Google Responds to AdWords Accusations

An anonymous reader writes "Google has issued a statement on the Inside AdWords Blog. Based on the thoroughness of the statement and the use of the word 'precedent' in the second sentence, it appears that the Google PR team huddled with the legal team to get their point across." From the post: "Being rather proud of AdWords as a means to effectively advertise one's products or services, it seems natural to use it ourselves. Since it's a common practice across the industry for companies to promote their own products and services through their own web presence, there is much precedent to do this. It's important to note, however, that our ads are created and managed under the exact same guidelines, principles, practices and algorithms as the ads of any other advertiser. Likewise, we use the very same tools and account interface."

Nice

[Anonymous Crowhead]

They probably set the max per click they'll pay to $10000. It's not like they have to pay for it.

And they get unlimited money to price clicks...

[xxxJonBoyxxx]

It's important to note, however, that our ads are created and managed under the exact same guidelines, principles, practices and algorithms as the ads of any other advertiser.

I think they forgot, "...only we have unlimited play money we can allocate toward each search phrase, so we can ensure Google ads always beat out the paid ads from the unwashed masses."

Except that it's internal "funny money"

[sdo1]

It's internal book keeping money. Funny money. No real cash changes hands like it does with between other advertisers and Google.

-S

Think about it...

[TheSHAD0W]

When Google uses this "play money" they lose the opportunity to make money from outside. It *is* an advertising budget; without it, Google would beat out EVERYTHING, but its revenue would trickle to a crawl. The best way to play the game would be to allocate a budget just like it was using someone else's service; that keeps everything under control.

Common Sense

[X43B]

I don't get what all the furor was about it in the first place. Has anyone watched any television channel out there?

NBC does a crap-ton of promos for their other shows as does every other station.

I don't get why a company can't use their own products to promote themselves.

Also I don't get the monopoly argument. Google--Yahoo--MSN Search is no where near the dominance that Windows--EveryoneElse is.

Also part of a monopoly is barriers to entrance. It is so incredibly brain-dead easy to stop typing google.com and start typing yahoo.com or newsearch.com if one day I don't like to use Google. There is no OS creator that can make it that easy to switch OS's.

1) Google doesn't have a monopoly, there are real viable competitors with real market share and it is incredibly easy for new compeitors to enter the market

2) Every company in the world uses their own products to promote themselves

MOD PARENT UP

[brunes69]

It's the exact same dillemma TV networks have. If they spend too much advertising time advertising their own shows, then they don't make enough money from REAL advertisers. But if they don't spend enough, no one knows about their new shows.

I don't see who Google's situation is any different AT ALL. They very likely do the same thing TV networks do, the station has its own "budget" of time they can allocate to promos, and they don't exceed it.

Re:Common Sense

[FunkeyMonk]

To take this comment a bit further -- not only does NBC do a "crap-ton" of promos for their own shows, but they do it alongside ads that they're selling to other companies.

If I buy a Nike shirt, it has a Nike logo on it.

What surprises me most about this whole thing is that Google even feels a need to respond at all!

Re:Classic Obfuscation

[leoc]

Out of curiosity, I wonder if the accountants at the SEC ever investigate the ads TV stations play for their own shows during prime time?

Re:Classic Obfuscation

[Myopic]

In fact yes they pay themselves *exactly* the highest rate for those adwords, because "paying themselves" is the same as saying "not getting paid by someone else". I mean, when google takes an adword, they are no longer paid for that adword by the person who otherwise would have paid the most for it. It is possible that google literally pays itself, but even if it doesn't, it still costs them in lost revenue, and this point is surely not lost on their accountants.

Re:Enron-like crash looming?

[krbvroc1]

Perhaps, but they will also list the same amount as an expense--thus the amounts would cancel out. That is why when you due your due diligence you look beyond the press releases.

One huge differnce...

[hal2814]

"It's important to note, however, that our ads are created and managed under the exact same guidelines, principles, practices and algorithms as the ads of any other advertiser. Likewise, we use the very same tools and account interface."

But Google knows their own search algorithms. I'll bet if I were privvy to the same knowledge, I could make AdWords ads that rival Google's. They play by the same rules but only they know the rules.

Re:Nice

[E++99]

They probably set the max per click they'll pay to $10000. It's not like they have to pay for it.

Actually they would. The ads that show up on Google search are the same ads that show up through their Ad Sense program on other people's website. So if they bid $10000 per click, they'd end up paying that (half of it, IIRC, and keeping half) for clicks on other web sites.

And they still pay when it's on their own web site, though not as much. They force another ad out of the #1 spot, and they force the bottom ad out altogether. That's less click-through revenue for them.

It's important that this is an auction

[jtappan]

There is an important difference between what Google is doing and what television stations do when they run ads for their own shows: the TV stations don't sell their ads in an auction market (at least not usually).

If Google bids for AdWords (either with funny money or somehow with real money) then it is bidding against its own customers in an auction for its own products. Bidding in your own auction ("shill bidding") has long been considered a fraudulent practice.

Re:Really? Strange that 'spreadsheet' would give..

[Assmasher]

Their not tight lipped about their criteria, they're tight lipped about the exact algorithm involved (understandably so), but it still doesn't explain how they rank #1 for spreadsheet. Seriously.

Remember when Google released 'Scholar'? The very next day (this is something other people critical of Google adwords like to mention) somehow, with very few links to this new product, the word 'scholar' had Google showing up as #1.

Yeah, sure they play fair ;)... It's a fair coincidence that ALL of these words show Google as #1?

intranet, spreadsheet, documents, calendar, word processor, email, video, instant messenger, blog, photo sharing, online groups, maps, start page, restaurants, dining, and books

Some? Yes, all? No way. Not spreadsheet, not documents, certainly shouldn't be for e-mail or instant messenger.

Re:Nice

[maxume]

Assuming you aren't heavily back-ordered, the opportunity cost is going to be relatively small. The same holds true for Google; unless I am horribly misunderstanding it, they are still charging the second and third place bidders quite a bit for spots 2 and 3, so they are missing out on whatever the bid is for spot 4(actually, it looks like they show ~8 ads for 'spreadsheet, so spot 8) and whatever amount the losing bidders would have paid to move up a spot.

I bet they manage the opportunity cost very aggressively, seeing as Adwords is their core business.

Re:MOD PARENT UP

[Tim C]

The television analogy is wrong because the TV networks don't sell anything other than ad time.

They don't see DVDs of their shows, and licence merchandising rights? The ones in the UK certainly do.

Re:It's important that this is an auction

[Anonymous Coward]

Shilling is used to raise the bid. This, on the other hand, is to outbid everyone. That's not really shilling. In a normal auction, who wants to win their own item?