back to article Google spanked for bidding on its own ad auctions

Google likes to argue that its search advertising empire is immune to anti-trust claims because it doesn't set ad prices. AdWords, the company says, is an auction where advertisers bid for the placement of paid links. But the reality is far more complicated. One issue is that in some cases, Google is bidding in its own …

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  1. John Tserkezis

    I don't quite see the fuss?

    Television networks do this all the time, they litter their advertising space with self advertisments of their own programs and such.

    However, I won't be fooled into thinking they're anything other than just that : Just more bloody ads.

    Either way with me, I flter Goolge ads, and don't watch television outside of a PVR, so I don't get ads in the first place. Not in the way THEY want to deliver them to me anyway.

    For all the anti-freetards out there, screw you. I'll get my ads in a controlled manner, when I want them, in the manner I want them, on the exact subject I'm interested in. Not when some marketing retard thinks it's a good time for me to get them.

    So there, deal with it.

    1. Kevin 6
      FAIL

      Slight difference

      TV ads are not auctioned they are sold at a set price. So if they decide to run a ad for their TV shows they are not running up a bill from their advertisers.

      Google pretty could be doing something closer to shill bidding like on Ebay in a way. They know how much an advertiser has bid, and can run up their own bid to the point their advertiser will be bidding max to drain their set amount of cash to blow on ads pe rday faster than normal, and after that let their own run more.

      1. Anonymous Coward
        Anonymous Coward

        re

        You really think those half time at the Superbowl commercials are first come first serve? A company like IBM or Coke or something would have those reserved decades in advance if that was the case. There are very definitely situations where TV ads (the best airtime one) are auctioned to the highest bidder, just that it isn't an open auction.

        The TV company goes to company A and says "how much would you pay for this?" then company B, C, D, E and gives the contract to the highest bidder.

        Keeping on top of the ads list on Google is like the Superbowl. It is one very viewed very selective spot. They want it and that is their own business.

        Maybe if you'd prefer they could just jack up everyone elses prices arbitrarily, which would be fully within their right.

    2. Anonymous Coward
      Flame

      Spot on

      Exactly, TV networks are a classic example here. BBC which is supposedly a publically sponsored no-ads TV network advertises its own services and programmes at the public expense like there is no tomorrow.

      1. david wilson

        @AC 05:50

        >>"BBC which is supposedly a publically sponsored no-ads TV network advertises its own services and programmes at the public expense like there is no tomorrow."

        At least regarding trailers, while they can sometimes be annoying, especially if repeated too frequently or in poor contexts(*), it does seem fair enough to inform people about stuff that is going to be broadcast.

        It's not advertising in the traditional sense - "Come and [pay to] consume our wonderful product", more a case of "You've already paid for this, so if you want it, here's where to find it".

        (*Like the Rugby World Cup (or similar) that was pushed relentlessly on Radio4 by a trailer which seemed to be trying to suggest it was the most important event in the entire history of humanity.)

  2. Adrian 10
    FAIL

    What do they have to do?

    If they _gave_ ads to their internal departments then many more people would be ticked off. If they shared how the systems worked, then they would be manipulated. <sarcasm>Maybe they should never grow their business outside search to keep people happy.</sarcasm> There is no perfect solution, but there are far bigger fish to fry than this.

    So when a 'noted blogger' (seriously, what is a noted blogger!!!) - says it is a conflict of interest, they'd have to just roll their eyes and move along. I don't like working with our Finance department. However there really are reasons, especially around accountability of spend, for having marketing accounts for seperate departments. Meh...

    1. Lou Gosselin

      Re: What do they have to do?

      I thought the article was thorough, but anyways...

      When any advertiser starts advertising on google, clearly (however the secret bidding works) the other advertisers will have to start bidding more to keep their visibility. This is no different if the new advertisers are invented by google.

      Google should ensure that, when placing it's own ads into the system, they don't not interfere with the bidding price for other advertisers. Otherwise that manipulation is at odds with the stated fairness of their ad auction process.

      Of course, a healthy free market normally prevents a single entity from overcharging (since customers can easily leave). However a 90% google market share doesn't give advertisers much choice.

      1. This post has been deleted by its author

  3. Mad Dave

    All search engines run ads to inform users about services that they provide

    Uhhh, so whereabouts on https://ssl.scroogle.org/ are these ads?

    Can't Google be sued for false advertising here, in the UK at least?

    1. heyrick Silver badge
      FAIL

      @ Mad Dave

      It's not a bona fide search engine. It's a Google repackager.

    2. Jeremy 2

      Erm... No.

      "Can't Google be sued for false advertising here, in the UK at least?"

      Erm... No. False advertising is when you lie or make claims you can't justify. Crucially it has to be in an advert, hence the "advertising" bit of "false advertising"

      So assuming you were talking about them using the AdSense system to advertise themselves, no, they aren't necessarily lying, it's just that they are (maybe) in conflict of interest. There's a difference.

      Alternatively, assuming you were talking about Google saying "all search engines run ads" when in fact, Scroogle don't, it was a statement from the company PR office, not an advert. There's a difference. Again. Also, Scroogle aren't really a search engine, are they? It's an interface to a search engine. Not quite the same thing.

  4. Bill Coleman
    FAIL

    "No out of pocket costs" "funny money"???

    what about the opportunity cost of losing advertising revenue that would have been generated form external customer purchase?

    However, unless they can prove that their bidding departments don't have access to the bidding engine the aligation of potential for stacking the deck unfairly using inside knowledge is valid. Even if they aren't using this advantage to bid strategically they shouldn't be playing in the same game they are responsible for monitoring.

    If they really want to play fair, they need to contract an external marketing firm with an approved budget to do their bidding (pun absolutely intended).

    1. Ian Michael Gumby
      FAIL

      @Bill, its not that simple..

      "what about the opportunity cost of losing advertising revenue that would have been generated form external customer purchase?"

      Its not that simple...

      I know that the GAAP rules have changed since I took some accounting classes on a whim when back at University....

      The issue is something like this...

      Google Nexus wants 2 million dollars to advertise their product on Google.

      They bid up the adwords... They 'spend' 2 million dollars out of their budget to Google.

      Google Adwords bills the department for the 2 million.

      In the overall scheme you have a 2million dollar expense on one department, against a 2 million dollar 'revenue gain' in another. So its a wash. At least that's the argument the author is making. (Note: This is an over simplification even if real money did change hands the net result is about the same.)

      The net result is that if someone like Moto wanted to advertise their 'Droidxxx' phone against the same key word, they have to raise their bids against Google. And its a blind bid.

      In terms of accounting, you can't 'account' for immaterial things like 'opportunity cost'.

      In terms of revenue... there isn't a 'loss' .

      This is very much akin to Ebay's shill bidders.

      Suppose you want to be a shill bidder. You list a product. You use a shill bid to inflate the bids.

      On most items, the buyers end up paying more for an item because of the shill. On the chance that the last bid is the shill bidder, then the seller is out the fees Ebay charges to host the auction. If you do this enough times, you make more money than you lose.

      Same thing here.

      The only nit to pick with the author is that since Google is a publicly traded company, there should be an outside auditor reviewing the books. Cross payments like the one used as an example should be flagged.

      However, if we look at the big 4??? (Used to be 8 but that has been shrinking due to acquisitions, and things like Enron killing Anderson and such...) How trustworthy do you think they are when they consider that Google pays their salaries?

      Its a FAIL not that the article is bad, its pretty much spot on. But that Google lacks transparency and so that we have to take them at their word 'do no evil' which may mean that getting advertisers to pay more for their services and more cash to the shareholders really isn't evil.

      After all, as Schmidt points out... you can always go somewhere else. ;-)

      1. Anonymous Coward
        Anonymous Coward

        re

        Lack of transparency?

        Most companies on the Fortune 500 list do something like this with their own business. Google is coming out and stating it to the world audience. That is the definition of transparency.

        To compare this to an example most people can understand better... say your name is Tom and you own Tom's Grocery Store. You make your own in house brands like every other grocery store, but also sell the national brands. Coke and Pepsi pay you a shelving fee to have a set amount of space in the pop aisle. In order to make you Tom's Cola more competitive, you add an entire second pop aisle, give Pepsi half of one aisle, Coke half of the other, and fill in the rest with Tom's Cola.

        Is that a conflict of interest? You own the production, you own the retail, you decide to give yourself something that you charge others for. That is your own damn business. If Coke and Pepsi don't like it, they can pull their product out. That's what freedom is. If you don't like it, go live in Iran.

  5. Anonymous Coward
    Grenade

    In other auctions

    it's called shilling, which is illegal in most places.

    1. BristolBachelor Gold badge

      shilling

      But I thought that shilling was where you put in fake bids to drive up the price.

      Now if Google really has real ads (for the google phone or whatever), and bids in the auctions to place those ads, then I don't personally see that as shilling, but I'd agree that it is a very fine line.

      Of course what they should really do (and might even do) is just place their own ads first without any need for bidding, and then auction the ad slots underneath. That may even be what is happening from reading this article, because it seems that all the blogger noted are that Google has it's own ads.

      1. Just Thinking

        Would that really work?

        "Of course what they should really do (and might even do) is just place their own ads first without any need for bidding, and then auction the ad slots underneath."

        I am not sure that would be a fair solution either. Suppose I bid at a level which guarantees me the top slot. Then Google come along and take the top slot for themselves. I get the second slot, but still pay exactly the same amount for it.

        The only cost to Google is the loss of revenue from the bottom slot, which gets pushed out.

        Would I not have the right to feel a bit ripped off?

        Now if Google were selling slots, not auctioning them, they could say "sorry, we've taken all the top slots, you can have second slot and here is some of your money back" - that's fair enough.

    2. Danny 14 Silver badge

      no

      Its only shill bidding if they have knowledge of the other bidders. If it is indeed a closed system and their "marketting" is bidding blind (ala other companies) then it is fine. Obviously *proving* this will be difficult and highly naive

  6. Anonymous Coward
    FAIL

    Ebay sellers get huge fines when they do this

    So why do Google consider themselves to be above the law? They are artificially hiking the bids.

  7. Donn Bly
    FAIL

    It isn't shill bidding

    Shill Bidding is when someone bids on an auction to drive up the price, with no intention to pay, for the purpose of making someone else pay more. That is not what is happening here. The situation would be closer to having a reserve on an auction item, saying that I've got 5 items, putting a reserve price on one of them and not telling you the reserve price before or after the auction.

    Does Google have inside information on how their system works? Of course, that fact should be obvious to anyone.

    Is it in any way a conflict of interest to advertise on your own network? No. It is stupid to ignore your own network and place ads on your competitors networks.

    If there are 5 ads, and even if google bids so high on their own auction that they are first, that still leaves 4 remaining slots for other advertisers, and their placement within those four or the amount spent is not affected.

    All that happens with the taking one of the slots is that a scarcity of resources situation can develop, where the demand exceeds supply. What happens in those cases? In a free market, the costs rise.

    If all of this were done in secret, there might be a story. However, every advertiser that competed with Google on their own network knew exactly what they were doing. They voluntarily entered into agreements with Google knowing that there would be competition.

    There is no story here.

  8. Alex Wells

    Question

    Genuine one for any ad-types out there:

    As one post above suggests, if Google were to display a separate section above any other ads on a page as a Google Products section, clearly defining those that they provide and third-party ads, would this be against the law?

    The only reason I can see not to do the above would be that it slightly smacks of elitism. Other than that surely they can do what they want on their own websites - even if they display a similar product's advert in a separate location?

  9. Anonymous Coward
    Grenade

    I dunno...

    I can see all of your points, but google has long since stopped being just a search engine years ago and is nothing more than an internet commercial. And since they are in the business of SELLING results in searches, I find it extremely shady of them to participate on key words that their customer base are bidding on.

    Google have some pretty scummy things in the past couple of years, why would anybody be shocked if it were found that they were inflating prices of the very product that provide? If it were fixed price, then hey, I'd say fair game as all businesses need to have a predictable profit margin. But in what is supposed to be to the highest bidder? No... That's like an auctioneer bidding on objects that he already owns, and then claims the fee as booked revenue, to the shareholders.

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