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Google AdWords: 11 herbs and spices revealed

Bidding on ignorance

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False Scarcity

Google likes to say that advertisers control the prices on its AdWords platform. It said this particularly loudly during its ill-fated attempt to win approval for its monopoly-expanding ad pact with Jerry Yang and Yahoo!. But as we've argued before, Google maintains far more control than it cares to admit. And squeezing impressions is just another way of doing so.

Yes, Google's impression game is likely an attempt to push clicks in certain directions. In limiting your impressions, it's ensuring you won't take clicks away from certain big-spending competitors. But it's also creating a kind a false scarcity that encourages you to spend more on the clicks you do get.

In essence, Google is driving prices higher by limiting the number of clicks available at the low ranks. With the top ranks getting more impressions, advertisers feel an even greater pressure to up their bids - even though upping a bid isn't always beneficial.

Towards the end of his fight for that GooHoo! deal, Google CEO Eric Schmidt admitted that advertisers "do not understand how the [AdWords] auctions really work." And he insisted the company was re-doubling efforts to educate them. But the truth is that Google prefers to keep them in the dark. ®

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