> 2. Search ads use this placement as a form of extortion. If you run, say, Best Buy, you shouldn't have to buy search ads for "best buy", because obviously you're the best result. However, they have to, because if they don't, the search engine will sell ads to their competitors using their keyword, so people searching "best buy" get "Circuit City" as the top result instead. (Yes, I chose that reference in part because I don't want to shame any real current companies in this example for sleezy practices.) And since users click the top result (the ad), not the first organic result, Best Buy ends up paying for every click for every user who goes through Google/Bing/etc. to get to Best Buy.
One thing to note is that the cost of the ad is based on the landing page relevance (and even more so for branded terms), and so in your example Best Buy would be able to buy the ad for the "Best Buy" keyword for pennies (a rounding error on their SEM campaign, I'm sure), while Circuit City would have to pay a whole bunch for the "Best Buy" keyword.
Given that, I don't mind it so much. It's a good way for a competitor to get their name out there, but it's not really a sustainable practice long term for them. There's built-in pressure favoring the incumbent on their own terms.
Bear in mind, Best Buy should pay zero pennies for each of the millions of people trying to reach their website. It's absolutely inexcusable for a search company, which also owns an ad company, and also happens to run the web browser everyone's using, to create a system that basically taxes all attempts to visit a business's website specifically.
Honestly, what Google and Microsoft and such are doing in this case is trademark theft. They are selling the search result for a trademarked name they don't own, and when the actual trademark owner wants to be found by their own name... they have to pay for it.
I don't know who is going to file the case, but sooner or later, someone should, because it's a slam dunk.
One thing to note is that the cost of the ad is based on the landing page relevance (and even more so for branded terms), and so in your example Best Buy would be able to buy the ad for the "Best Buy" keyword for pennies (a rounding error on their SEM campaign, I'm sure), while Circuit City would have to pay a whole bunch for the "Best Buy" keyword.
Given that, I don't mind it so much. It's a good way for a competitor to get their name out there, but it's not really a sustainable practice long term for them. There's built-in pressure favoring the incumbent on their own terms.