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Google's riches rely on ads, algorithms, and worldwide confusion

'Please ignore the cash machine behind the curtain'

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Turning the Knob

Behind the AdWords curtain, Google has the power to do just about whatever it wants. Which begs the question, How far does the company actually go?

Naturally, Google refuses to answer this. We first approached the company about an Adwords interview in early January. Two months and many requests later, we're still waiting - though the company did provide answers to a long list of questions over email.

Google always stops short of answering the biggest questions. After all, keeping AdWords a mystery suits the company just fine. During the fourth quarter of 2007, Google-owned sites raked in $3.12bn in revenue, and revenue from partner sites topped $1.6bn.

And the questions Google refuses to answer are far bigger than the world realizes. Considering Google's use of clever tricks like quality score and minimum bid, you might ask, is the AdWords auction is really an auction? But more on that later.

Yes, Google is interested in keeping ads relevant. But it's also interested in making large amounts of money. It's a business like any other - a publicly traded business under enormous pressure to grow revenue from quarter-to-quarter, from year-to-year. And though AdWords is designed to keep ads relevant, this design also gives Google tremendous latitude to adjust advertiser spending.

Erick Herring's company, Adapt, is run by a man named Michael Harris, who was once a senior VP at Overture, the company that pioneered search engine marketing and was eventually purchased by Yahoo!.

"We know for a fact - because we know what happened at Overture - that when a quarter runs short, you turn the knob and more money comes in," Herring says. "That happens all the time at Overture, and I'm sure it happens at Google. Why wouldn't it? Like you said, it's a publicly traded company." ®

Build a business case: developing custom apps

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