Is Google Un-American?

I grew up on a steady diet of 1980s synth-pop, so I hope you don't mind if I open with a quote from retro popsmiths Missing Persons' song "Words."

"Something has to happen to change the direction.
What little filters through is giving you the wrong impression.
It's a sorry state, I say to myself.
What are words for, when no one listens anymore?"

See, we've got a battle brewing between Google (Nasdaq: GOOG) and American Airlines parent AMR (NYSE: AMR) and it's all about little filters, wrong impressions, and sorry states. The legacy carrier is unhappy to find Google collecting ad revenue from companies that are bidding on trademarked keywords such as "American Airlines."

To understand the situation a little better, fire up Google and punch in "American Airlines." Google's AdWords program serves up sponsored results along with the organic search-engine results. Online advertising accounts for as much as 99% of Big G's revenues -- it's clearly a big part of the Google model.

Your mileage may vary, but when I searched this morning for "American Airlines" (in quotes, but it works just as well without them), I saw several third-party ads. The most prominent ad, at the top of the page, is for AMR's own AA.com website. However, the column on the right features rival airlines and portals that promise discounted airfares.

The ads themselves don't feature the American Airlines brand. However, the ads wouldn't be on the page if the sponsors hadn't bid on the trademarked term. To be sure, I logged into AdWords and saw that I could bid on the term "American Airlines" for as little as $0.04 per click. (Minimum bids vary depending on ad quality, even within the same keywords.)

Is this right? Is this wrong? The only thing for sure is that a lot of money is weighing on the answer.

What words are worth
It's not just American Airlines. Go with "Disneyland" as a search term, and you'll find sponsored results for competing theme parks and ticket-brokering middlemen. "New York Yankees"? eBay 's (Nasdaq: EBAY) StubHub is there as a ticket reseller for the next home game. However, if you punch in "eBay" -- or "Yahoo! " (Nasdaq: YHOO) -- with the exclamation point -- Google won't populate the page with third-party ads.

It's a different ballgame, though, if you punch in "Yahoo! advertising," because that search item triggers ads for paid-search providers, whether you entered the term with or without quotes.

It is easy to see that Google could lose a lot of money if it caves in on these cases. If no one else is allowed to bid on "American Airlines" and other AMR trademarks, AMR has no reason to bid on it, either. It is the top organic search-engine result.

Google isn't the only one with a lot riding on this situation. Yahoo!, Microsoft (Nasdaq: MSFT), and Ask.com parent IAC/InterActiveCorp (Nasdaq: IACI) all have the same paid-search model: They sell ad spots based on keyword-bidding advertisers.

Now, before you land on the "Google is evil" side of the argument, realize that users are electing to go to Google for their search instead of punching in "AmericanAirlines.com" or "AA.com" into their browsers. Google has bills to pay, and it wouldn't profit from serving up ad-less landing pages.

What's the next step? When you search Amazon.com for a book about a company, will you get back results only of company-approved perspectives? When you're searching a social network for fellow employees, will disgruntled workers get filtered out?

Trademarks are important. I'm sure that someone in our legal department can't be entirely tickled to see the third-party ads that pop up when you search for Fool-related trademarks. However, it all ultimately becomes a matter of knowing where to draw the line.

You also have the argument that Google is a media company. If you are watching a television show about American Airlines, no one would expect the carrier to approve every ad that the network runs during the show.

From Missing Persons to missing keywords
In the end, AMR isn't the first company to go after Big G. It won't be the last. This may seem like little more than a passing story, but there are serious implications here for the search industry.

"The business issue American has with Google is not related to their overall business model," reads AMR's Friday afternoon press release, in explaining its position. "Rather, the dispute is centered on Google's process of allowing other companies to purchase the right to use American Airlines trademarks for Internet search."

That may be true, but when you get down to it, it's all about Google's business model.

© 2007 Universal Press Syndicate.