Feeds

Google antitrust? Ask the one man who can (almost) answer

To know the unknowable

Application security programs and practises

Auction unknowable

With AdWords, businesses bid to place ads on Google's search engine. If a business bids high enough, its ad will appear when someone searches on a particular term or collection of terms. And each time someone clicks on the ad, the business pays Google somewhere south of its bid (until they exhaust their daily budget). But ad spots aren't calculated by bids alone. Google also assigns ads a "quality score", and placement is determined when bids are multiplied by this numerical rating.

But there's so much you have no way of knowing. Quality score is explained in generalizations not specifics, and it can change at any time. You can't see the bids of your competitors, only your own. And it's not quite clear what you're bidding for. Though you're nominally bidding on search "keywords", ads may not appear each time a keyword is entered.

What's more, there's a minimum bid — or, as Google now calls it, a "first page bid." If you don't bid the minimum, your ad won't show up on the first page of search results. This is specific to each advertiser, and it's tied to quality.

The system is so complex — and Google's maintains so much control — that it's only natural to ask whether it's really an auction. Yes, advertisers will never pay more than they bid. But if an advertiser wants to maintain a particular ad placement, they're largely at the mercy at Google. AdWords is famous for the so-called "Google Slap", when an advertiser's quality score suddenly drops, forcing much higher bids for the same ad placements.

The situation is further complicated when you consider that Google bids on its own auctions in placing house ads. Santa Clara law professor and noted tech blogger Eric Goldman has called this an "impermissible conflict of interest."

"Google’s positioning as an auction conductor has emerged as a central defense to the increasing antitrust attention being paid to Google’s remarkable share of the search advertising market," Goldman said in a recent blog post detailing Google's house ads. "However, Google’s positioning breaks down when Google buys house ads via AdWords."

When we first asked Preston McAfee about the ins and outs of AdWords, he told us that — just like the rest of the world — he has no way of knowing what Google is doing. And then he immediately brought up a Yahoo! search advertising technique known as "squashing", which we detailed in an earlier story. With squashing, Yahoo! "handicaps" its search auctions. "When someone has a really high ad click probability, they're very hard to beat, so it's not a really competitive auction," McAfee said. "So that they don't just win [every auction], we do squashing. This makes the auction more competitive.

"It's like handicapping. We handicap the people with the high click probability."

According to McAfee, this can increase Yahoo!'s revenues. "The bidders respond by bidding higher. The one who was destined to lose is now back in the race, so they bid higher trying to displace the number one, and the number one is trying to fend them off so they bid higher too.

"We can make the competition a bit more fierce using squashing, even on keywords where there's not much bidding." He would not say how much squashing Yahoo! does, but he did say that this is always changing. Others within the company, including CTO Raymie Stata, told us that squashing must be balanced against Yahoo!'s efforts to make ads relevant and satisfy searchers. Nonetheless, the practice further blurs the lines between auction and non-auction.

Asked if he thinks Google uses something similar to squashing, McAfee reiterated that AdWords is unknowable. But he did say that according to Yahoo!'s research, Google "could use page two to promote a higher bid price," referring to the second page of search results.

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Airbus promises Wi-Fi – yay – and 3D movies (meh) in new A330
If the person in front reclines their seat, this could get interesting
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
prev story

Whitepapers

Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.