Consumer WebWatch, a project of Consumer Union, has released a study entitled: “False Oracles: Consumer Reaction to Learning the Truth About How Search Engines Work.”   It reports its major findings as:

1. Most participants had little understanding of how search engines retrieve information from the Web or how they rank or prioritize links on a results page.

2. The majority of participants never clicked beyond the first page of search results as they had blind trust in search engines to present only the best or most accurate unbiased results on the first page. As a result, two-in-five links (or 41%) selected by our participants during the assigned search sessions were paid results.

3. Once enlightened about pay-for-placement, each participant expressed surprise about this search engine marketing practice. Some had negative, emotional reactions.

4. All participants said paid search links on search and navigation sites were often too difficult to recognize or find on many sites, and the disclosure information available was clearly written for the advertiser, not the consumer. Search engine sites that were perceived to be less transparent about these related disclosures lost credibility amongst this group of online consumers.

What is described as industry reaction is here.

 UPDATE:  The study is an ‘ethnographic’ study in which four cultural anthropologists spent an average of 6 hours each with 17 pre-screened ‘experienced web researchers.’  The study itself discusses the choice of method, and points out that this approach allows for in-depth understanding of how a small group of subjects behave.  Of course 17 is way too small a number for this to be considered a representative sampling.  This study does, however, come on the heels of a previous Consumer Union study of 1500 respondents, 60% of whom did not know that search engines accepted fees for placement.