Screwgle™ - Google's new ad revenue model
It's wallet-emptying good...
Google's strict code of secrecy calls for extra silence when the subject is AdWords, the epic money-making machine fueling the company's drive towards world domination. But sometimes, the truth slips out.
Earlier this month, during Google's all-important quarterly earnings call, a financial analyst outed the company's plans to squeeze who knows how many extra dollars from the world's online advertisers. Though no one seems to have noticed, this astute money man mentioned "Automatic Matching."
"Automatic Matching" is an AdWords beta program that Google launched ever so quietly at the end of February. Via email, the search giant notified an unknown number of advertisers that if they ever failed to spend their daily ad budget, this new feature would automatically spend it for them.
With AdWords, you arrange for your very own text ads to appear in response to Google keyword searches. The program is billed as an auction. You bid for a particular term or collection of terms - "chia pet," say, or "suppositories" - and if you bid high enough, your ad will turn up each time a web surfer searches on those words. And each time someone clicks on your ad, you pay Google a fee somewhere beneath your bid - until you reach your daily budget.
Of course, if a relatively small number of surfers search on your keywords, you won't reach your daily budget. And that's where Automatic Matching kicks in. When Auto Match is turned on - and it was turned on by default with many (if not all) beta-testers - AdWords automatically spends your unused budget on keyword searches you aren't actually bidding on.
"Automatic Matching automatically extends your campaign's reach by using surplus budget to serve your ads on relevant search queries that are not already triggered by your keyword lists," reads Google's email to beta testers. "For example, if you sold Adidas shoes on your website, Automatic Matching would automatically crawl your landing page and target your campaigns to queries such as 'shoes,' 'adidas,' 'athletic,' etc., and less obvious ones such as 'slippers' that our system has determined will benefit you and likely lead to a conversion on your site."
Naturally, this boosts Google's bottom line. But as search marketing consultant Dan Theis has pointed out, it doesn't exactly benefit the average advertiser.
"They're offering you the exciting opportunity to bleed every penny of your budget every day, advertising against keywords that you didn't want to bid on," Theis says, before unloading the sarcasm. "Sure, if I sell Adidas shoes, why wouldn't I want to get some traffic from people who searched for slippers? I mean, it's not like I'm trying to turn a profit or anything, right?"
Well, midway through that Google earnings call, Bank of America analyst Brian Pitts popped up to ask about the progress of Auto Match - which Google has yet to publicly acknowledge with anything more than some extra words on its AdWords help pages.
"You expanded Auto Match to more advertisers this quarter. Do you see this as a significant driver of coverage going forward?" Pitts asked, referring to the number of Google results pages that include ads. If more pages include ads, then Google gets more paid clicks. And more paid clicks mean more revenue.
Others have indicated that Google is expanding Auto Match, which only affects accounts in the US and Canada. And in response to Pitts, the company seemed to say that further expansion is on the way.
"We only just started expanding Auto Match," said senior vice president for product management Jonathan Rosenberg. "It was in beta. We only expanded it to a slightly bigger group of advertisers this quarter."
Rosenberg downplayed the effect of Auto Match on Google's overall coverage - though he couldn't help but acknowledge it's a great way to rake in some extra cash. "I do think the impact on revenue would be positive," he said.
When Pitts asked what percentage of Google's advertisers would be "helped" by Auto Match, Rosenberg hesitated - "Wow," he said - before he was interrupted by CEO Eric Schmidt. "It’s really too early to - the answer is it should apply to everybody," Schmidt said, before asking Google co-founder Sergey Brin to change the subject. "Serge, do you want to talk a little bit about coverage?"
At which point, Brin contradicted Rosenberg, indicating that Google is interested in expanding coverage. In recent months, the company has seen coverage shrink, though it claims this is part of its master plan to improve the "quality "of Google search ads.
Auto Match: On by default
Many of the listening press reported Brin's comments about coverage, guessing that Google will juice its paid click rate this quarter. But not a single news outlet touched on Auto Match. Typically, the press doesn't talk about what Google doesn't talk about.
We asked the company for some more talk, but this is all it would say: "As part of our ongoing commitment to provide advertisers with innovative ways to reach users online, Google is currently testing a feature known as 'Automatic Matching.' This feature is currently in a limited beta with a small number of advertisers. We have no news to announce at this time regarding developments in our AdWords product offering."
So, Google prefers to call this blatant revenue grab "part of our ongoing commitment to provide advertisers with innovative ways to reach users online." Even with Google threatening to rule 90 per cent of the search ad market, we're guessing the masses will take this talk at face value. But we do not.
The issue here - and this is typical of AdWords - is that Auto Match is turned on by default. Newbie users won't know any better. In its AdWords help pages, Google indicates there will be cases where the Automatic Matching box isn't automatically checked, but Dan Thies tells us he's yet to speak with a tester who can verify this.
Yes, Auto Match is a beta. But that means nothing coming from Google, which slaps a beta tag wherever it likes. And as Mr. Schmidt let slip, he believes that Auto Match "should apply to everybody." ®