UPDATE 1-Overstock.com says Google penalty hurt sales

April 8 Fri Apr 8, 2011 9:42am EDT

April 8 (Reuters) - Overstock.com Inc said it will be at least two to three weeks before Google Inc ends the penalty period slapped on the discount e-retailer, hurting its revenue.

On Feb. 22, Google notified Overstock that it was penalizing the company for noncompliance with some of Google's search guidelines.

"As a result, we have dropped significantly in some Google natural search result rankings," Overstock said in a regulatory filing.

Google is not yet fully satisfied and continues to penalize Overstock in search results, the company added.

The lower Google natural search rankings has hurt sales during the penalty period to date by 5 percent and Overstock expects this to continue for the rest of the period.

This winter, Google penalized JC Penney Co Inc after it determined that the search engine optimization company the department store chain hired had used unauthorized means to make Penney's website rank high in searches.

Overstock shares were down 8 cents at $15.43 in early trade on Friday on Nasdaq. (Reporting by Nivedita Bhattacharjee in Bangalore and Phil Wahba in New York; Editing by Gopakumar Warrier)

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