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Google's Silent Monopoly (Or How Much Does Google Pay For It's Own AdWords?

blog.centraldesktop.com — 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?

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  • mitchgroup, on 10/12/2007, -14/+13Excellent analysis. How long will it be before everyone stops being enamored with that which kills?
    • tweaked, on 10/12/2007, -8/+4Ha! Google ads occupy two of the adwords slots on my digg view right now. Isn't that something.
    • hoppdawg, on 10/12/2007, -5/+4Yeah!! Look up and to the right two inches. Case in point.
    • op12, on 10/12/2007, -0/+24A google story with google ads....it's almost like the ads were relevant to the story content!!
    • undersky, on 10/12/2007, -2/+7now finally a solid reason to buy google stock!

      btw, op12: well said.
    • iamexcite, on 10/12/2007, -2/+13Take a look at some of the people commenting anti-Google on this story... no diggs (or just one... this article), no profile pic, no friends, etc... and only one comment.

      metrix, mitchgroup, vrhans... list probably goes on. Seems spammy. It seems to me Central Desktop is a little worried that Google will be competing with them at some point... the examples given in the blog post aren't even accurate (see the link a few posts down, or check the terms live).
    • zwtang, on 10/12/2007, -8/+0Yeah!! DFDFDF ADFAF Look up and to the right two inches. Case in point.
    • ywong137, on 10/12/2007, -2/+0Small mom-and-pop pez dispenser merchants had better watch out, as I'm sure eBay gives its own pez dispenser auctions top listing positions in their search results!
    • franksands, on 10/12/2007, -0/+3Of course a google story has google ads. The ads are content sensitive, remember?
    • OmegaNine, on 10/12/2007, -0/+1Come on, does anyone expect google to put up ads for Yahoo? This is a mute point. If I own Ford I am not going to advertise for Chevy.
    • Azur2, on 10/12/2007, -0/+1@iamexcite: Well spotted. It sure seems as if those accounts have been created specifically to slag google over this.
  • vrhans, on 10/12/2007, -16/+9I'm shocked to find that Google does this and I'm not particularly naive (or so I thought...) This is something that is *quite obviously* unacceptable behavior from a search engine.
    • jwyles, on 10/12/2007, -3/+8Unacceptable maybe, but unexpected? I think not.
    • hoppdawg, on 10/12/2007, -2/+7But it is their search engine ...and people have the free choice to use it or not.

      Also, they aren't trying to make money off of these placements (except for the possibility you may click an advertisers link), they are offering links to a bunch of great free products: like Google docs & spreadsheets, financial, maps, email, video, calendar, start page, etc... They are also doing it at the expense of lost adsense revenue from customers willing to pay for those high placements.

      Great article, though!
    • aywwts4, on 10/12/2007, -1/+12Google doesn't need to allow a single advertisement for a competing service on their site, They could just link to bad reviews for the competitors product if they wanted, Its THEIR site. Note the possessive.

      Its perfectly acceptable. How often do you see advertisements for Fox News, Fair and Balanced on MSNBC, Nobody would think thats "unacceptable" Thats just good business.
    • undersky, on 10/12/2007, -3/+8Yes, the core difference between Google and Microsoft Windows monopolies is this: People PAID for their Windows OS while Google Search is FREE.
  • walkingalone, on 10/12/2007, -6/+3well written
    but too skeptical
  • draconum, on 10/12/2007, -6/+10Too skeptical huh?

    Everyone complains about MS and loves Google these days, but really, the buy outs and broadening of focus, as well as the 'bundling' that occurs seem to be no different and no better. Google's advantage is, nobody believes that they have any ill intent!
    • MiddleGirth, on 10/12/2007, -4/+7Do no evil? That's like me saying Eat no Fat.
  • metrix, on 10/12/2007, -11/+16Precisely true!

    MS Windows + "IE on desktop" = Monopoly
    Google Adwords + "Google's product on top of spots" = Monopoly 2.0
    • undersky, on 10/12/2007, -5/+11MS Windows = $$$$
      Google Search = FREE
    • iamexcite, on 10/12/2007, -2/+6"monopoly" = single seller (or consortium), multiple buyers. Seller has the ability to price-fix.

      What do you think would happen if Google suddenly decided to triple the price of all their ads?
    • koko775, on 10/12/2007, -2/+4Web services aren't tangible objects. There is only marginal costs for selling additional products. Price fixing is a problem when the competitor simply can't produce at a low enough price. Servers should be easy for a company to come by if they have the traffic to match Google's (and a sensible business plan, duh).

      As has been said before -- Google is free. Nobody pays to search or expects to. Nobody pays for ads or expects to either - the "price" is having them on the page they're giving to you. Price fixing? Give me a break.

      No computer depends on google services. Don't wan't picasa? Install something else. Don't want gmail? use something else. Don't want gtalk? Use jabber or something else. Don't want google calendar, spreadsheet, or documents? Use their respective MS or OSS alternatives. Want a coherent, integrated platform? You have a choice, and its name is Google.

      This language might get me modded down (or up, *rolleyes*), but seriously. Don't give me this bundling *****. Computers by default don't explicitly need Google to function, and retailers don't have to pay google for licenses to use it. How is google analogous to microsoft when its "crime" is completely different in nature?

      And at the risk of using the same tired argument as many OSS enthusiasts, users have choice - they can walk away from google and use/create something better. The user/independent business decides she/he/it needs google. This is not the case for Windows. Ultimately, this article fails to take into account the progress of internet business since Bubble 1.0 -- products have become services, and as a result, benefit from the coherence this so-called "bundling" gives them.

      Article takes shots at google that frankly aren't warranted. As for Adwords? Maybe he's right, maybe he's not, but we'll see if or how much Google's clients care about such things. After all, its Google's ad service, to some degree (let's say...to the point that it's not evil ;) they have the power and the right to use it for themselves.
    • mickoes, on 10/12/2007, -0/+2Well, at least we're not playing with monopoly dollars.
  • dono169, on 10/12/2007, -4/+15This has been proven to be innacurate:

    http://blog.outer-court.com/forum/78519.html
    • bbatsell, on 10/12/2007, -1/+8Read through the comments of parent's link. This post is debunked and the author posts in there as well (and comes across rather negatively, if I do say so myself).
  • diggfilter, on 10/12/2007, -7/+7the author also backed-up his claims with screen shots of the search queries on the same blog.

    http://www.centraldesktop.com/isaacgarcia/googleresults
  • oOLiquidNightOo, on 10/12/2007, -9/+2i posted this earlier:
    http://digg.com/videos_educational/EPIC_2014_The_Future_of_News

    if you haven't seen the video before, it's worth a watch. the video speculates on the future of "news". the video is google related.
  • alexlr, on 10/12/2007, -1/+15Consider this: When Google gives itself the top ad slot for a search term, it denies itself the revenue of a third-party advertiser who might have paid for that slot. So really, Google pays exactly the same rate as everyone else.
    • auratus, on 10/12/2007, -5/+2Not necessarily. They can still take the money and just move everyone else down while taking the slot they want for free.
    • undersky, on 10/12/2007, -0/+6auratus:
      Not true. People who paid for the top slot will not be moved down. Their ads will still be displayed as the top ad, just not at the same instance when Google is at the top slot. Maybe another page with the same AdWord context will display the top-slot paying client the top slot.
  • woodsja, on 10/12/2007, -1/+10When you read your local newspaper do you complain that it doesn't advertise for another, competing newspaper?

    If the people at google are smart (their track record says they are) they have a cost-benefit of how much they make for click-throughs to their own product. As long as someone is willing to pay more than that I bet they'll get their ad placed.
    • lastberserker, on 10/12/2007, -0/+2Yes, if they take money from their competitor for a front page ad I _do_ expect them _not_ to post this ad in classifieds section.
  • egotripping, on 10/12/2007, -1/+2Googles own *ads* are in a different spot. So what? Shouldn't the customer be given a choice?
  • Vandel405, on 10/12/2007, -1/+10"1. How much does Google pay *itself* to claim the top ad position for searches relevant to its own products?"
    It is called opertunity cost. If you offer to pay $1,000 dollars for 1 ad, and google, instead "sells it to themselves" then they just payed $1,000 for it by not taking your $1,000
    • undersky, on 10/12/2007, -0/+8What you said was completely true. Some people would confuse the point by saying that, "But Google can still take their money and not place the ad..." That is not possible unless Google commits fraud.
  • geronimo, on 10/12/2007, -7/+4Sounds like something I've been talking about for years. Finally this gets more press. At this point things have gotten absurd with google analytics. I have to laugh at the people who use google analytics, gmail, adwords, adsense, and now google checkout. You are giving Google an immense amount of information! I wouldn't trust anyone not even my mother with that kind of data. Can you imagine, "Here mom, I make this amount every day, aren't these profits huge?" She'll be hitting you up for money every day. You realize a google exec can look at your cost per acquisition, keyword hits, CPC, CPM, and decide whether or not to increase profits by cutting you out?

    I've been at places where this Moral Dillema is brought up. I left immediately when there was talk of competing against customers. But Google has done exactly this and we still think they're totally innocent. Free email sites? Replaced by gmail. Ebaumsworld, other video sites? Sorry, google is into that now. Now how stupid would it have been for Ebaumsworld(or whoever - just an example) to show google ads when in the future google comes along and competes with them. I think google has innovated but having top placement certainly helps them cut you out.

    Then there's their liftetime cookies. Back in 2000 when doubleclick decided to do that there was outrage and lawsuits, but with google no one has a problem. This has always amused me. Google is a much bigger threat than doubleclick ever was. People were concerned about data mining then, just imagine the data mining possible at googleplex right now.

    "And you are right. Today you don't compete with Google, but tomorrow you might."

    Exactly. If you use google you are signing your death warrant - if you get too successful, they'll take notice and cut you out, happens all the time in the online advertising world due to disgusting executives. Google is no different. Yahoo and others are the same. The higher ups will mine everything to increase those profits. Stick to smaller independent shops if you can.
    • dalooo, on 10/12/2007, -0/+3I would like to see competition, so not everything is so dependant on Google. I'm sure everyone on Digg is tech savvy and bright may one day come up with a product. I don't think it's good to be too dependant on one source for your income.

      I don't know what it'll take but we definately do need competition in search before it's completely monopilized forever. I hope Yahoo doesn't give up on search, I would like to see search numbers spread evenly across few search engines instead one.

      I agree Google's cookies are crazy as well, they track you thru various accounts, so don't think you're safe from profiling if you're alternating between accounts.
  • diggfilter, on 10/12/2007, -0/+3Vandel405 et al.,
    You are missing the point.....presumably the #1 position bid wouldn't have been "as high" had they known that Google would insert their own ad and make #1...actually #2.

    Had the person known they were ACTUALLY bidding on #2, they probably would have bid lower.

    Yes, there is opportunity cost...but more importantly, its false expectation and manipulation on behalf of Google.
  • WolfDV, on 10/12/2007, -1/+4We are Google . . . You will be assimilated

    Its unfair, but my few shares in GOOG obligates me to say that :p
  • WOTEugene, on 10/12/2007, -3/+5I think Google is gradually becoming evil empire #2. They're just doing it more subtly than Microsoft did.
  • dalooo, on 10/12/2007, -3/+2Many of you probably disagree, but I would love to see competition in search. We've all seen what happens when Microsoft controlled the desktop market for the last 20 years, it stiffles competition and gives them ennormous power. I read an article a few years back, that Microsoft threatened to not sell their OS to Hitachi if they used a different OS for their hand helds.

    Everyone has to remmber Google is no longer the company that does no evil, they'll do anything to remain King of the Internet. With everyone going to Google for everything, they basically control all new services and products that enter the market, and this gives them ennormous ability to do whatever they want.

    They basically set the rules for the internet, and if you have a new product that needs to be noticed, your basically dependant on all their rules, their prices... and they could change the rules on you in a heart beat...
    • alexlr, on 10/12/2007, -1/+4Google has nothing like a monopoly on web searches. There are countless close substitutes. Even if Google has a large portion of the market share, as long as those substitutes exist (or can exist), Google cannot function as a monopoly. (If Google could function as a monopoly, they could charge for their search services and anyone wanting to search would have no choice but to pay.)

      We're talking about their advertising business, though. In that context, whether they have a monopoly on searches is irrelevant because they're competing against the entire internet for eyeballs. In this context we would be even less justified in calling Google a monopoly.
    • geronimo, on 10/12/2007, -1/+1The only way I see it happening is an open source search engine, harnessing knowledge from around the world to create a great search engine. Paid search listings could be used, but they wouldn't try to promote their own products. With the revenue generated it could finance the enormous amount of server/real estate/power/hiring needed. PhD's bored out of their skulls could design and optimize it nicely. Performance could be published and tweaked. Once everyone knows how it ranks pages higher then no one person/group will have an advantage so immediately it lessens the spammer problem. This is similar to open source projects like openbsd being immune to attacks.
    • dalooo, on 10/12/2007, -1/+2alexlr,

      It's not so much their's no other substitutes, but because of the name recognition with Google 63% of searches are done on Google, altho I'm starting to find Yahoo is getting decent results for what I'm looking for at times. I do online advertising and am dependant on Google Adwords for my traffic thru their PPC engine. I mainly limit my options to only show on their search results.

      With Google controlling 63% of the search market from the latest stats I've read, many in the online advertising world are dependant on the traffic that Google generates.

      Now if you had a competing product with Google, or if they decided to just change the rules as they so often do for PPC or for on their search engine, we're left without income.

      It is their product and they're free to do as they please, but being dependant on one company or one source for making a living is a never good.

      And who's to say one day when they control 80%-90% the search market, they could set the rules for the internet.

      Would you want 1 single company to control what they decide to be important on the internet or if your business is relevant or not?

      I might be rambling, I hope I make sense.
    • undersky, on 10/12/2007, -0/+1dalooo,

      Alex's point was that, technically what Google has is not monopoly, unless you are using the term monopoly outside of its economics definition. Like he said, if Google has monopoly they can charge for search.
    • dalooo, on 10/12/2007, -1/+1Point understood. I mean that they're a monopoly by that they control over 60% of the search market and they could set the rules anyway they want, like Microsoft's OS owning 80% of the market.

      Which is outside the normal definations of a monopoly.

      My opinon maybe biased cuz of what I do for living. But whether I was in the industry or not, I would not like to see one company controlling that much of an market.
    • mousky, on 10/12/2007, -0/+1But Google does not control over 60% of the search market. Google provides a service that is voluntarily utilized in over 60% of searches. By using the term control you are implying that Google has some form of leverage in the search market. They don't. Anyone can use a competing service at any time. I can remove the Google search plugin in Firefox whenever I want and start using the Yahoo plugin. There is no negative impact on me.
  • bradbaxter, on 10/12/2007, -1/+2Maybe this has been covered... but for a blogger running AdSense Ads... and a Google Ad shows on his page (let's say for one of Google's paid services) and a visitor clicks the ad, does Google pay anything to the blog's owner (like a typical AdSense revenue share)? If not, this is the only thing I can really see hammering Google for, at this time.
    • scratt, on 10/12/2007, -2/+1Agreed. That was the first question I had. As long as Google are paying for the space they use on my site I don't care... Assuming that is the case then well, as for the rest of the article it's like critisising Wall Mart for advertising it's own products on it's own windows...
  • hoppdawg, on 10/12/2007, -2/+1It's like Exxon filling up their tanker trucks with their own gas. BFD
  • dalooo, on 10/12/2007, -2/+1ooopss was trying to reply
  • miaow, on 10/12/2007, -1/+1someone will come along and we will prefer them and everyone will jump ship. with hindsight, greedtube was a good idea (but unfortunate name). agloco will soon be running. the end-user or website owner should always be told what the deal is.
  • chevas, on 10/12/2007, -1/+3*****
    "It's like Exxon filling up their tanker trucks with their own gas. BFD" - hoppdawg
    See above

    This statement is PRECISELY what I was thinking, only I had a different analogy that was not quite as simple and concise as this analogy is. "Big F'ING Deal" is exactly what I thought as well. If you have a problem with Google doing this, then ALL of you should go tell your employers to stop giving you discounts to the products they sell and to stop getting free services that they offer. I work for a large telcom. Part of working for them is FREE service.

    Google created the damn thing, they can use it for free however they like. Damnit, articles like this are just ignorant.
    • dalooo, on 10/12/2007, -1/+2"Google created the damn thing, they can use it for free however they like. Damnit, articles like this are just ignorant."

      I agree, they created it and can do whatever they want. They created their own monopoly thru better products. But if you're company depended solely on Google to make survive, you may have a different perspective.

      Hypothetically speaking, say one day you wake up Google decides the telecom industry is no longer relevant and you lose your job...

      Thats the kind of power Google has on the online world. That's why I would like to see competition or more searches on other engines.

      Will probably get dugg down, for my negativity on Google, but those are just my perspectives from being in the industry I'm in.
  • cougar618, on 10/12/2007, -0/+4So wait. Microsoft doesn't promote linux?
    ABC won't show CBS News commercials?
    Maybe Google should promote Yahoo! email.
  • LavaHot, on 10/12/2007, -0/+1For a second, I thought this was about a Google based Monopoly game. I wonder what boardwalk and Parkplace would be replaced with?
  • scbysnx, on 10/12/2007, -0/+1my father's a builder.. what this is saying is.. that he should say other builders are better then him. In the spirit of co op etition. Sorry johnny my name comes first if I can't help then I'll sell 'em on something else. This is retarded btw .. "lame"
  • tybris, on 10/12/2007, -1/+1Do Not Use Caps In Every Word Of Your Sentence.
  • anuragiit, on 10/12/2007, -2/+0hell
  • vhold, on 10/12/2007, -1/+3It's barely been mentioned, but how much it costs google for their own AdWords is fairly simple. It's a lost revenue opportunity when they run their own ad.

    When somebody clicks on one of their ads, they make no money, and if it's an Adsense ad, they have to pay it out to the partner. Now, they could potentially cheat their own auction and pay the partner less for position one then they'd normally pay the partner for position one on those keywords..

    But this is nothing new. Newspapers run their own ads. Television stations run their own ads. Radio stations run their own ads. And their advertising inventory is a market as well.
  • franksands, on 10/12/2007, -0/+1This is FUD.
    I searched for "search engine" and top result was MSN Search
    I searched for "email" and the top result was Yahoo mail

    see for yourselves
  • enjourni, on 10/12/2007, -1/+1A few points.

    - Unfortunately (or fortunately, depending upon how you look at it), google owns search on the web. In that case I don't see a problem with them putting themselves at the top of certain keywords. Microsoft put their name on a lot of computers sold with windows pre-installed. This is a free market guys, and google has a right to get their name out there for their own services.

    - Knowing something about adwords, you have to understand that fat cats will always get the top spot if not the top 3. Amazon, yahoo, ebay. These kinds of companies don't care about ROI or making a good ad- what they care about is building brand name. To do that, they will simply outspend the competition to get the #1 spot. Trying to compete with a company like that (with massively big pockets) not only is foolhearty, it's a waste of time.

    - How do I know google or what-have-you's strategy is to outbid the competition? Easy. "intranet, spreadsheet, documents, calendar" .... these are all extremely vague and untargeted keywords. Few people bid on them, because they convert so poorly. One of the golden rules in business is to target the right person (niche, or market). A person searching on "calendar" could be looking for what this month's calendar is. Or to buy a calendar for their grandmom. Or to compare the gregorian calendar to some other calendar. We have no clue, based on the keyword "calendar", what the person is looking for- it could be almost anything. In this case I think google is right. There's a strong possiblity that a person searching google itself for calendar might be looking for google's calendar service. So showing google's calendar as an option is relevant to the keyword searched. So long as google's results are relevant and there is a chance I can get into the top 10, then I don't know what people are complaining about. Those are the rules google established, and they seem to be playing by them (google calendar is relevant, so I don't mind them showing it).
  • enjourni, on 10/12/2007, -0/+0Look at it this way. The only purpose for trying to get a top spot in google adwords is to drive more traffic to your website. But the truth is, more traffic does not equal greater quantity of sales (if you are using adwords, I'm assuming that you're trying to make money with your site.)

    A lot of people on the web view traffic as their primary problem. Traffic isn't a problem anymore, as long as you know a little bit about adwords. For example, it's easy to get loads of traffic- just spend a lot of money on a high-traffic keyword. I think what you really care about is spending money on the RIGHT keyword for your product/service website, and making your web page CONVERT to sales. If you have a converting website and are bidding on the right keywords, then you will make money, regardless of how little or much traffic you have. You will BEAT the competition if your site converts, because then, all you have to do is ramp up traffic, and you will get more and more sales!
  • mbrutsch, on 10/12/2007, -1/+4Google does *not* have a monopoly on web search, and the author knows that. The headline is just a troll. Not that the author doesn't have a point, but if you want to call Google out for being dishonest, you should probably try being honest when doing so.

    No Digg.
  • etnu, on 10/12/2007, -1/+21. Google doesn't have a monopoly. They have the leading search engine, but it's not even close to a monopoly. Just because you and most of your friends use Google doesn't mean everyone does. Yahoo and MSN still take about 35-40% of the combined web searches in the U.S., and outside the U.S. Google isn't even #1.

    2. Every search engine does this. At least Google puts their sites in the paid listings. Yahoo and MSN just drop them in as the #1 "organic" result. Try it for yourself.

    3. The practice of promoting your own product over the competition is not illegal. Having a monopoly is not illegal. ABUSING a monopoly by using it to gain or hold position in a new market IS illegal.
    • Atomic1fire, on 10/12/2007, -0/+1a monopoly is when its impossible to have an alternitive
      thats why microsoft isnt one nor is google or yahoo
      google> msn yahoo snap ask
      Microsoft>apple and linux based oses and possibly google anytime soon
      yahoo> snap google msn ask
    • etnu, on 10/12/2007, -0/+0You don't have to have a "complete" monopoly to have a monopoly. Microsoft was found to have a monopoly in a court of law, and was guilty of abusing that monopoly to unfairly compete in other markets. This is illegal. Google does not have a monopoly (near or complete) because they only control about half of the search market in the U.S.
  • krylm, on 10/12/2007, -0/+0http://www.mattcutts.com/blog/im-on-debunking-duty/
  • kufurex, on 10/12/2007, -0/+1This post is just full of crap. It is just 'link bait' nothing more nothing less. Instead of reading a bunch of allegations on a blog, why doesn't everyone take two min and go do a few searches on Google. Their ads don't show up on the top of the listings all the time. One interesting example I came across is 'cpc advertising'.

    The author of the article should get a life.
  • shazbot, on 10/12/2007, -0/+1http://www.google.com/search?q=search+engine
    I don't think you can argue with that now can you? :)
  • trevornk, on 02/16/2008, -0/+0This was never true. I use adwords extensively and have never run into this.

    For accurate information on adwords and ppc visit http://trevornashkeller.com
  •  

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