On April 20, 2010, an explosion on the Deepwater Horizon drilling rig killed 11 platform workers and injured 17 others, while resulting in what is the largest offshore oil spill in U.S. history. The rig, which was operated by Transocean Ltd. (RIG), was hired by BP plc (BP), the owner/operator of the well, in order to access the reserves of the Macondo Prospect in the Gulf of Mexico (Anadarko Petroleum (APC) is also a minority owner of the mineral rights for this prospect and may also face liability for the disaster). Within a couple of days, a large oil slick began to appear at the former rig site. Initially, BP and the U.S. Coast Guard expressed optimism that there would be little or no environmental impact related to the explosion; however, in the months since, this tune has changed drastically.

As of this writing, the U.S. government estimates that between 51 million and 145 million gallons of oil have been spilled into the Gulf, causing a slick of at least 2,500 square miles and immense amounts of oil that are not visible at the surface. Both the environmental and economic fallout are impossible to gauge at this point, but the damage is likely on the order of tens of billions of dollars. Indeed, BP has already spent nearly $4 billion attempting to clean up, disburse, and contain the spill. Further damage has been done to the Gulf’s multibillion-dollar fishing and tourism industries, which have been hurt by a large-scale fishing ban and oil washing ashore along much of the Gulf Coast.

In an effort to manage the public relations fallout from the Deepwater Horizon disaster, BP has bought terms such as “oil spill” and “oil spill claims” on Internet search engines, such as Google (GOOG), Yahoo! (YHOO), and Microsoft-owned Bing (MSFT). As a result, whenever someone enters one of these phrases into an Internet search, BP’s disaster-response page is the first link the user will see.

Over the past few years, the Internet has become an increasingly important part of the lives of many people around the world. The average person’s response to a big news story is to conduct an Internet search to find more information. Thus, buying relevant search terms is becoming commonplace amongst Internet advertisers, since such practice often helps to increase companies’ visibility on the Web. As the Deepwater Horizon event has played out over the past few months, millions of search results have become linked to the tragedy. Therefore, having your link at the top of the page becomes very important, particularly given the impact of, and interest in, the BP oil spill.

For a company like BP, visibility is not the end goal with an advertisement like this, as it is one of the world’s largest corporations and already receives more than its fair share of ink. The company has stated that it purchased the search terms in order to make it easier for people looking to access impact and claims information on its website. BP has also added large red buttons on its homepage to draw attention to the claims and response sections related to the incident. All of this is part of the company’s overarching strategy to reduce public outcry, while protecting its brand. Surely, if BP hadn’t bought the search terms, someone else would have, perhaps a rival or a critic.

Clearly it’s in BP’s best interest to manage public response, and to portray itself in a good light. It is hard to run a successful business in which a large percentage of the population sees you as some sort of villain. While the company’s critics may view such a thing as a bit Big Brotherish, it is likely to become standard operating procedure for companies dealing with a crisis. The selling of search terms will probably become typical for other important events, too, as companies attempt to take advantage of marketing opportunities and search providers endeavor to augment their revenue streams.

Although companies that provide search engines, such as Google, Yahoo!, and Microsoft, are most likely to benefit from increased demand for targeted advertising in search results, contextual marketing can also help improve traffic to the websites of advertisers. Whether it is a large corporation seeking to exert greater control on its Internet brand, or react to a particular event, or a smaller venture seeking to build up its customer base, the purchase of search terms is likely to become a more important part of advertising. This type of marketing is cost effective, as the purchaser only needs to pay when its advertisements generate clicks, and tends to reach the types of customers that the advertiser is seeking, due to the use of targeted keywords.
We advise investors to pay closer attention to highlighted, sponsor links that show at the top of their search results. Knowing how companies are using the Internet to manage their brands can also reveal potential investment opportunities. In particular, smaller companies that can successfully use this platform to increase the scope of their business are likely to achieve strong growth.