Aquantive, Doubliclick, 24/7 Media, Linkshare, Digitas) in this space for large premiums to their trading prices. As the deal volume dried up, much of the money flowed out of these names and many are now trading at historic lows.

The two names we have seen tossed around most often as a ValueClick acquisition targets fit neatly into this category - Miva (MIVA) and Think Partnership (THK).

Miva Media Solutions, previously known as Findwhat.com, is the largest of the second tier networks. With over $100 million in annual click revenue flowing through the company’s North American and European networks, Miva stands out as the quickest option for an acquiror looking to gain heft quickly. Miva also owns a number of valuable content sites including the rapidly growing Spill.com, Screensavers.com and WeatherStudio.com in addition to a growing toolbar segment that currently boasts of over 6 million active users.

In addition to offering the possibility of instantly becoming the next largest player in PPC behind MSFT, adding highly regarded content sites and leveraging the possibilities inherent in having an installed base of over 6 million toolbars, ValueClick and others have to look at the current market valuation of MIVA as extremely attractive. With a current market cap of $32.5 million (closing price July 1), no debt and over $22 million in the bank, the same marketplace that one year ago placed a valuation on these operations of just over $225 million is currently placing a value on this same business of less than $10 million. While the $250 million+ valuation achieved during the height of the ad network buying frenzy of a year ago might be on the high side, its hard to imagine that there are not buyers out there willing to pay three or four times the current trading price to take down such a large piece of pay per click market share. ValueClick in particular does seem like a company with the complementary assets, existing clientele and market cache’ necessary to take a business like Miva’s that is struggling to be profitable and significantly expand the margins by reaching the critical mass of advertisers necessary to ramp profitability quickly. With an existing CPA (Cost Per Action) network and display advertising business that reaches 74% of US internet users, its quite likely that ValueClick’s reach and brand name would bring many more advertisers into the fold quickly and also that existing advertisers would be more likely to bid higher and spend more through a ValueClick ad network than they would through Miva owned network.

The company whose name seems to be most frequently mentioned as a takeover candidate for ValueClick is called Think Partnership, (THK). Think Partnership (hereinafter THK) is in many respects similar to ValueClick, albeit a smaller version as it is most widely known for the affiliate marketing platform (Kowabunga) within its “network” segment and the lead generation operations within its “Direct” segment.

THK’s Kowabunga is a highly regarded player in the affiliate marketing space that has long been a thorn in the side of ValueClick, whose “Commission Junction” is the largest player in the affiliate marketing space. While Kowabunga is much smaller than Commission Junction, many high profile corporate names have either chosen Kowabunga over ValueClick’s Commission Junction when they started their affiliate program (like Microsoft and Yahoo Search Marketing’s affiliate programs ) or migrated to Kowabunga after testing the Commission Junction platform (like Intuit). Taking ownership of Kowabunga would make ValueClick’s Commission Junction not only the largest affiliate program provider, but also the “go to” provider for the largest names in technology, not to mention that the removal of a competitor like Kowabunga from the playing field might allow them to raise their percentage take on affiliate transactions.

While the lead generation operations within THK’s “Direct” segment are much smaller than ValueClick’s lead generation ops from a revenue standpoint, THK has actually had more success at maintaining strong margins while steering clear of Federal Trade Commission sanctions. Additionally, the specific niche’s served by THK’s direct segment (home based business owners and life stage niche marketing) would be complementary to ValueClick’s lead generation offerings.

Despite the obvious synergies of the THK businesses above with ValueClick, it is a third aspect that makes it most attractive to ValueClick. THK’s ValidClick AdExchange offers ValueClick an entry into the Pay Per Click space with what is arguably the most differentiated offering in the PPC space and also what is likely the fastest growing ad exchange. The ValidClick AdExchange platform combines a unique patent pending technology for eliminating click fraud combined with an exclusive technology alliance with Fair Isaac Corporation (FIC) that uses analytics based on artificial intelligence and patented profiling technologies that adapt to each click and conversion, scoring publishers on their ability to drive conversions for advertisers. This new exclusive partnership with the company whose FICO score has become the standard in the lending industry makes the ValidClick Ad Exchange that much more attractive to a company wanting to differentiate themselves from the pack in the PPC space. It has also caused many of the second tier networks to run their own ads through ValidClick’s Ad Exchange to take advantage of its Click Fraud protection.

Recent comments by THK management and our own channel checks in several verticals suggest that the ValidClick exchange is experiencing exponential growth in clicks, searches and revenues generated. In the verticals we tested, we saw more than 100% growth in Q2 over the record clicks and revenue achieved by the network during Q1 2008. This Google-like growth stands in stark contrast to the declines in revenue experienced by most of the other Pay Per Click search networks (including Miva) over the last few quarters as Click Fraud concerns seem to have scared more and more advertisers away from second tier PPC networks. These concerns appear to be making the ValidClick’s click fraud prevention technology and alliance with Fair Isaac that much more appealing.

Despite the success of the ValidClick network, THK’s stock has recently traded down to a historical low, with a market cap settling in the $27 million range. With its existing business pieced together by acquisitions totaling nearly $90 million over the last three years, several business segments that appear to be flourishing and a company campaign to divest non core assets that could raise cash greater than its existing market cap, we believe that THK might look like a tremendous bargain to ValueClick and more importantly, a quick entry into the PPC space with a unique offering whose technology solves the biggest problem (Click Fraud) plaguing the second tier PPC networks.

We believe that ValueClick is uniquely positioned to make waves in the Pay Per Click space if it should make an attempt to enter the fray. We also believe that the timing is perfect for such an entry. The current Yahoo conundrum that will likely result in only two of the big three Per Per Click networks surviving combined with the capitulation among investors in the small cap online advertising names makes the “perfect storm” and possibly a historic opportunity for a well financed player with a good name to stake a claim to be the new “first tier” player in this highly profitable space. ValueClick’s sterling balance sheet (over $160 million with no debt) and scale would likely be attractive to MIVA and/or THK’s management team if they are in fact entertaining offers. We believe that they are and note that both have recently announced steps to divest of assets that would not be appealing to a ValueClick or other similarly situated suitor.

We also note that timing is of the essence as there may be some increase in the valuations accorded many of the online advertising assets when Interactive’s (IACI) spin off is complete next month and they begin shopping with their $1.5 billion cash war chest and a stock currency whose valuation will be based on the prospects of Ask.com rather than many of the slower growth businesses that plagued IACI’s valuation for so long. It will likely take just one deal by IACI, CBS’s (CBS) recently acquired CNET or one of the other media players who would benefit from owning an ad network to make the valuations move back to historical norms - much higher than where the currently reside.

Several recent worldwide online ad spending projections indicate that the medium still has a lot of room for growth. Worldwide online ad spending will reach $65.2 billion in 2008, according to IDC’s “Digital Marketplace Model and Forecast.” The research company predicted 15% to 20% annual growth through 2011, when spending would hit $106.6 billion.

IDC said that online ads would account for nearly 10% of all ad spending across all media in 2008, rising to 13.6% by 2011. Nearly one-fifth of Western European ad spending will be online by that time.

“The long-term opportunity for Internet advertising can be seen in the disparity between per-capita spending,” said John Gantz, chief research officer at IDC, in a statement. “Total advertising revenues equate to more than $105 per inhabitant of the planet, while Internet advertising revenues are less than $50 per active Internet user.”

In May, Credit Suisse lowered its worldwide online ad spending estimates and forecast only modest growth in total ad spending for the next two years. The investment bank said the US and most other developed nations would actually drag growth down, thanks to phenomenal growth in developing nations.

Credit Suisse’s estimates of online ad spending as a percentage of total ad spending were very close to IDC’s: 10% last year and 12% this year.

The climbing ratio of online ad spending to total ad spending will help drive up the dollar amount advertisers spend on the Web.

eMarketer senior analyst David Hallerman has noted a number of reasons to expect continued growth in online ad spending in the US, which also apply to the medium worldwide. Among them:

Online ads are more measurable than other media, making them increasingly appealing to advertisers.The Internet audience is huge, so the simple process of advertising following eyeballs will lift spending.Internet ad prices are rising, thanks to targeting and other techniques, which can push up overall spending.

“US Internet ad spending is not impervious to the current economic weakness. However, those economic effects are more the case for display advertising than for paid search advertising,” said Mr. Hallerman. “Even so, the trend toward display ads, including video and rich media, continues to attract brand marketers as they shift spending from traditional media to the Internet.”

Nimbuzz according to TechCrunch.com has has raised $15 million in a second round led by Naspers/MIH, with Nimbuzz’s other major existing investor Mangrove Capital Partners also participating. It’s already had $10 million from Mangrove (the original Skype investor). Apparently deals with 10 major social networks and three operators are already on the table. The latter see these kinds of apps as a way of boosting data use and therefore revenues. Nimbuzz offers free mobile VoIP, conference calling, IM and group chat and photo and file sending across multiple IM communities, including Skype, MSN, Google Talk, Yahoo!, AIM, Jabber and ICQ, plus 23 social networks, including apps/widgets for Facebook and Myspace.

Primetime and scheduled TV are losing their impact as consumers create their own entertainment lineups. Digital video recorders (DVRs) and video-on-demand (VOD) allow viewers to watch content on their own schedule and avoid traditional TV advertising.

At the same time, the slowing economy drives advertisers to demand the greatest return on their advertising investments. With interactive digital platforms allowing more measurability, the business case for traditional TV advertising is becoming increasingly weak.

VOD would seem well-positioned to capture a rising share of ad spending, but the way consumers use it may limit its potential as an ad medium.

Most cable TV operators offer free VOD content in combination with pay-per-view options, but time-shifting with DVRs is proving more popular.

According to Comcast—the leading cable operator in the US with 14.7 million subscribers—the most popular free VOD content is karaoke, music videos and programs for children.

VOD’s ad potential is somewhat limited by use. An August 2007 study by IBM indicated that only 48% of US adult Internet users had used VOD.

eMarketer estimates that VOD is available in one-third of TV households today, and will reach over 60% of households by 2012.

Content is the big driver of VOD usage. ChoiceStream data from December 2007 shows there would be greater viewership of VOD if there were “more content of interest.” Notably, however, 57% of respondents said they would not watch more VOD even if the content were better. Clearly price, awareness and usability are also factors in VOD usage.

Increasing the VOD audience (and ad revenue potential) may depend in part on advertisers and marketers: Better content, supported by ads, combined with VOD awareness and education campaigns, could be part of the solution.

By the end of 2009, more than two-thirds of the US population—or 200 million people—will be going online.”Unfortunately, this potential audience for Internet ads is largely unenthusiastic about most forms of advertising, notably banners, rich media and the growing area of online video,” says David Hallerman, senior analyst at eMarketer and author of the new report, Behavioral Targeting Attitudes: The Privacy Issues. “A primary reason for their lukewarm attitude is Internet advertising’s irrelevance, with messages peripheral to their current interests and needs.”

However, with its promise of relevant advertising and greater revenues from ad inventory, behaviorally targeted advertising offers a ray of hope for online advertisers and Web publishers.

“And yet, collecting the visitor data needed for online ad targeting is raising concern among Internet privacy groups, the FTC, state governments—and, most importantly, consumers,” says Mr. Hallerman.

For the public, government agencies and the mainstream media, behavioral targeting can represent all the ways that companies appear to be violating individual privacy on the Internet.

As the FTC indicated in its report, “Protecting Consumers in the Next Tech-ade,” while behavioral targeting “may result in more relevant advertisements being served to consumers, it also may implicate data security and privacy risks if the underlying information used to target consumers is not adequately secured or is misused by companies in the marketing chain.”

The report went on to say, “Given the amount of information—personal and otherwise—about consumers that is likely to be collected, used and stored, privacy will continue to be a top consumer protection priority for the FTC.”

“While Internet companies argue that behavioral targeting benefits Internet users because it greatly increases the relevance of the advertising they see online, perception is reality,” says Mr. Hallerman.

Consumers are confused.

The second annual “State of the Media Democracy” study from Deloitte and the Harrison Group found that while 66% of US Internet users said they would click on additional Internet ads if they were better targeted and 67% would be willing to accept more ads in exchange for free and valuable content, a similar number—65%—called Internet advertising more intrusive than print ads.

Making a strong argument for behavioral targeting, a TNS Global survey commissioned by TRUSTe found that 72.4% of Internet users “agree” or “strongly agree” that irrelevant Internet advertising was intrusive and annoying.

“As people make the Internet an increasing part of their daily lives, privacy issues will become more of a battleground,” says Mr. Hallerman.

However, among marketers and Web publishers attuned to consumer concerns, a good portion of these issues can likely be resolved through a clear process of informed consent.

“In other words,” says Mr. Hallerman, “ask the audience for permission.”

Just like marketers have learned to do with e-mail.

Explore all the pros and cons of this controversial new advertising tactic, download the eMarketer report, Behavioral Targeting Attitudes: The Privacy Issues, today Source: emarketer.com

Most search engine markets are dominated by Google and there seem to be no real local competitors. In Russia however, a fierce battle for the search query’s of the consumers is going on. But when we talk about Russia then, there is no place for Google. Russia’s largest search engine Yandex, is the first engine that revealed a billion pages outside the .ru domain.

The leading Russian search engine Yandex has expanded its web index outside of Russia by indexing the first billion pages outside the RU domain, says Yandex’s webmaster blog. For example, when one makes a search for an English keyword on Yandex, the search engine will return one result from the COM domain (or other domain) and the other nine results from the RU domain. The ranking of search results is according to Yandex’s general search ranking rules with no particular preference given to non-Russian results.

Yandex has a web index of more than 4 billion pages, including 3 billion pages in Russia. ComScore recently ranked Yandex as the ninth search engine globally.

According to Yandex statistics, 15% of its searches are in a language other than Russian. That would imply that 15% of Yandex revenues from search ads could come from non-Russian searches. Google is number 2 in Russia with 31% market share of referrals behind Yandex with 44% market share, according to LiveInternet.ru.

By expanding its web index outside the RU domain, Yandex will likely seek to retain those of its users who usually switch to Google for searching information outside the RU domain.

How Google will overcome Yandex? Is Yandex a serious threat for Google? The answer is YES! Google has started a $ 250K per month advertising outdoor campaign. he company is launching “”Moscow 2.0,” which includes over 5,000 outdoor advertisements across Moscow. Yandex, with nearly 50% market share, is preparing a Nasdaq IPO. Google has around 31% market share.

As Google Inc. pushes to sell ads crucial to its revenue growth, some of its largest advertisers are growing angry with the way the company oversees its sponsored searches.

The problem is a tactic known as “piggybacking,” in which smaller advertisers use major players’ brand names, slogans or other trademarked words in the text of search ads to lure Web surfers to their own sites.

While Google and other search engines have policies against this maneuver, some marketers say the practice often goes unchecked. The brick-and-mortar world has long-established laws in this area, but the legal situation is less clear for the Internet and has only recently started to be tested in the courts.

 

Tensions over piggybacking have been simmering for a couple of years. Companies such as Marriott International Inc., InterContinental Hotels Group PLC, AMR Corp.’s American Airlines and Northwest AirlinesCorp. say the use of their names and slogans in the text of other companies’ search ads confuses potential customers and increases their cost of doing business. They are particularly upset with Google, which is the dominant player in the search business. It controlled 71.2% of the search market last year, according to research firm eMarketer Inc.

As a result, Google could face a backlash as it attempts to grab a bigger share of other advertising niches, including display advertising and video ads. Big advertisers say they may punish Google if they aren’t satisfied with the way the piggybacking dispute is dealt with. “This does play into our decision of overall spending — it has to,” says Michael Menis, vice president of global marketing services at InterContinental.

 

Adds John Gustafson, director of distribution and Internet strategy at Northwest Airlines: “If Google has an inability to help us resolve issues about abuses of our brand, that would impact our decision to participate in future forms of advertising.”

Last August, American Airlines filed a suit against Google in federal court in Fort Worth, Texas, seeking restitution for damages caused by trademark infringement on the search engine. The airline is asking Google to stop selling its trademarked terms to other advertisers. This practice is “utilizing our brand that we’ve built for more than 80 years for the benefit of someone else,” says American Airlines spokesman Billy Sanez.

Google says it is disappointed that the court denied its motion to dismiss the lawsuit. It believes the suit lacks merit. “Google’s trademark policy strikes a proper balance between trademark owners’ interests and consumer choice and has been validated by prior court decisions,” a Google spokeswoman says.

Google acknowledges that piggybacking occurs and says that when it gets complaints, it investigates the claims and tries to stop the practice. “We have a long-running policy where we don’t allow advertisers to use trademarked terms in ad text to avoid creating any user confusion,” says Richard Holden, a product-management director at Google.

The other main players in the search-advertising market are Yahoo Inc. and Microsoft Corp. Both say they have policies similar to Google’s.

The way search-engine advertising works, marketers bid on key words in a continuous auction. InterContinental, for example, bids on millions of key words a day from Google in 11 different languages. Among them are its own brand names, such as “Holiday Inn Express” and “Crowne Plaza Los Angeles.” When a consumer searches for any of the words, the company’s ad appears above or next to the results, depending on the amount the company bids and an algorithm Google uses to determine an ad’s relevance to a search.

Companies only pay Google for the key words if someone clicks on their search ad.

For large companies, the frustration comes when their names and other well-known phrases are used in the text of a search ad leading to an unrelated site. A recent Google search using the words “Marriott Atlanta,” for instance, brought up an advertiser-paid link labeled “Marriott Atlanta.” That led to www.hoteltravel.com, a discount hotel-reservations site. But a link on the site for a Marriott hotel room in Atlanta ultimately led to an error page. Marriott says the site isn’t authorized to use the Marriott name in its online text.

Hoteltravel.com didn’t respond to requests for a comment. The link on Google has since disappeared.

The piggybacking that Marriott, American and others are complaining about is not to be confused with another practice known as “conquest buys,” in which marketers buy a competitor’s term so that an ad for their own product appears when a consumer searches for the other brand. The difference is, the text of the ad doesn’t contain the competitors’ name or slogan. While companies have also protested this practice, Google’s policies allow it, unlike piggybacking.

Piggybacking is a big problem for marketers that do a significant amount of business online, experts say. If it is allowed to continue, companies seeking online visitors will be forced to pay more to advertise in search engines because rising demand will force up the cost of key words, says Eric Clemons, a professor at the University of Pennsylvania’s Wharton School who follows the search-ad business.

The companies interviewed for this article say they aren’t able to put a dollar amount on their claims of lost business as a result of the piggybacking. But concerns like InterContinental, which spends more than half of its online marketing budget on search ads, say they depend on these ads to generate sales. “Any research will tell you search is the place where people research travel,” Mr. Menis says.

A recent Google search with the words “Holiday Inn Orlando” brought up a sponsored link labeled “Holiday Inn Orlando.” It led to LowFares.com, an online travel comparison-shopping site. InterContinental Hotels, which owns Holiday Inn, says LowFares.com is not authorized to advertise using the Holiday Inn name.

LowFares.com says it bids on millions of search terms at any given time and often uses Google’s automatic system to generate its advertising copy. “What we rely on Google to do is to essentially stay within its own policies so that if a given key word or a search term that we are bidding on should not show up in the search ad, it doesn’t,” says Steve Yi, senior vice president of Oversee Marketing Services, which owns LowFares.com. LowFares.com says if it is notified of a violation, it immediately takes down the ad.

Some advertisers are demanding that Google and other search engines create an automatic system that will only allow advertisers to use other companies’ names and slogans in the text of search ads if they have permission.

But Google says its system works. “We are trying to balance advertisers and trademark owners and user interests,” Mr. Holden says.