Did J. C. Penney Trick Google With Search Optimization?

Includes: GOOG, JCP, SAMC
by: Paul Zimbardo

James Segal of the New York Times wrote an excellent investigative report this weekend detailing how J. C. Penney’s website (NYSE:JCP) was the top search result on Google (NASDAQ:GOOG) for various queries. Some of the search terms mentioned in the article include “dresses,” “area rugs,” “furniture,” “grommet top curtains,” and “Samsonite (SAMC) carry on luggage.” Yes, J. C. Penney ranked higher than Samonsite for its own products.

To summarize the article, someone created links to J. C. Penney’s website using these keywords on a variety of websites to create the appearance that J. C. Penney’s website was more popular than it was in reality. One such website was completely unrelated to the product. While not illegal, such tactics (link schemes) are highly frowned upon by Google as they effective manipulate Google’s search algorithm. J. C. Penney has denied involvement in the event.

Based upon the New York Times’ research, J. C. Penney could have attracted almost four million visits per month just from being the number one search result for “dresses.” Obviously not all of those visits will have led to purchases but this was likely a catalyst for J. C. Penney’s “significant increases in traffic and orders for the key holiday shopping periods,” according to company spokeswoman Kate Coultas. After reading Mr. Segal’s article, I would be anxious ahead of J. C. Penney’s next earnings release as it will not have the boost related to this traffic going forward.

While this entire situation is a potential blemish for J. C. Penney, Google is also shown in an unfavorable light. I have the same question that Mr. Segal poses:

“WHY did Google fail to catch a campaign that had been under way for months? One, no less, that benefited a company that Google had already taken action against three times? And one that relied on a collection of Web sites that were not exactly hiding their spamminess? [sic]”

I believe Google’s Matt Cutts, the head of the Google Webspam team, who says that the failure relates to the cat-and-mouse game that Google has with “black hat” optimizers.

Mr. Segal poses a more cynical interpretation:

“Here’s another hypothesis, this one for the conspiracy-minded. Last year, Advertising Age obtained a Google document that listed some of its largest advertisers, including AT&T (NYSE:T), eBay (NASDAQ:EBAY) and yes, J. C. Penney. The company, this document said, spent $2.46 million a month on paid Google search ads — the kind you see next to organic results.”

When Mr. Cutts was presented with such a hypothesis he gave a “categorical denial.” Google has taken “corrective action” and new J. C. Penney results are appearing as low as the 70th result. It is illogical for Google to compromise its integrity for short run revenue but it is worrisome that Google’s core business can be disrupted with such apparent ease.

Disclosure: I am long GOOG.