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Google’s Unfair Advantage

(Updated)
Google’s Adwords is a fair system – with enough money you can outbid anyone and get top position … or .. can you?

Joe Kraus’s last blog post, It’s a great time to be an entrepreneur has become a much -quoted classic.  Part of his argument is how Search Engine Marketing changed everything, how one can now reach millions of small customers just buy buying the right keywords. Following this strategy a lot of startups spend most of their marketing budget to one company: Google.

Online collaboration company  Central Desktop followed the same path: frugal start and steady growth to profitability simply by having a solid good product and focused Adwords-based marketing. (They have  a really good integrated suite that I warmly recommend to small businesses as well as ad-hoc groups in need of  collaborative editing, groups, calendar, wiki, project management, tasks ..etc.)

It wasn’t until one of Central Desktop’s competitors, Joe Kraus’s very own JotSpot got acquired by Google that CEO Isaac Garcia started to investigate how Google plays its system against their own customers.

“You see, I’m not afraid of competing with Google – but I *AM* afraid of AdWords. Here is why……….
Google Cheats
Google holds the top advertisement (Adword) slot for the following key words:
intranet, spreadsheet, documents, calendar, word processor, email, video, instant messenger, blog, photo sharing, online groups, maps, start page, restaurants, dining, and books (somehow Amazon has managed to appear in the #1 ad slot for ‘books’).
For
spreadsheet, blog and video, in addition to squatting the premium ad position, Google Products also dominate three of the first four search results.
In such cases, Google Product Links and Ads can account for up to 25% of your viewable screen resolution – 30-40% for lower screen resolutions – almost guarantying that users will click on a Google Product over any other search results, sponsored links or text ads.
What this tells me is if you are trying to advertise a product that is competitive to Google, then you’ll never be able to receive the Top Ad Position, no matter how much money you bid and spend.

How successful do you think *your* ad buys would be if your competitor trumped your position no matter how high you bid your key words? “

His three questions to Google:

“1. How much does Google pay *itself* to claim the top ad position for searches relevant to its own products?
2. Does Google hold itself to the same minimum CTR thresholds for Ads placed?
(In case you aren’t aware – Google recently changed its Landing Page criteria; increasing keyword buys to $5.00, $10.00, $15.00+ for companies who’s Ads were not meeting a minimum (unknown) CTR.)
3. What alterations does Google make to its search algorithm to guarantee top rank for search results relevant to its own products?”

I think Isaac hit on something really big here:

“In the beginning, AdWords was hailed as the revolutionary platform that enabled small start-ups, mom and pop stores and businesses all around the world to ‘compete fairly in an open market bid system.’ It was written that “small businesses can now compete evenly with big business – it levels the playing field.”"

Yes, it levels the playing field – as long as Google itself has no interest in your particular field.  So if you’re a small business owner, startup entrepreneur, how safe are you?  Today you don’t compete with Google, but considering Google’s appetite for acquisitions chances are tomorrow you will.  Is Google abusing its monopoly *against* you?

Update (11/8): The Inside Adwords blog responds:

“…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. As does any advertiser, we aim to give our campaigns a budget which is in line with their value to us in terms of the increased traffic we might see. We actively monitor and manage the success of our ads by adjusting ad copy, keywords, bids, and so forth in the same way any advertiser who is concerned with their account performance would. That said, there are no special buttons to push or levers to pull that give our internal account managers special treatment or leverage.

Well, if I want to absolutely win a $10 item on eBay, I may auto-bid generously… $12, $15?   I certainly won’t bid $100.  Not that the price would reach $100, but eBay’s system will keep me in the winning position against all other bidders, who in a crazy bidding frenzy might drive my price up to .. $20? $30?  And, this being real money, I’d have to pay “too much”, above the value of the item.  Of course, if eBay as a company was bidding against me, they could afford that $100, or even $1000 bid – after all, it’s only “funny money”, just like Google bidding for Adwords.
Or, as ZDNet puts it:

“A Google AdWords self-promotion at Google.com, however, IS unique in a key way; The house is playing against the paying players.”

Update (11/8): Nick Carr’s When the auctioneer bids is a must-read.

Update (12/20): “Google recently emphasized they need to pay the same budgets as everyone else to advertise on Google using AdWords. What they might not have told us is that Google might simply not use AdWords in the first place… and instead, display a graphical “tip” Onebox on top of the organic results.“  Full story on Google Blogoscoped.

Update (7/7/2008)Ross Mayfield pondering on why he always gets outbid by Google.

Comments

  1. And this is news? Google is a buisness, not a noble charity organization serving a higher power. If Google would not give itself the top slots for their own products I would say they’re just plain dumb. This is like going to McDonalds and complaining because there’s no Whoppers on the menu (not really, but you get the point). Anyways, I still think Google is the best at what they do and I wish luck to all companies directly competing against them.

  2. I just got this email from the Google AdWords crew, I subscribe to their news list:

    Recently, we’ve noticed a few posts on other blogs commenting on the fact that Google advertises its own products or services using AdWords. We wanted to say a few words on the subject of why and how we do this, with an eye towards laying a few concerns to rest. Here’s Walter H., from Google Marketing, to fill us in on the details:

    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.

    As does any advertiser, we aim to give our campaigns a budget which is in line with their value to us in terms of the increased traffic we might see. We actively monitor and manage the success of our ads by adjusting ad copy, keywords, bids, and so forth in the same way any advertiser who is concerned with their account performance would.

    That said, there are no special buttons to push or levers to pull that give our internal account managers special treatment or leverage. Quality Score is automatically evaluated in the same way for our keywords as it is for any advertiser’s keywords. Likewise, the potential to show up in the top spots above the search results is the same for Google’s ads as it is for any other. We rely on the AdWords system to let relevancy and usefulness to our users be the driving force behind our ad placement. As such, we do not intentionally try to secure a top position. In fact, we generally aim for a more ‘conservative’ position.

    As was already mentioned, there are no algorithm changes to ‘smooth the way’ for Google’s ads — and the accounts of ‘competing’ advertisers (should there be any for particular keywords or Ad Groups) are never referenced in any way.

    We’re quite proud of the advertising platform we’ve built and it simply makes sense for us to use it. At the same time, the trust of both our users and our advertisers is of paramount importance. We honor that responsibility, and work hard to earn and keep that trust.

    Posted by Blake, Inside AdWords crew

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    It looks like our article yesterday (actually probably as a result of Erick Schonfeld’s article at Next Net Blog) made Googl…

  4. Anonymous says:
  5. When the auctioneer bids

    How many times have you searched for something on Google and found, in the shaded “Sponsored Link” box at the top of the list of results, an ad for a product offered by … Google? It happens fairly frequently for me, and every time I see it, it strike…

  6. Yes I agree with you, Google’s advantage in adsense is some sort of unfair, but I think google has the right to play the game with their own rules, because they play on their own field.

    Thank you for sharing this story with me !

  7. Anonymous says:

    GOOGLE IS C**P

    1. If you sell the same product as someone else and you type in the same keyword the same names always appear at the top. getting listed on google for any keyword is just left to these pathetic algorithms to list your site rarely works.

    2. the layout of google has not changed in many years. its still the same layout with paid links down the right and free on the left. surely it would be more advantagous to the users at least to have a or 4 column layout so at least you get to see more results per page. Also randomizing the free listing instead of showing the same names on the free listings at least other website owners will get the chance to have their site viewed.

    3. Google Sitemaps, yet another method of confusing people on how to get your site listed or ranked. very poor technical support information in the help documentation…. just leave it to the algorithm type attitude.

    4. Google has huge corporate companies who can out bid anyone smaller company selling a similar product or service.

    5. “If you cant beat them, buy them”. Thats googles attitiude to everything. If they are hogging the first places for the keywords for their own benefits then what they state in their documentation about not manipulating results is crap…. they clearly are.

  8. What I do know for sure is that Google at least does a very poor job of "policing" its rules and at worst purposely letting unfair competition to go on in its organic results so that to push businesses to spend money on the adword and content word department. Eg> One particular dentist has created over 20 different websites that appear on Beverly hills cosmetic dentist organic search results that he occupies 50-60 percent of each search result page. Other dentists will have to start bidding and therefore raising the cost of the adwords for Google. I have informed Google of this paractice. If they do not stop it, it means they are complicit.

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