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Will New Regulations Kill Pharma Ads On Google?

This story was written by Joseph Tartakoff.
Google executives have singled out health as an ad category that has been performing well. "Health, for example, has seen strong growth in the U.S. and it's now one of our largest verticals," Jonathan Rosenberg, Google's senior vice president for product management, said in his introductory remarks on the company's earnings call Thursday.

But government scrutiny is threatening that golden goose, and Google may have to get creative to figure out a solution. Earlier this month, the Food and Drug Administration warned 14 major pharmaceutical companies that their search-engine ads were misleading, largely because of their brevity. Unlike more traditional ads, the FDA said the online ads failed to include risk information and often simplified, into short phrases, the types of ailments for which the drugs could be used. The FDA ordered the pharmaceutical companies to stop running them.

Asked by an analyst about the impact of the FDA's warnings, Rosenberg said, "We are working with the advertisers to try to figure out how to get their ads in compliance, and that's certainly going to take some work. I would say that pharma is the largest component of total revenue in that category. So I think we will figure that out with the advertisers and move forward."

One problem for pharmaceutical companies is that there are limits on the length of search ads on Google (NSDQ: GOOG). Titles can only be up to 25 characters, and the description lines as well as the display URL are limited to 35 characters each. During a second call, Rosenberg was asked how easy it would be to get around those constraints. "It wouldn't be ideal if we had to modify the user interface to accommodate substantially more information," he said. "Can it be done? Yes. Is it easy? Maybe not. We're going to find a way ... to make it work and you could do it within existing creatives if you wanted to."

For the moment, though, it appears as though the pharmaceutical companies have simply responded to the FDA's warnings by pulling their ads.


By Joseph Tartakoff