Many advertisers were disappointed and angered last week when it
was widely-reported that Yahoo has changed its ‘Sponsored Search and
Content Match Program Terms’ to permit Yahoo to automatically make
modifications to the campaigns of its advertisers.

Section 3 of the Yahoo terms and conditions dealing with the Sponsored Search and Content Match search advertising programs detail the change:

OPTIMIZATION. In the U.S. only, for those advertisers not bound by an Insertion Order, we may help you optimize your account(s). Accordingly, you expressly agree that we may also: (i) create ads, (ii) add and/or remove keywords, and/or (iii) optimize your account(s). We will notify you via email of such changes made to your account(s), and can also include a spreadsheet of such changes upon your written request. If you would like any of such changes reversed, please reply to such email within 14 days of the change(s), and we will make commercially reasonable efforts to reverse the change(s) you specifically identify. Notwithstanding the foregoing, you remain responsible for all changes made to your account(s), including all click charges incurred prior to any reversions being made. It is your responsibility to monitor your account(s) and to ensure that your account settings are consistent with your business objectives.

In other words, Yahoo has reserved for itself the right to proactively ‘optimize‘ Sponsored Search and Content Match campaigns as it sees fit. And it’s a bit of a worry, for some people.
The changes to the terms and conditions were apparently rolled out in mid-2008 but it appears that advertisers were only emailed about it this month.

Needless to say, the advertiser reactions to Yahoo’s changes have not been, by and large, overly positive.

From blogs to message boards, few seemed to express enthusiasm for Yahoo’s changes. 

Andy Beal of the Marketing Pilgrim blog went so far as to write: “I am actually embarrassed for Yahoo.” Comments poured in.

One commenter, Al Scillitani, discovered that Yahoo was modifying his campaigns without permission back in December. According to a blog post published by Scillitani, Yahoo sent him notification of its new program after the modifications had been made, throwing into question the whether or not Yahoo was initially providing the notification of modifications it says it is.

I spoke to a number of Yahoo advertisers about the changes to Sponsored Search and Content Match and their experiences with it.

One, John Wieber of search management firm SEOMoves, stated that he was hit with nearly $4,000 in charges that he believes were a result of modifications Yahoo made to his campaigns. He told me that Yahoo increased maximum bids for specific keywords and added new keywords he wasn’t interested in “at inflated prices.” He eventually went to his credit card issuer after he did not receive a satisfactory response from Yahoo.

Other advertisers I spoke to, who preferred to speak off the record, painted a similar picture, although none reported such substantial charges or indicated that Yahoo exceeded their daily spending limits.

Another Yahoo advertiser I spoke with, who manages campaigns in-house for his employer, explained that Yahoo had created a new campaign containing keywords he believed were, in part, generated automatically using Yahoo’s keyword suggestion tool. He suspected that some keywords were selected based upon search volume and others based upon keywords that had been used previously elsewhere.

While this advertiser did not see any increase in spend and or decrease in conversions that were harmful, he was upset that Yahoo took it upon itself to add to his campaigns, ignoring the possibility that the keywords and ad copy already being used were being used for a reason. He also voiced a concern that most of the advertisers I spoke to voiced: by taking matters into its own hands and assuming that it knows what is best for their campaigns, Yahoo ignores the very specific requirements and restrictions that many advertisers have.

From keywords to ad copy, many advertisers want to maintain absolute control over their messaging and their branding. Sometimes it’s a necessity; advertisers often have contractual obligations with vendors and partners that forbid them from using certain keywords and ad copy.

I contacted Yahoo and asked about the changes to Sponsored Search and Content Match. Yahoo spokesperson Angela Watts explained by email:

“Back in June we changed the way that Yahoo! account optimization specialists can access and optimize advertiser accounts in the US. These changes started in the UK in November. By enabling Yahoo! service representatives to selectively optimize accounts, we believe we can help them achieve a greater degree of success with their search marketing campaigns.”

She told me that accounts are optimized on a daily basis “in tune with dynamic changes in the marketplace” and reiterated that Yahoo notifies advertisers when changes are made, giving them the opportunity to reverse the modifications by responding within 14 days.

While Watts did admit that “in some cases, account optimization can increase the value of the leads provided to advertisers through Sponsored Search,” she stated that Yahoo never exceeds the daily spending limit set by the advertiser and that if unwanted campaign modifications result in charges, Yahoo will issue a refund in most cases “provided the advertiser is acting reasonably and fairly.

We asked Andrew Girdwood, Head of Search at Bigmouthmedia for his take on Yahoo’s new policy:

“So many Yahoo paid search accounts are terribly set up because the media planners behind them neither understand Yahoo Search nor care to learn. Yahoo must have yearned to show advertisers the success properly structured accounts could become. Bigmouthmedia commonly finds huge benefits can be won for clients by undertaking a wholesale restructure of Yahoo accounts after picking a campaign up from a media buying agency.

But, he added…“Yahoo is daft for so bluntly announcing that they would ‘fix’ accounts whether the account holder wanted them ‘fixed’ or not. All Yahoo has managed to do is further endanger the trust and fragile confidence search marketers may still have in the engine.”

Given the concerns many of the advertisers I spoke with had, I was curious to find out whether or not Yahoo’s actions might raise the possibility of legal action.

I spoke with Ira Rothken of the Rothken Law Firm about legal issues Yahoo’s changes may create. Rothken is a California-based attorney who has been involved in a number of high-profile technology legal cases.

When it comes to whether or not Yahoo’s changes to the Sponsored Search and Content Match terms and conditions are permissible under law, Rothken explained that transactions between businesses generally have less protection than transactions between businesses and consumers. Many consumer safeguards are not available in business-to-business transactions because the law assumes that businesses, no matter how small, operate in a more sophisticated manner than consumers.

Any legal dispute over Yahoo’s changes to its terms and conditions would hinge upon the legitimate expectations that exist between Yahoo and its advertisers, industry norms and whether or not Yahoo handled the updating of the terms as it had stated it would. Even if the terms and conditions seem to disproportionately favor Yahoo, it is quite possible that the new terms could pass legal muster, Rothken told me.

While Yahoo’s business practices – no matter how upsetting to advertisers – might be permissible in the eyes of the law, the level of involvement in its advertiser’s campaigns that it is choosing to create could be far more problematic.

I asked Rothken what might happen if Yahoo added keywords to an advertiser’s campaign that resulted in a trademark infringement lawsuit, which is one of the questions brought up by an advertiser I spoke with. Rothken responded that this is an “interesting issue” and that Yahoo’s “business model could be in jeopardy” if Yahoo gets too involved in campaigns.

While Yahoo, like most companies in the online advertising space, includes robust liability limitations in its terms that attempt to place most of the liability burden on advertisers and limit potential damages, if Yahoo added keywords or ad copy that resulted in a lawsuit against an advertiser, it could potentially find itself named in the lawsuit, especially since it is a big target with deep pockets.

Being named in a lawsuit over keywords or ad copy could force Yahoo to cause the advertiser to indemnify it under the Yahoo terms and conditions but, as Rothken explained, many small advertisers would likely not have the resources to indemnify Yahoo, creating a separate legal dispute between Yahoo and the advertiser.

Rothken raised the possibility that as Yahoo gets more involved in advertiser campaigns and its level of discretion increases, the chances of it being considered a ‘de facto fiduciary‘ could also increase. This means that the courts could possibly hold Yahoo to the same standard as a fiduciary. Fiduciaries are held to a higher standard of conduct and trust, as they are acting on behalf of another party.

Finally, by selecting keywords and ad copy, Yahoo risks losing its immunity under Section 230 of the Communications Decency Act, which provides entities that publish the content of others online with immunity from legal action taken over that content. While Section 230 is not a defense to trademark infringement, it can be used in state causes of action, including unfair business practices.

In short, Rothken felt that Yahoo’s decision to exert a high level of control over campaigns is a “foolish approach.”

Which begs the question – why is Yahoo doing this? Why would Yahoo expose itself to legal risk? Why would it implement changes that it should have known advertisers would be upset about? Why did it do so in an opt-out fashion instead of an opt-in fashion?

Yahoo’s struggles in the search advertising market have been well-documented and its shuttered deal to outsource some of its search advertising business to Google (which it believed would add $250m to $450m in incremental operating cash flow within 12 months) highlighted its woes.

While Yahoo’s Watts stated that “at the heart of these changes is our goal to help advertisers optimize their accounts to their fullest potential,” Yahoo’s struggles might lead one to suspect that its financial situation played some role in its decision to get more involved in its advertisers’ campaigns.

Most of the advertisers I spoke with informed me that Yahoo’s changes, while upsetting, had little to no real impact on their overall business because they were already using Yahoo sparingly. One search advertising management firm I sought comment from informed me that it had stopped using Yahoo years ago.

Yahoo might believe that helping advertisers manage their campaigns will make its offering more compelling, but it’s hard not to look at the experience of an advertiser like John Wieber and conclude that Yahoo’s decision likely has something to do with increasing campaign performance for its own benefit. Indeed, it’s difficult to avoid the observation that there is an appearance of conflict created by Yahoo granting itself the privilege to modify its advertiser’s campaigns. Providing assistance and optimization to advertisers who request it is one thing, but giving itself the ability to help manage campaigns that may already be managed by sophisticated advertisers (and firms that are hired by companies to manage their campaigns) is quite another.

Time will tell whether or not Yahoo’s changes to Sponsored Search and Content Match will benefit advertisers or its bottom line. Judging from the reactions in the blogosphere, it seems that the changes were not received well. And amongst the advertisers that I spoke with, Yahoo’s changes only seem to have validated their decisions to limit Yahoo spend in their search advertising budgets.

As such, it appears that Yahoo’s next CEO, when it finds one, will have a lot of work to do winning back the trust of some advertisers and convincing them that Yahoo should have a meaningful place in search advertising budgets.