Complaint: GoTo favors sister firms

Kelly Britt, president of Autos.com, claims that his request to be the top-ranked bidder for about 75 search terms on GoTo.com was shunted aside when Cars Direct, a new-car site that launched last week, made a similar request and got top billing. idealab also is an investor in Cars Direct, which located in the same building as GoTo.com.

But Jay Gallinatti, vice president of sales for GoTo.com, called it a coincidence that Cars Direct got higher placement, noting that the service lists advertisers in the order of their bids per lead and that Cars Direct pays more.

GoTo.com lets online merchants say how much they'll pay for each referral by the shopping search engine. The bidding sites are listed in order of how much they'd pay, with additional, non-paying merchants also included in some categories. Bids range from a penny per clickthrough to more than $2 on some categories.

"Idealab has financial stakes in both companies and it's using our search terms to their own company's advantage and our disadvantage," said Britt, who has created a Web page that outlines his complaints. "That is where we see a huge conflict of interest."

"Even if it were a total coincidence, it would still seem incorrect that GoTo.com's own sister company is allowed to bid against customers," Britt added.

GoTo.com's Gallinatti said the service treats all customers alike.

"We don't treat any idealab company differently than any other company," Gallinatti said. "This happens every day-- somebody outbids somebody else. It's a coincidence that when [Britt] was in the process and he requested his bid to be increased, that another person in [GoTo.com's] office was working with Cars Direct."

Britt, who also uses GoTo.com for his Web-hosting business, said he believes in its approach.

"The model they have is a good model. Obviously I think there's a problem in the way it's being executed," said Britt, who has filed complaints with the California Attorney General's office and the Federal Trade Commission. The California agency said it has no ongoing investigation of GoTo.com but that a complaint filed last week would not have appeared in its system yet.

For starters, Britt wants GoTo.com to disclose that affiliated companies may bid for placement on the service, but he really thinks bids should be disallowed from firms that idealab has invested in. Without that, he said, GoTo.com could use bids from related companies to inflate prices for placements on the service.

Founded in March 1966, idealab is an incubator for Internet companies, that are funded and supported by Gross, an entrepreneur who made millions from an accounting software firm sold to Lotus and later founded educational software firm Knowledge Adventure with his brother.

Gross now invests in start-ups. Idealab companies include City Search, which went public last month as Ticketmaster Online-Citysearch, eToys, and Wedding Channel. He also invested in Shopping.com, which had a controversial public offering for which the underwriter later was ordered to pay $400,000 in damages.

Autos.com is a 3-year-old firm with four employees, owned by Britt. It has a marketing arrangement with Auto-by-tel in which Autos.com furnishes leads on buyers in return for information in Auto-by-tel's used car database.