Google quietly raised ad prices to boost search revenue
theverge.com
theverge.com
Prohibited in California:
* Cause or allow any person to bid at a sale for the sole purpose of increasing the bid on any item or items being sold by the auctioneer, except as authorized by Section 2328 of the Commercial Code or by this title. A violation of this subdivision includes, but is not limited to, either of the following:
* (1) Stating any increased bid greater than that offered by the last highest bidder when, in fact, no person has made such a bid.
* (2) Allowing the owner, consignor, or agent thereof, of any item or items to bid on the item or items, without disclosing to the audience that the owner, consignor, or agent thereof has reserved the right to so bid.
In a consolidated market disclosure is a water sandwich.
Fantastic
The only thing I can imagine is raising the minimum bid, but this would also result in less ads being shown (may still be overall beneficial but not a simple price increase).
There are some lawsuits that allege that Google was effectively cheating before then, by sort of manufacturing a shill bidder, with privileged access to everybody's bids, that turned it into something closer to a first-price auction (https://www.wired.com/story/google-antitrust-ad-market-lawsu...). The quotes from within Google look pretty bad, e.g. one Googler allegedly wrote: "Doesn’t that undermine the whole idea of second price auctions? I.e., the assurance that you can bid the maximum you’re willing to pay with no negative consequence. But if the publisher manufactures a floor based on your bid to get you to pay more than the second price, this principle gets violated. It’ll transform the system into a 1st price auction where the bidder has a strong incentive to bid LESS than he’s willing to pay. (Only just enough to win.) I don’t think that’s desirable for either side in the long term."
Google... disputes this (https://blog.google/outreach-initiatives/public-policy/ag-pa...). I guess we'll see.
Example: On search results, if all bids are 0.01$, then it’s worth showing no ad, because it will annoy the customer to have low-relevance ads. But what is the ceiling? 0.10$? 1.00$? Sounds reasonable to have a ghost bid which represents the weight of customer fatigue.
I think the issue that the floor varies depending on google sets and there’s no visibility to how they do this.
If there’s only one bidder and the minimum price is $1 for one ad but $0.10 for another, why is that? It’s because google knows that one person can pay $1 while the other won’t.
It hasn’t been a proper auction for many years and is really just whatever google wants to charge. Because they have monopoly pricing power, customers don’t have any real alternatives to search ads.
It would be like if there was one magazine that had 90% of all readers and they charged whatever prices they wanted.
No impact on Google Search - is that still the case?
Even if that's true, it's still an auction, with real competition and bidding. And it's not only about price, it's also about the quality of the ad and the quality of the advertiser.
Yes, absolutely, if the court can sort through the unfathomably complex layers of rules of real-time ad auctions and show that Google did something illegal, they should be held accountable.
But isn't it bizarre how everyone's so hot and bothered by a possible 5% to 10% swindle, meanwhile:
- Questcor bought the rights to Acthar Gel, which treats infantile spasms, a rare form of childhood epilepsy. Questcor raised the price of a vial from $40 to $23,000.
- Valeant bought diabetes drug Glumetza and raised the price from $800 for a 90-day supply to over $10,000.
Here's an industry that routinely runs 1000% arbitrary price increases, with no competition, while holding people's lives hostage. Seems like we should be far more outraged about that than an unproven, speculative, 5% to 10% issue.
No it is not bizarre at all. Honestly with this reply my response would be "How much is Google paying you to say this", but sadly it is likely you are shilling for them for free.
Now, maybe you are only able to focus on one thing at a time, but I do believe the average person can hold multiple opinions over multiple subjects at the same time, and while on a site about technical issues, complain about the technology companies implementing bad policies.
Acthar Gel is prednisone with a claim of less side effects. Interesting it got approved in the early 1960s and was grandfathered in and didn't need to provide trials so many questions exist around if it's any different from prednisone anyways. Either way patents have expired and a generic maker can make this.
You can be mad at both, either or none. But companies being shielded by patents doesn't really apply here so it's hard to generate outrage
It’s clear from Facebook for example that they have dramatically lowered the bar for what can advertise recently.
Bidding against a larger pool of advertisers would increase the clearing price of the auction.
This former executive just testified under oath that they change the auction rules without telling advertisers, and do so in ways that increase Google's revenue specifically in order to cook their quarterly SEC filing numbers and mislead investors into thinking the ad business is healthy.
The executive also testified that they've fallen far behind Meta and Amazon on ad campaign quality and revenue.
edit: The bottom of this article explains one of the mechanisms they use. The top bidder gets second place, and the second bidder gets top place. This increases their ad revenue on average (tricks like this get them 5-10%, they think they could take 15% because of their monopoly power):
https://www.msn.com/en-us/money/companies/google-tweaks-ad-a...
So... tl;dr: Their ad business is based on fraud built on top of other fraud.
He didn't even talk about the pop-under / youtube fraud that was reported a few months ago.
Each of the following guarantees YouTube makes to advertisers is demonstrably false:
- video ads will be displayed prominently
- video ads will be displayed on high-quality, reputable sites
- audio will be played back
- if the ad is over 5 seconds there will be a skip button that the user can click on, and the ad impression doesn't cost anything if the user skips it. (In many cases, the ads are rendered with an occluded or missing skip button.)
The difference between their claims and reality is responsible for a mid double-digit percentage of YouTube's revenue.
But there is literally no one who understands it all, so I'm sure there are ways.
For example for the keyword “foo” google sets the minimum bid at $1. I set my max bid at $5. There’s only 5 bidders so we all pay $1.
Google ups the minimum to $2 and it’s under our max bid so now we all pay double.
That’s how.
If it is not a refactoring, a UI/UX redesign, or a wholly new ad product, then most likely it affects average prices of running ad campaings. Even if you think it does not, maybe you slipped in a coding bug. So before rolling out your change, you canary it and measure how much it changed stuff. A dumb raise in ad price will cause bad stuff for conversion costs, so it'll be a no-go.
Yeah, Ads Googlers perform a massive numbers of these price-affecting canarying and rollouts yearly, and it's not about raising minimal bid prices that folks ITT think of. Even if Google didn't support automated bidding strategies, there would be other considerations, for instance hourly budgeting. Not diving into details.
There are a lot of VPs at Google.
Now if everyone is increasing budgets, prices of goods, ad spend, that story would make more sense. But that would correlate to whole market movements which honestly makes sense for something of this scale
> Don’t most companies have budgets?
Yes
> Wouldn’t raising prices just cause companies to buy less?
Not necessarily, the "ad-spend" typically remains a fixed budget until a given ad-campaign is complete.
The kicker is basically the cost per ad is increased, which means the budget for an ad-campaign is consumed more quickly. Thus, for example, rather than an ad-campaign lasting 4 weeks and generating X number of impressions, it lasts 80% of that time with 80% the impressions. Thus, even though the revenue is fixed per ad-campaign, Google would be able to cycle through more ad-campaigns
> I feel like folks don’t just increase spend when prices go up, when it comes to ads.
Depends on the company. In all probability the ad-spend would remain fixed and the companies just get less return on that spend (as an aside, the ROI for ads is highly debated to begin with)
This is, in fact, companies buying less (advertising), which is what I took the parent comment to be asking. It certainly isn't spending less.
Google increases ads 5% or 10%
Agency Y reports 5% or 10% decrease from last quarter. Company X goes well that's not great. Agency Y makes changes, Google changes back 5-10% change, next quarter it goes up. Company X goes great!
Google just made 5-10% extra an entire quarter.
Rinse and repeat.
Basically 5-10% is nothing, nobody would really notice. General traffic would probably change 5-10% every quarter, same with spending habits and other factors.
At one point though, it isn't profitable to market there anymore and I move onto something else, which wouldn't be what they want I would assume? That's where the ad "market" comes into play. The market decides the price supposedly? Is the argument that there is nothing else to move on to when they fudge the price?
They being sold less product for a high price and their tools to identify that are manipulated opaquely.
Setting aside all the challenges south multiple devices lagged purchasing etc there are a lot of sales processes that take a digital lead and convert it to real human contact so attribution is very difficult
Google obviously tracks lots of people through multiple devises, because they are in eccosystem.
I have been trying to recruit participants for my academic observational health study. My ads get incorrectly flagged as clinical trials and there seems to be no way to reach anyone who could override it. I also wanted to use a specific advertising strategy, which is only available via Google's poorly documented desktop software. Facebook Ads, while far from ideal, are much easier to set up.
They don't have any incentive to improve the product, only to increase revenues (e.g. by raising prices).
Even if you choose "custom bids" for keywords the default will be $1 or $3 depending on the ad type.
Of course, thousands of people accepting the defaults results real-time bid levels rising across the board for everyone.
How is anyone supposed to design products when customers don’t consider their money to be scarce? And why do we not expect Amazon to not take advantage of it?
It’d be like if I was selling a used bike on Craigslist and I said “default price $10k” and then people were like okay guess I’ll just pay way too much money
The other group getting burned are desperate passive income newbies sitting on a pile of junk from Alibaba and grasping at anything which might move the needle on sales. To pay for campaigns, they'll even take out loans from Amazon Lending or predatory finance partners like Parafin Cash Advance, which take a percentage of your gross sales every other week.
Self published authors are also getting tricked by Amazon suggested bids, high default budgets, and ridiculous default levels for custom bids.
Amazon is laughing all the way to the bank.
And why isn't the answer also take Google to your state attorney for fraudulent and anti-competitive practices?
If organic doesn't work, it's because you are not ready, ads won't fix your issues.