Google has recently come under scrutiny for quietly adjusting its advertising auctions to meet revenue targets, a revelation made during a federal antitrust trial.
According to Jerry Dischler, a Google Ad executive, the company frequently modifies the auctions used to sell search ads, resulting in cost increases of up to 5% for the average advertiser. In some cases, ad prices may have even surged by as much as 10%. Shockingly, Google does not typically inform advertisers about these pricing alterations.
This revelation has raised concerns within the digital marketing community, with experts questioning whether Google manipulates Smart Bidding for profit, with some industry insiders suggesting that Smart Bidding may be a tool for Google to easily manipulate ad prices.
Google’s more recent trial is centered around allegations of employing underhanded tactics to maintain its position as the dominant search engine worldwide. The U.S. Justice Department has accused Google of making substantial payments to companies like Apple to secure its status as the default search engine on products like the iPhone.
More than 60% of Google’s total revenue comes from search ads, generating over $100 billion in revenue in 2020, as confirmed by Dischler.
Matt Wilkinson – Head of Paid Media at Spike commented; “The black box nature of Google’s products requires a high degree of trust from advertisers, or perhaps more realistically a begrudging acceptance of a complete lack of agency. There is widespread acceptance of steadily rising CPCs within Google Ads, but the suggestion has always been that this is driven by increased competition and dynamic market forces. Even as a Google cynic, this revelation comes as a shock to me and absolutely underlines the need for some form of regulation and control over their monopoly in this sector.”
Google’s search ad revenue growth has consistently remained in the “high teens” since 2012, as revealed by documents presented during the antitrust trial. Dischler admitted that his team was under pressure to meet revenue targets set by Ruth Porat, Google’s Chief Financial Officer, and resorted to finding creative ways to achieve this goal.
Why is this important?
The significance of these ad price adjustments lies in their potential impact on the Justice Department’s case against Google. If Google can raise ad prices without encountering significant competition, it could strengthen the argument that Google holds an illegal monopoly. While this argument cannot be applied directly to Google’s free search engine product, it can be used to address other issues, such as privacy standards, within the search industry that could have been addressed with increased competition.
Google’s admission of quietly increasing ad prices to meet revenue targets has caused wide concern and raised questions about the company’s practices. This revelation may have implications for the ongoing antitrust trial, where Google is being accused of maintaining an illegal monopoly in the search industry.Author spike.digital