This is a big week for Google. Its new mobile phone software called Android is debuting, and there will be much debate about whether this much hyped project is going to get any traction. But that discussion may get drowned out by another. It seems as if everywhere you turn in the past two weeks, someone is wringing their hands about Google, the monopolist.
Google is trying to get a mega advertising deal with Yahoo approved by the Justice Department. Advertising agencies, a bunch of big and small advertisers and - big surprise - Microsoft, are all crying that Google is hell bent on world domination and want the deal blocked. Google says the accusations are ridiculous and has stepped up its defense in recent days to press that point. It says Microsoft isn't really credible on antitrust matters, after all. Moreover, it's hard to be a monopolist when you don't have any pricing power. Google ads are auctioned to the highest bidder, not sold in the conventional sense.
right? Wrong. The truth is, Google has more control over pricing than
it lets on, and it is going to need to do a better job of explaining
that in the coming weeks if it doesn't want to see this deal - and
maybe all future deals - go down in flames.
It is absolutely true that Google's ads are auctioned, but it is also true that Google sets minimum bids for those auctions on an advertiser by advertiser basis. That means that if Google doesn't like you as an advertiser, your price per click - the way advertisers bid on Google ads - will have to be higher to get top placement in search results than an advertiser Google likes a lot.
How do you know whether Google likes you or not, if you're an advertiser? The answer to that question used to be clear. If your ad was popular, it meant Google liked you, and you had to pay less per click than if your ad was unpopular. If your ad was unpopular, it often didn't get listed at all. But you knew what to do. You made it better and tried again. Advertisers whined about all this at first, but when they saw how much better their ads performed compared to other networks, like Yahoo's, they shut up. Indeed, Google's obsession with ad's quality is at the root of why it is such a successful company.
So what's different? Google has made the way it measures ad quality a lot more complicated, and it hasn't done a very good job of letting advertisers understand what all those variables are and how each one affects the overall measurement of ad quality. For example, part of an ad's quality score now depends on whether dozens of raters working for Google around the world like your site and the ads on your site. Google's position is that it doesn't want users clicking on Google ads and getting taken to sites that aren't "useful." Google says this approach improves the user experience, and it probably does. However, the changes also mean that it has become harder and harder for advertisers to understand how to tweak their search ads to get the best placement - and they no longer have any real choice about where else to go.
I don't believe that Google is becoming another Microsoft. It is not using its position to unfairly crush competitors. Indeed, part of he reason Google added so many quality measures to its ad bidding process
was to stop ad arbitrageurs from gaming its system. And I think Google has succeeded. Indeed, Google executives openly talk about how improvements in ad's quality allows it to show fewer, but better ads. Because the ads work better, both Google and its advertisers benefit.
But the world applies different standards of behavior to corporate heavyweights than to young fast growing companies. When you're the latter, as Google has been for most of the past 10 years, telling your customers that you are doing what's good for them - and delivering - makes you brilliant. When you are the Google of today, it can also make you seem arrogant and pushy.
More transparency would do wonders. Even Google's biggest supporters have criticized it for becoming something of a black box to the outside world. I understand why Google doesn't want to do this. But stubbornness in the face of antitrust cops, as Microsoft will surely attest, enables you to win a few battles, but ultimately lose the war.