[HN Gopher] Google quietly raised ad prices to boost search revenue
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Google quietly raised ad prices to boost search revenue
Author : skilled
Score : 96 points
Date : 2023-09-19 16:50 UTC (6 hours ago)
(HTM) web link (www.theverge.com)
(TXT) w3m dump (www.theverge.com)
| ilamont wrote:
| The way Amazon Advertising utilizes dark patterns to boost search
| revenue is by setting default bids artificially high. The UX
| preselects "suggested bids" at the top of the bidding range and
| daily budgets for some ad types at $100.
|
| Even if you choose "custom bids" for keywords the default will be
| $1 or $3 depending on the ad type.
|
| Of course, thousands of people accepting the defaults results
| real-time bid levels rising across the board for everyone.
| gretch wrote:
| They just accept the defaults even when it means more money
| comes out of their pocket?
|
| How is anyone supposed to design products when customers don't
| consider their money to be scarce? And why do we not expect
| Amazon to not take advantage of it?
|
| It'd be like if I was selling a used bike on Craigslist and I
| said "default price $10k" and then people were like okay guess
| I'll just pay way too much money
| ilamont wrote:
| You'd be amazed at how many junior people at an SMB or
| publishing imprint who are thrown into the deep end and told
| to spin up an Amazon ad campaign with zero knowledge of the
| platform. It's not their money, and their bosses don't get it
| either, so they accept the defaults and the suggested bids,
| and blow through a pile of cash. Some realize the mistakes
| and quickly optimize, and learn how to set up future
| campaigns the right way.
|
| The other group getting burned are desperate passive income
| newbies sitting on a pile of junk from Alibaba and grasping
| at anything which might move the needle on sales. To pay for
| campaigns, they'll even take out loans from Amazon Lending or
| predatory finance partners like Parafin Cash Advance, which
| take a percentage of your gross sales every other week.
|
| Self published authors are also getting tricked by Amazon
| suggested bids, high default budgets, and ridiculous default
| levels for custom bids.
|
| Amazon is laughing all the way to the bank.
| sagarm wrote:
| That doesn't seem sustainable. Amazon's advertisers seem
| like the type to want to sell something directly rather
| than bolster their brands, and if they aren't getting a
| return on their spend they'll stop.
| iepathos wrote:
| Need to pay for those massive lawyer costs somehow.
| Animats wrote:
| Google should be subject to auction laws.
|
| Prohibited in California:
|
| * Cause or allow any person to bid at a sale for the sole purpose
| of increasing the bid on any item or items being sold by the
| auctioneer, except as authorized by Section 2328 of the
| Commercial Code or by this title. A violation of this subdivision
| includes, but is not limited to, either of the following:
|
| * (1) Stating any increased bid greater than that offered by the
| last highest bidder when, in fact, no person has made such a bid.
|
| * (2) Allowing the owner, consignor, or agent thereof, of any
| item or items to bid on the item or items, without disclosing to
| the audience that the owner, consignor, or agent thereof has
| reserved the right to so bid.
| jjoonathan wrote:
| "Without disclosing" sounds like a gigantic loophole. They'll
| just reserve the right to bid on page 53 of their phonebook
| contract and since they own the ad market everyone just has to
| agree to let them.
| kmeisthax wrote:
| Disclosure is an effective deterrent in a competitive
| marketplace - the implication being that once this behavior
| is disclosed nobody will want to work with you, or they'll
| negotiate it away somehow.
|
| In a consolidated market disclosure is a water sandwich.
| jstummbillig wrote:
| > water sandwich
|
| Fantastic
| 54r4rf wrote:
| [flagged]
| Growtika wrote:
| The answer is monitor & adapt. If Google has indeed increased the
| price for ads, you can choose to be upset with them or to see it
| as a signal for your company to diversify the methods through
| which you drive traffic, leads, sales, and brand awareness. I'm
| into SEO, few months ago with the rise of AI it felt like the SEO
| industry is about to end. The ranking signals of today, might not
| be as useful tomorrow. So does your PPC budget.
| pixl97 wrote:
| >The answer is monitor & adapt.
|
| And why isn't the answer also take Google to your state
| attorney for fraudulent and anti-competitive practices?
| bogwog wrote:
| There really aren't many other options. If Google raises prices
| 10x, then your budget will be 10x less effective, but it will
| still probably be much more effective than if you were to
| advertise on, say, Bing or Yahoo instead.
| r0m4n0 wrote:
| Don't most companies have budgets? Wouldn't raising prices just
| cause companies to buy less? I feel like folks don't just
| increase spend when prices go up, when it comes to ads.
|
| Now if everyone is increasing budgets, prices of goods, ad spend,
| that story would make more sense. But that would correlate to
| whole market movements which honestly makes sense for something
| of this scale
| seadan83 wrote:
| Drawing on my experience from working with an Ad-Tech:
|
| > Don't most companies have budgets?
|
| Yes
|
| > Wouldn't raising prices just cause companies to buy less?
|
| Not necessarily, the "ad-spend" typically remains a fixed
| budget until a given ad-campaign is complete.
|
| The kicker is basically the cost per ad is increased, which
| means the budget for an ad-campaign is consumed more quickly.
| Thus, for example, rather than an ad-campaign lasting 4 weeks
| and generating X number of impressions, it lasts 80% of that
| time with 80% the impressions. Thus, even though the revenue is
| fixed per ad-campaign, Google would be able to cycle through
| more ad-campaigns
|
| > I feel like folks don't just increase spend when prices go
| up, when it comes to ads.
|
| Depends on the company. In all probability the ad-spend would
| remain fixed and the companies just get less return on that
| spend (as an aside, the ROI for ads is highly debated to begin
| with)
| drawkward wrote:
| >The kicker is basically the cost per ad is increased, which
| means the budget for an ad-campaign is consumed more quickly.
| Thus, for example, rather than an ad-campaign lasting 4 weeks
| and generating X number of impressions, it lasts 80% of that
| time with 80% the impressions. Thus, even though the revenue
| is fixed per ad-campaign, Google would be able to cycle
| through more ad-campaigns
|
| This is, in fact, companies buying less (advertising), which
| is what I took the parent comment to be asking. It certainly
| isn't _spending_ less.
| riku_iki wrote:
| I think the real negative impact would be that clients see
| lower ROI, and move somewhere with better ROI.
| dubcanada wrote:
| Company X makes budget of $200k a quarter to buy ads. Agency Y
| setups up ads in Google, a budget and a keyword. They then tell
| Company X they got a certain amount of
| referrals/traffic/clicks/what ever.
|
| Google increases ads 5% or 10%
|
| Agency Y reports 5% or 10% decrease from last quarter. Company
| X goes well that's not great. Agency Y makes changes, Google
| changes back 5-10% change, next quarter it goes up. Company X
| goes great!
|
| Google just made 5-10% extra an entire quarter.
|
| Rinse and repeat.
|
| Basically 5-10% is nothing, nobody would really notice. General
| traffic would probably change 5-10% every quarter, same with
| spending habits and other factors.
| r0m4n0 wrote:
| That's the thing though, with the Agency Y making changes.
| They would have to go back and ask for more money than
| before... which I just don't think that's happening (at least
| that's not what I do). I'm speaking from a place where I
| purchase ads for my product and know someone else who does as
| well. We just budget a set amount on ads with an agency and
| then measure what we get out of that. If it's worth it, then
| it's worth it for us. The tuning of 5% up and down doesn't
| really effect how much I spend per se. I only have so much to
| spend on that type of marketing. I guess the more expensive
| it is the more it grinds into profit margins because those
| clicks go down.
|
| At one point though, it isn't profitable to market there
| anymore and I move onto something else, which wouldn't be
| what they want I would assume? That's where the ad "market"
| comes into play. The market decides the price supposedly? Is
| the argument that there is nothing else to move on to when
| they fudge the price?
| AlbertCory wrote:
| I was in Ads. Offhand I don't know how they'd raise the prices,
| since it IS an auction.
|
| But there is literally _no one_ who understands it all, so I 'm
| sure there are ways.
| conradfr wrote:
| I don't even understand the AdWords UI these days.
| mathteddybear wrote:
| It's very simple.
|
| If it is not a refactoring, a UI/UX redesign, or a wholly new
| ad product, then most likely it affects average prices of
| running ad campaings. Even if you think it does not, maybe you
| slipped in a coding bug. So before rolling out your change, you
| canary it and measure how much it changed stuff. A dumb raise
| in ad price will cause bad stuff for conversion costs, so it'll
| be a no-go.
| prepend wrote:
| They could raise prices by upping the minimum bid.
|
| For example for the keyword "foo" google sets the minimum bid
| at $1. I set my max bid at $5. There's only 5 bidders so we all
| pay $1.
|
| Google ups the minimum to $2 and it's under our max bid so now
| we all pay double.
|
| That's how.
| AlbertCory wrote:
| That would be blatant. There are subtler ways.
| tpmx wrote:
| Do they actually publicly claim it is a (fair) auction?
| AlbertCory wrote:
| https://policies.google.com/terms
|
| have fun
| m_kos wrote:
| Anecdotaly, I find Google Ads hard to use despite their market
| dominance.
|
| I have been trying to recruit participants for my academic
| observational health study. My ads get incorrectly flagged as
| clinical trials and there seems to be no way to reach anyone who
| could override it. I also wanted to use a specific advertising
| strategy, which is only available via Google's poorly documented
| desktop software. Facebook Ads, while far from ideal, are much
| easier to set up.
| bogwog wrote:
| > Anecdotaly, I find Google Ads hard to use despite their
| market dominance.
|
| They don't have any incentive to improve the product, only to
| increase revenues (e.g. by raising prices).
| kevincox wrote:
| Aren't Search Ads based on a second-price auction? How can Google
| just raise the price? Or is it lying about the auction?
|
| The only thing I can imagine is raising the minimum bid, but this
| would also result in less ads being shown (may still be overall
| beneficial but not a simple price increase).
| pixiemaster wrote:
| well you don't know the other bids, or if they even exist....
| kevincox wrote:
| But that is my point. Lying about the auction would probably
| be fraud, which is much different than just raising the
| prices.
| jszymborski wrote:
| Do they not have a base fee for themselves? Or is it
| entirely a percentage cut?
| jonas21 wrote:
| Google is the seller in the auction. Their cut is 100%
| (for search).
| jszymborski wrote:
| Ah of course, I misunderstood.
| hedora wrote:
| Ad auction fraud is one of the allegations that landed them
| in court.
|
| This former executive just testified under oath that they
| change the auction rules without telling advertisers, and
| do so in ways that increase Google's revenue specifically
| in order to cook their quarterly SEC filing numbers and
| mislead investors into thinking the ad business is healthy.
|
| The executive also testified that they've fallen far behind
| Meta and Amazon on ad campaign quality and revenue.
|
| edit: The bottom of this article explains one of the
| mechanisms they use. The top bidder gets second place, and
| the second bidder gets top place. This increases their ad
| revenue on average (tricks like this get them 5-10%, they
| think they could take 15% because of their monopoly power):
|
| https://www.msn.com/en-us/money/companies/google-tweaks-
| ad-a...
|
| So... tl;dr: Their ad business is based on fraud built on
| top of other fraud.
|
| He didn't even talk about the pop-under / youtube fraud
| that was reported a few months ago.
|
| Each of the following guarantees YouTube makes to
| advertisers is demonstrably false:
|
| - video ads will be displayed prominently
|
| - video ads will be displayed on high-quality, reputable
| sites
|
| - audio will be played back
|
| - if the ad is over 5 seconds there will be a skip button
| that the user can click on, and the ad impression doesn't
| cost anything if the user skips it. (In many cases, the ads
| are rendered with an occluded or missing skip button.)
|
| The difference between their claims and reality is
| responsible for a mid double-digit percentage of YouTube's
| revenue.
| cvalka wrote:
| If your allegations are true, Google is done.
| theGnuMe wrote:
| Just raise the starting bid price and minimum bid size.
| jstummbillig wrote:
| Interesting. One way to do it might be to enter the
| competition and "bid" for the ad space?
| keithwinstein wrote:
| No -- in 2019 Google Ad Manager announced it was moving to a
| first-price auction
| (https://blog.google/products/admanager/simplifying-
| programma...) and AdSense followed in 2021
| (https://support.google.com/adsense/answer/10858748?hl=en).
| (Edit: With regard to Google Ads for Search, they no longer
| seem to commit to any particular algorithm for deciding what
| price gets paid.)
|
| There are some lawsuits that allege that Google was effectively
| cheating before then, by sort of manufacturing a shill bidder,
| with privileged access to everybody's bids, that turned it into
| something closer to a first-price auction
| (https://www.wired.com/story/google-antitrust-ad-market-
| lawsu...). The quotes from within Google look pretty bad, e.g.
| one Googler allegedly wrote: "Doesn't that undermine the whole
| idea of second price auctions? I.e., the assurance that you can
| bid the maximum you're willing to pay with no negative
| consequence. But if the publisher manufactures a floor based on
| your bid to get you to pay more than the second price, this
| principle gets violated. It'll transform the system into a 1st
| price auction where the bidder has a strong incentive to bid
| LESS than he's willing to pay. (Only just enough to win.) I
| don't think that's desirable for either side in the long term."
|
| Google... disputes this (https://blog.google/outreach-
| initiatives/public-policy/ag-pa...). I guess we'll see.
| eastbound wrote:
| Not a googler, but it sounds important that ads compete
| against no-ad bids.
|
| Example: On search results, if all bids are 0.01$, then it's
| worth showing no ad, because it will annoy the customer to
| have low-relevance ads. But what is the ceiling? 0.10$?
| 1.00$? Sounds reasonable to have a ghost bid which represents
| the weight of customer fatigue.
| prepend wrote:
| It's hard to believe that google cares about customer
| fatigue as the search results are littered with ads.
|
| I think the issue that the floor varies depending on google
| sets and there's no visibility to how they do this.
|
| If there's only one bidder and the minimum price is $1 for
| one ad but $0.10 for another, why is that? It's because
| google knows that one person can pay $1 while the other
| won't.
|
| It hasn't been a proper auction for many years and is
| really just whatever google wants to charge. Because they
| have monopoly pricing power, customers don't have any real
| alternatives to search ads.
|
| It would be like if there was one magazine that had 90% of
| all readers and they charged whatever prices they wanted.
| josefresco wrote:
| > It's important to note that our move to a single unified
| first price auction only impacts display and video inventory
| sold via Ad Manager. This change will have no impact on
| auctions for ads on Google Search, AdSense for Search,
| YouTube, and other Google properties, and advertisers using
| Google Ads or Display & Video 360 do not need to take any
| action.
|
| No impact on Google Search - is that still the case?
| panarky wrote:
| The article says they changed auction rules that had the
| ultimate effect of increasing ad prices for some advertisers,
| at certain times, of between 5% and 10%.
|
| Even if that's true, it's still an auction, with real
| competition and bidding. And it's not only about price, it's
| also about the quality of the ad and the quality of the
| advertiser.
|
| Yes, absolutely, if the court can sort through the unfathomably
| complex layers of rules of real-time ad auctions and show that
| Google did something illegal, they should be held accountable.
|
| But isn't it bizarre how everyone's so hot and bothered by a
| possible 5% to 10% swindle, meanwhile:
|
| - Questcor bought the rights to Acthar Gel, which treats
| infantile spasms, a rare form of childhood epilepsy. Questcor
| raised the price of a vial from $40 to $23,000.
|
| - Valeant bought diabetes drug Glumetza and raised the price
| from $800 for a 90-day supply to over $10,000.
|
| Here's an industry that routinely runs 1000% arbitrary price
| increases, with no competition, while holding people's lives
| hostage. Seems like we should be far more outraged about that
| than an unproven, speculative, 5% to 10% issue.
| ipaddr wrote:
| Sounds horrible but Glumetza is just metformin with something
| extra to stay in the stomach longer.
|
| Acthar Gel is prednisone with a claim of less side effects.
| Interesting it got approved in the early 1960s and was
| grandfathered in and didn't need to provide trials so many
| questions exist around if it's any different from prednisone
| anyways. Either way patents have expired and a generic maker
| can make this.
|
| You can be mad at both, either or none. But companies being
| shielded by patents doesn't really apply here so it's hard to
| generate outrage
| pixl97 wrote:
| >But isn't it bizarre how everyone's so hot and bothered by a
| possible 5% to 10% swindle, meanwhile:
|
| No it is not bizarre at all. Honestly with this reply my
| response would be "How much is Google paying you to say
| this", but sadly it is likely you are shilling for them for
| free.
|
| Now, maybe you are only able to focus on one thing at a time,
| but I do believe the average person can hold multiple
| opinions over multiple subjects at the same time, _and while
| on a site about technical issues, complain about the
| technology companies implementing bad policies_.
| alangibson wrote:
| This is Whataboutism. All of the above are bad.
| riku_iki wrote:
| I think many bids generated through Google's automation:
| customer sets target ROI, and google decides what and where to
| bid.
| lesuorac wrote:
| People are saying there is a "RGSP" (Randomized Generalized
| Second Price) mechanism where sometimes the second-place bidder
| wins instead of the first-place bidder.
|
| https://threadreaderapp.com/thread/1703969874698011098.html
| mathteddybear wrote:
| Yeah, ad campaigns have budgets, and in order to spread
| traffic evenly during a day, a randomized ad suppression
| occurs. So sometimes it is the second place bidder who will
| win
| cavisne wrote:
| I think the other lever is ad relevance?
|
| It's clear from Facebook for example that they have
| dramatically lowered the bar for what can advertise recently.
|
| Bidding against a larger pool of advertisers would increase the
| clearing price of the auction.
| bogdanu wrote:
| Lowered the bar so low that I'm getting a lot of scams and
| fishing.
| RobRivera wrote:
| I got explicit sexual images on my facebook scrolling. It
| felt like 1999.
| SpicyLemonZest wrote:
| They're based on consideration of five factors of which the
| price paid in the auction is only one. Google explicitly does
| _not_ promise that people who pay more will be ranked higher
| than those who pay less. (https://support.google.com/google-
| ads/answer/6366577?hl=en, https://support.google.com/google-
| ads/answer/142918?hl=en)
| kytazo wrote:
| This is a dead horse but they keep still beating it
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