Google Made Billions With Secret Change to Ad-Auction Algorithm, Witness Testifies (yahoo.com) 46
An economist testified that Google made billions of dollars in extra ad revenue starting in 2017 — by making a secret change to its auction algorithm that bumped their revenues up 15%. Bloomberg reports:
Michael Whinston, a professor of economics at the Massachusetts Institute of Technology, said Friday that Google modified the way it sold text ads via "Project Momiji" — named for the wooden Japanese dolls that have a hidden space for friends to exchange secret messages. The shift sought "to raise the prices against the highest bidder," Whinston told Judge Amit Mehta in federal court in Washington.
Google's advertising auctions require the winner to pay only a penny more than the runner-up. In 2016, the company discovered that the runner-up had often bid only 80% of the winner's offer. To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said, citing internal emails and sealed testimony by Google finance executive Jerry Dischler earlier in the case...
About two-thirds, more than 60%, of Google's total revenue comes from search ads, Dischler said previously, amounting to more than $100 billion in 2020.
In 2021 Google was also accused of running "a secret program to track bids on its ad-buying platform," according to the New York Post (citing reporting by the Wall Street Journal). A Texas-led antitrust suit accused Google "of using the information to gain an unfair market advantage that raked in hundreds of millions of dollars annually, according to a report."
And the Post's article also mentioned "an alleged hush-hush deal in which Google allegedly guaranteed that Facebook would win a fixed percentage of advertising deals."
Google's advertising auctions require the winner to pay only a penny more than the runner-up. In 2016, the company discovered that the runner-up had often bid only 80% of the winner's offer. To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said, citing internal emails and sealed testimony by Google finance executive Jerry Dischler earlier in the case...
About two-thirds, more than 60%, of Google's total revenue comes from search ads, Dischler said previously, amounting to more than $100 billion in 2020.
In 2021 Google was also accused of running "a secret program to track bids on its ad-buying platform," according to the New York Post (citing reporting by the Wall Street Journal). A Texas-led antitrust suit accused Google "of using the information to gain an unfair market advantage that raked in hundreds of millions of dollars annually, according to a report."
And the Post's article also mentioned "an alleged hush-hush deal in which Google allegedly guaranteed that Facebook would win a fixed percentage of advertising deals."
Google is evil, welcome to corporatocracy (Score:4, Insightful)
money is power, power corrupts, therefore absolute wealth is absolutely evil
watch as these corrupt self-serving unethical upper class people bring down our civilization because of unsustainable greed
classism is the real problem
Re:Google is evil, welcome to corporatocracy (Score:5, Informative)
They very well might bring down themselves in the process.
Secretly modifying bids to dishonestly extract extra money in auctions is fraud. SOME states allow the seller to also be a bidder, but it MUST be disclosed.
The penalties are quite savage. 20 year prison terms, and more.
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The only way rich get destroyed is if other rich lost money.
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He is going to be our next President, like it or not. There just nobody that can really derail the Trump train right now, and every inditement, every arraignment is just another blow from the persecutor's flogger or another thorn in Trump's crown of thorns.
I hope you are wrong. Because he has enough support with the loonies right now to take over the government and become a dictator. He might be our last elected president. Look no further than his brother Putin to see what the future holds for us with a Trump win.
2024 [Re:Google is evil, welcome to corporato...] (Score:2)
Wake me up when he actually sees handcuffs. Even though I don't like to state it, but he is almost certain to be President come January of 2025.
Hard to say. Right now, Trump indeed seems likely to be the Republican candidate (according to polling data [fivethirtyeight.com]).
But current polling results also seem to show Trump and Biden are running nearly dead even (to within the margins of error), so from the data so far I'd predict that the 2024 election is likely to be a very tight race.
But a lot could change that either way over the next year (quoting Neils Bohr: Prediction is very difficult, especially about the future.)
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The way I see it (Note, I'm not am american, I just get american politics yelled at me on twitter so I kinda keep a vague eye on it) a lot of its gonna depend on how the Supreme Court interprets Section 3 of the 14th ammendment which prohibits anyone who has participated in insurrection against the US from being pres. A *LOT* of lawyers think that prohibits trump from running again, including the federalist society (which all the conservative judges in the supreme court belong to) and while it might seem se
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You get your American news from weird sources.
A handful of fringe left noisemakers are proposing this, but it is essentially just noise, and there is almost no probability the any court in the US would make that ruling.
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Of course they'll bring themselves down in the process, but it won't be because of legal repercussions (they're mostly exempt from those). They are ultimately dependent on the society that they're strangling to death and when they choke the last breath out of it they'll find out that their wealth and power was derived from that society itself.
It's all so predictable and easily avoided. If they were able to be content with owning 90% of everything instead of demanding 100%, their little parasitic arrangement
Re:Google is evil, welcome to corporatocracy (Score:4, Interesting)
The writing was on the wall when they bought doubleclick.
Now to be fair. An ad exchange should only be "buy only" or "sell only", we keep treating these like stocks or real estate when we should be treating them as a farmers market.
Here is the "buyers market", I go to the buyers market to sell space on my website, anyone can bid if they are interested, but I'm not going to accept a bid below 1.00CPM. This is the problem with Google, is that they allow bids to plummet. So small websites see no incentive to actually sell their space.
Here is the "sellers market", this is a list of websites that actually want progmatic ad selection. Rich Media, Javascript, animations, whatever. A website owner specifies what they will allow, and someone who wishes to bid for exclusive ads on this site, gets them if they hit the minimum bid offer. If someone outbids you tomorrow, you can pay a higher "lock in my bid" rate, where the website will refuse all bids if you pay in advance.
Google operating both sides of this, results in them being able to manipulate things. They choose the best way to enrich themselves and give as little ad revenue as possible to the website.
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Re: Google is evil, welcome to corporatocracy (Score:2)
Nothing Google offers is absolutely necessary to the survival of people, people voluntarily enter into commerce with entities like that. Google could disappear tomorrow, besides a few people complaining, there is literally nothing they offer that someone else doesnâ(TM)t.
Terrible wording in article (Score:5, Informative)
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This article [theregister.com] says they "handicap the people with the high click probability" to make them bid more, and it also puts the distant 2nd place runner back in the race so they are willing to place a higher bid.
Helps but still not clear (Score:3)
Given that it seems this bidding process follows completely different rules to the way that a normal auction works there really needs to be a brief explanation of the process otherwise we lack the conte
Re: Helps but still not clear (Score:5, Informative)
truly useful, (Score:2)
thanks!
Re:truly useful, (Score:5, Informative)
These might also help :
"There’s two common kinds of auction those with multiple rounds where the final bid wins and those where everyone puts in the maximum amount upfront and the winner pays whatever #2 bid. The second type is much faster but incentivizes the auction house to lie about the #2 bid. Google did the second type and then got caught lying about bids. Doing so is really tempting but also generally fraud."
"Correct way: Winner bids $1.00, 2nd Place bids $0.80, Winner pays $0.81
New way: Winner bids $1.00, 2nd place bids $0.80, Google adds 15%* markup to 2nd bid, Winner pays $0.93.
*used as example, not a verified number"
https://news.ycombinator.com/i... [ycombinator.com]
Re: Helps but still not clear (Score:4, Interesting)
With Ebay though the auction is the product. Sellers want a market it place that will get them best prices, buys want both access to merch and an 'experience'.
Ebay's motivations are a bit different too. Sure the house gets a higher fee the greater the settlement figure is but at the same time Ebay has not real interest in just manipulating prices to sellers advantage. After all if the public perception ever became ebay auctions tend to highly over value items, the bidders would go away.
In Google's case the ad placement is the product. Its always in Google interest to adjust the game to garner the highest prices. Exactly none of the bidders are looking for an experience, they just want their ads run, and many/most of them are in fact software.
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Yes, in short EBay owns the auction marketplace and gets a fee from sellers to operate it for them.
Google owns the auction marketplace and is also the seller. Fox guarding the hen house.
Re: Helps but still not clear (Score:3)
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With Ebay though the auction is the product. Sellers want a market it place that will get them best prices, buys want both access to merch and an 'experience'.
I think that Ebay did the change they did because the proliferation of bots made the experience hell for normal users so they'd leave for other options, even if more expensive, and was rough on Ebay's servers with hundreds of bids for the same product at the same time right at the end of the auction period.
Giving buyers the 'assurance' that they're not overpaying(IE just barely beating the 2nd highest bidder) can help get them to put a bigger bid in in the first place, and that just speeds everything up. W
Re:Helps but still not clear (Score:4, Insightful)
You can read a little about the concept here: https://en.wikipedia.org/wiki/... [wikipedia.org]
I am not a game theorist, but I recently read about these because of smbc comic [smbc-comics.com]. The article is kind of short and doesn't give strong motivation. The Vickrey auction article is much more interesting. In this one, the winner also pays the second bid, but the wiki article proves the dominant strategy is truthful bidding (if you bid low or high, you are always worse off than if you had bid the item's real value to you).
https://en.wikipedia.org/wiki/... [wikipedia.org]
I'm sympathetic to the smbc comic. For decades I've wanted to get my friends to make an important decision with math and a handful of marbles, but haven't gone through with it.
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Part 2: There are a few additional points to make.
In a prototypical auction (shouting out prices), you also in theory don't pay your maximum bid. You pay (slightly more than) the previous person's maximum bid, since that is the number you voiced. You don't ever voice your true maximum, unless you are about to be knocked out of a bidding war. In that case, the true winner would pay your maximum bid (or rather, they will pay whatever they bid after your maximum). Though it looks different, that prototypical a
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Why does the winning bidder only pay the price that the runner-up bid? ... surely the better solution would be to charge them what they bid like a normal auction?
It is common around the world to pay to the price of the runner-up bid or just marginally more than it. In a traditional English auction where the auctioneer says "$50, I have $50, will anyone give me $55?" that's also a way for the winner to pay only slightly more $5 than the runner-up bid. Vickrey won the nobel prize in economics for proving that this kind of "runner-up price" is a theoretically optimum way for bidders to bid their own true estimates of the value of the item to them, rather than needing t
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t surely the better solution would be to charge them what they bid like a normal auction?
There's lots of types [cornell.edu] of auction [wikipedia.org].
4 Major (found out that I had the dutch auction definition wrong:
English: This is what you're thinking of. You start at the minimum bid. Bidders bid until nobody is willing to bid anymore.
Upside: You find who's willing to bid the highest price. Downside: It's potentially expensive, time wise, and you can get "bidding fever" where somebody pays more than they intended. Which isn't a bad thing to the seller...
Dutch: You start at some huge price, and lower it until some
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That article helps but still has bizarre bits of information in it. Why does the winning bidder only pay the price that the runner-up bid? I can see how that would mean that they would want the runner-up to bid more but surely the better solution would be to charge them what they bid like a normal auction?
Given that it seems this bidding process follows completely different rules to the way that a normal auction works there really needs to be a brief explanation of the process otherwise we lack the context to understand what the article is saying.
Because it's not a normal auction.
Say I go to a normal auction, I'm willing to bid $10 but I'd obviously like to go lower.
The item comes up, my competitor bids $7, so I bid $8.... and I won, no need to spend that extra $2 dollars.
Now same auction, but my goldfish has an appointment with the fin masseuse so I can't go in person and I send an agent in my stead. The agent doesn't simply bid $10 when the items comes up, they do the same thing I would do and bids the minimum necessary to win the auction.
When peo
Re:Terrible wording in article (Score:4, Interesting)
I'll have a go at summarising (my understanding):
- You bid $100
- I bid $110
On ebay, the auction would end with the price being struck as $101. Ie. my bid would be used to just about ensure I won, but won't use any more than that. That's how it used to work in Google too.
The change was to say "hmm... the highest price was $100, but coofercat _said_ he was prepared to pay $110, so we'll internally say n1ak's bid was actually $105, so coofercat has to pay $106 to win - if coofercat withdraws and decides not to go ahead, then n1ak will pay $100".
The whole 'handicap' thing is just confusing (IMHO). Essentially, Google was telling people they worked like ebay, but actually were ripping people off by working differently, at their own whim and weren't publishing the details.
It's been a long time since I played with Google ads, but back in the day I wondered if something was wonky with it. I was advertising something pretty niche, so I put in some pretty niche match terms - and unsurprisingly, they were all pretty cheap. Two days later, the least niche ones of all of them were suddenly a whole lot more expensive - it was as if someone could see what terms I was bidding on, decided some of them looked fun and bid against me on them. I couldn't prove anything of course, and actually, being so niche I got limited benefit from advertising at all, so pulled out.
My advice is: be very wary - very little of it is actually transparent.
Re: Terrible wording in article (Score:2)
I havenâ(TM)t bid on eBay for a long time, but from my experience (decades ago) you could set both a maximum and an increment, so you would increment your bid by $n until you had the highest bid or $max was reached. With eBay the fee for selling the item would be paid by the seller. It seems here the fee is borne by the buyer, which is more along the lines on what you see in art house biddings.
Secret and Hush Hush .... (Score:2)
...But unless the bidding companies know then it has no effect, and so they all knew - and so it's not secret at all
An actual shill bid by the auctioneer (Score:3)
Isn't this outright fraud? I know we will never see it in out lifetimes but it sure would be nice to see some of these assholes server actual jail time.
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It's a shill bid, but it's pretend made by the other competing bidder.
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Yes: the penalty should be jail time + a penalty to ensure that they will not do it again, how about: $1tn. In addition there should be an external team embedded at Google to inspect their algorithms to keep them clean ... although the likelihood of corruption/bribes would be high.
Re:An actual shill bid by the auctioneer (Score:4, Interesting)
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It's the same today. Running local ads for a local school for the past few months, prices are 1-2 USD per click. There are no competing ads at all.
Most people using Google don't care, since they're the product, and not paying for it directly. But the products they buy probably increase in price to cover the monopoly costs on marketing these days.
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It is and it is highly criminal.
The auction strategy has a name, and it's common (Score:2)
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Still being evil? (Score:4, Interesting)
I wonder if the recent "invalid traffic" situation with YouTube content creators who've seen their revenues slashed by up to 90 percent on unfounded allegations that they've been generating false traffic to their videos is just a further demonstration of Google's lack of ethics and their greed?
What better way to boost your profits than to tell creators that "one or more of your videos has received invalid traffic" and therefore we're reducing the amount we pay you by up to 90 percent -- yet ads continue to run with the same frequency on those channels as they did before.
Surely Google's not pocketing the difference are they? Nah... they'd *NEVER* do that.
These creators are not told which videos are the problem or where the "invalid traffic" is coming from but they are told it is the creators responsibilty to ensure that no invalid traffic is generated. Most creators have found no change in their analytics with the vast majority of their traffic coming from Google and YouTube itself -- but YT/Google's ears are closed and they simply tell the creators to fix the problem.
That's not what matters at all (Score:1)
What matters is whether Google broke any laws, not whether they made money.
If Google broke no laws, this "witness testimony" and the tongue-wagging here on /. have nothing to do with reality. Google is a pubilc company and their goal includes making a profit. If they found some algorithm that allowed a 15% increase in that profit it would be UNLAWFUL and a VIOLATION OF THEIR FIDUCIARY DUTY to their shareholders NOT TO implement it.
So, the dicussion about Google and "Do No Evil" -- not unlawful.
The discuss
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would be unlawful not to maximize shareholder value.
Can you cite the statue that requires a company to gouge its customers?
Isn't this fraud? (Score:2)
Google: Do Evil (Score:2)
Sounds just like politics, doesn't it? (Score:1)