Google Advertising Competes Against its Own Ad Space Customers

By | 28.01.2017

Google, a subsidiary of Alphabet Inc., runs the largest business world by selling online advertising space next to the results of Google search engine. The company is also one of the biggest buyers of these ads, which takes advantage to promote products ranging from their music service to their app store.

Google supports its growing list of hardware products, such as Pixel smartphones and Nest smart thermostats, placing them in the top spot of advertising next to their search results.

An analysis found that advertising for Google products or its affiliated companies appeared in the most prominent place in 91% of 25,000 recent searches related to those articles. On 43% of the occasions, the two most famous ads were products linked to Google.

Google Advertising Competes Against its Own Ad Space Customers

The study, conducted by advertising firm SEMrush, examined 1,000 searches for every 25 terms, from “laptops” to “talking” to “carbon monoxide detectors.” SEMrush did the searches on December 1 on a desktop computer and blocked the previous browsing history on the internet to prevent it from influencing the results.

The analysis shows that Google uses the dominant position of its search engine to boost other parts of its business and to gain an advantage over its competitors, including some of its primary customers.

A Google spokesman said the company has designed its marketing programs “consciously and carefully” so that they do not affect other advertisers.

An analysis reveals an apparent conflict of interest that is rarely mentioned in digital advertising, a $ 187 billion-a-year business. The leading sellers of spaces on the web, like Google, Facebook Inc., and Microsoft Corp. are competing with their customers for that space.

Google search results for “phones” almost invariably began with three consecutive Pixel model notices. The total of 1,000 searches for laptops started with an ad for the company’s Chromebook model. Advertising for Smart Android watches appeared in first place in 98% of searches for “watches.” The search for a “smoke detector,” in turn, was spearheaded by two Internet-connected alarm alerts from Nest, a company owned by Google’s parent company Alphabet. In all instances, the stores that suggested the ads were also part of Alphabet.

After sharing the result with Google on Dec. 15, much of the advertising went missing, including almost all ads from the online store. A second analysis, conducted on December 22, showed Google or Nest advertising in the first place of the search results in 19% of the time. Google did not want to refer to the disparity.

The company’s practice of promoting the rest of its products and services in its search engine has not gone unnoticed by regulators. The European Union accused the company of favoring its service of comparison of prices in detriment of those of its rivals in the search results. Google has denied the allegations.

Television stations and newspapers have long used their means to promote company products, but they usually charge fixed prices, rather than auctioning spaces, and often place advertising in unused spaces. Internet giants sell ads through auctions, which means they compete with their customers, which can affect the prices paid by other advertisers.

Google conducts auctions for each appropriate search result, millions of them per minute. Companies that buy advertising choose the offer price and conditions. Google determines the placement of the ad by a secret algorithm that weighs the bids and the relevance and quality of an ad, partially calculated by its click rate and landing page, that is to say where users who click on the ads access.

Google stresses that when competing for ads, the rest of the advertisers are charged as if it is not participating, i.e., it does not inflate prices. It is one of the internal rules established by a company committee to minimize disputes.

Google emphasized that the only reason that the ads that promote their products appear in the first place of the search results is the quality of the ad and the price that Google is willing to pay. He added that his ads are also subject to a marketing budget.

The strategy, however, has a cost: Google no longer perceives potential revenue from the advertising it displaces.

Executives at digital advertising companies and analysts say that Google ads can affect the price, location, and performance of their customers’ advertising. Advertising slots on many pages are limited so Google ads can cause others to increase their bids to compete for available slots. “It’s clearly problematic,” says AJ Kohn, director of a small marketing firm called Blind Five Year Old.

Google is the dominant digital advertising company and captured 31% of revenue last year, according to eMarketer.

Facebook, which ranks second in online advertising sales, says it participates in space auctions on its sites “just like any other advertiser.” The social network promotes its products, such as the Instagram photo-sharing application, in the users’ news wall, a source said.

Microsoft indicated that it competes with its customers “under the same rules of the game” for ads on Bing, its search engine.

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