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A Closer Look at Google Adwords
zaphle writes "This article describes an interesting experiment with the Google Adwords service; in an effort to fine-tune the price per word, a mirror site was set up, paying a different price per word. I turns out the second site had to pay more in order to reach a similar click-through rate. My questions to the slashdot community: are organizations like Google redefining the law of demand and answer? To what extent does this imply a competitive advantage for larger companies? Do we need an ethical framework to direct companies to make such algorithms open source?"
Do we need an ethical framework to direct companies to make such algorithms open source?
Correct me if I'm mistaken, but I keep on hearing that "open source" is about freedom. Since when is forcing someone to behave in a certain manner considered "freedom"?
Google can do what google wants to do as long as it's within the limits of the law, you don't like it? Start your own damn company that is more ethical.
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Google IMO has the best advert service because it's unintrusive and they're ads you want to see because they're context sensitive. To me that makes it more likely you'll be interested in what the ad's selling and you'll want to get it more because the ad doesn't piss you off. Because of this, google can charge whatever they like and most people will pay it.
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Like making a site with the $ .05/word.. and few others.. the total cost and time to do that should be quit low as said in the artickle. anyone using adwords to generate sales should definitely try to find the best results by doing those types of doubleblind tests.
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I've said it before, I'll say it again. Google is a company. They are out to make a profit.
... you need to branch out and you may also do things that may be questionable.
... I think with enough contact/interest from people in the community that Google may become interested in sharing these algorithms (good public relations never hurt) ...
Companies grow from profit, Google has grown a lot. To maintain growth percentages (which as you become gi-normous like Google, becomes harder to do)
I think that paid search priority is somewhat ethically questionable, but I am not at all surprised.
Given that Google has been taking efforts to make themselves appear even more friendly to the open source community (those huge contributions awhile back)
Who knows, though?
===
However, Google doing things that are questionable and quite publically, in my opinion, spin a dangerous message for the future. They may be progressing into a more pervasive position than Microsoft in the years to come, with increased power comes increased corruption.
Scary stuff!
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Cringely, near the end of his article, drones on and on about how he has "no idea what the heck is happening here." But, in fact, he very clearly states what is going on at the beginning of the article:
Google places you higher in the rankings of of paid search results based partly on your volume of click-throughs because, again as Cringely very claearly pointed out, the more people click the more money Google makes.
Why then, Cringely, is it so hard to understand that since the first site has been opperating for what I assume to be months or even years, it would more easily place at the top of the paid search results than the brand new experimental site you created?
Your experiment proves what you already knew: popular click throughs means higher placement for less money. What don't you get?
Just a speculative thought because no one really know about googles algorithms.
The result may be due to the original pages higher pagerank. I wouldn't be surprised if google would give higher position to "better" sites even in ads. In Googles context, higher pagerank means "better" site.
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I have an alternate explanation. I believe what existed before the guy's experiment was a more-or-less stable "ecology" around those particular keywords. There were probably a number of people paying a premium for a limited number of clicks for those keywords, well above the 10-cent level he was originally paying for. Google probably sorted the higher-paying advertisers onto the best pages and left the dime-a-click ones for others and everyone was more-or-less happy.
Then when the experiment began, it disrupted things. The advertisers who were initially offering a premium found themselves with fewer clicks as their ads were placed on less advantageous pages, or when their ads were displaced entirely. They then changed their own behavior, perhaps by choosing different keywords and/or paying higher rates. This would have cascaded, causing other advertisers to change their behaviors.
The end result would've been a shift in AdWords' performance with those keywords, one that wouldn't easily be reversible, and which could account for the poor performance when the experimenter reduced his bids for clicks.
If you ask google to justify every detail of their pricing, you may as well demand it of oil companies & every other business.
If you don't like it, dont use it.
No, I don't think Google is redefining the "law" of demand and answer... they are just better set up to take full advantage of it.
And I don't see anything wrong with this.
Sure, in some cases, larger companies have a competitive advantage when it comes to this.
Mind you, larger companies also have a competitive advantage when they have a crap-load more money than smaller companies... they can hire a boat-load of top-knotch engineers, spend way more on advertising, etc. Does this mean it's unethical? No. That's the way it works.
Of course, there could be Monopoly issues, but I doubt that they are of issue in this case.
So, do we need an ethical framework? No. The smaller company needs a better negotiator to enter into the agreement and get the better rate and the service they want.
$0.02 (CDN)
I'm assuming that the lawsuit posted earlier this week was what prompted this - which by the way, in my opinion is total nonsense and has a snowballs chance in hell of winning in court.
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Long gone are the days of getting a simple answer from Google without advertising. As a search engine, it still does a very good job but, there are far too many people out there thinking that Google is the Only online advertising platform. This may have begun skew the results in favor of sites that have no real content other than a bunch of google ads. Google wins either way, click on the paid ads based on the search or ads loaded on the landing page of the search result. At some point, Google will loose it's lustre.
It works for all, it is capitalism at its best:
Anyone can bid prices, but the costs you need vary based on how well your ads do.
Useful pages that are well typed to keywords (lemonhead ads for a search for lemon chicken would have to pay more for instance) are good for us, which means good for google, because google want to make more money.
Advertisers are stupid, they want to be top of EVERY SEARCH no matter how useful it is, and they want it cheap.
Google says, the less relevant you are to the search, the higher the click through, the higher the cost.
If you happen to convert your audience, and you now become more relevant, you prices go down.
So if I start selling neckties to skaters, I might have to stump up a bit in the long run, but if I hit a craze, they would go down, until some chump makes his own neck ties and starts bidding above me.
I think it is dumb to make this public, and the guy behind this has an ulterior motive anyway.
Misleading ads change the equation, but what can you do.
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Adwords does placement on more than just the cost-per-click. This fact is spelled out all over their website, try something like https://adwords.google.com/support/bin/answer.py?a nswer=10215&topic=114 :
"We want to ensure that your keywords get a fair chance to run and that we do all we can to properly gauge their performance. We use a Quality Score to do this. Each keyword is given a Quality Score based on data specific to your account, including your keyword's clickthrough rate (CTR), relevance of ad text, historical keyword performance, the quality of your ad's landing page, and other relevancy factors.
Quality Score = keyword's CTR + relevance of your ad text + historical keyword performance + other relevancy factors
Your keyword's Quality Score and maximum CPC (at the keyword or Ad Group level) determine your ad's rank on Google search and content sites. (For the top positions above Google search results, however, we use your keyword's actual CPC.) Remember that improving the relevance of your ad text and keywords will increase your keyword's Quality Score and reduce the price you pay when someone clicks on your ad."
If you start a new campaign, it is no wonder that Google will not be able to give you the same placement as with a campaign that has run for years. It's new, it's unknown, the visitors / clicks are unknown, heck - even the cost-per-click value is jumping around. It looks weird to the system, it gets placed lower or even removed from some of the results.
What happens in the end: those who target properly (right keywords) and have a good ad copy get lots of clicks, those clicks end up making your placement better (while paying the same amount of money). The users are voting for your ad (whether they buy or not is partially unknown to Google -- "partially" because you can track it through Google if you want to).
A new factor coming into play is the landing page - the page that the ad takes you to. According to their blog ( http://adwords.blogspot.com/ ) they are now evaluating the quality of the landing page. So if you search for "children" and click on the "Get children at ebay" ad, and the page they link to does not offer "children", then sooner or later (heh, hard to guess, it depends on the amount of automatisation behind the checks) Google will either remove the ad or move it down, while the advertiser is still paying the same amount per click.
Is that evil? Is that being greedy? or is that just watching out for the "user experience"?
.... if this guy didn't trip over a duplicate content filter. I would be very surprised if Google didn't check to make sure it wasn't being fed the same content from multiple sources. From Googles point of view checking for duplicates is a good thing. They don't want their natural listings (or ad listings I imagine) to be filled with hundreds of copies of exactly the same site.
I would have been more interested to see the results of a test that modified the wording of ads and how that affects placement.
Finally, I wish I was getting 15000 click throughs a day. Sigh.
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I skimmed this and thought, "Hmm, this looks like the kind of text that would be generated by a script." A couple of minutes of searching (via Google, ironically enough) turned up the Automatic Complaint Generator.
Sigh. Remember when trolling was an art form, when people would put time, effort, and (dare I say it?) heart into inciting flame wars, even when posting as Anonymous Cowards. The kids these days are just phoning it in, and that saddens this oldtimer's heart.
I was thrilled with the ad-block extensions of Firefox, and welcomed the relevant ads from google. I'll admit, I have actually clicked on, and even (shocked) bought a few things.
I hate desperate ads, like those on TV and everywhere else. Advertisers realise that they are failing.
When/if google starts flash, popups, then start to complain.
Tired of online retailers charging extra to ship products to Alaska?
Google not only knows what you like, thanks to the things you search for, but it also knows who your friends are, and what they like thanks to relationships formed through GMail invites and Orkut which could come in very handy when it comes to targetted advertising in the Christmas season (and any other gift buying season).
And I'd be quite appreciative of that as I've no idea what to get my Dad this year, and a few casually placed Google Adwords undermining my own thought process wouldn't go a miss!
The problem with slashdot is that most of its users were bullied and stuffed into lockers as kids!
First of all if he gets 15000 @ 0.15 clicks per day he is paying $1500,- a day in advertising that is $547.500 per year in advertising alone. His friend must be an internet miljonair! I somehow doubt that such a large operation would execute the test as described in the article. I think the figures are a bit inflated to make it a better story. Furthermore I use Google Adwords for my company (http://www.tiouw.com/). I spend around $5000 a year on Google. As everyone who has ever worked with AdWords knows is that when you change your ad, it changes your click through rate. Changing URL's, text, anything has a direct result. It takes some time before the system gets used to the changes and then you are back on track. I expect that if the company in the article would have run for some time with the new settings it would generate more and more hits. Finally, tests have shown that people do not click on the no.1 position, but prefer no. 2 or 3.
are organizations like Google redefining the law of demand and answer?
You mean supply and demand, the cornerstone of capitalism? More like - Google is redefining the rules of advertising and IT for the entire world.
To what extent does this imply a competitive advantage for larger companies?
Well, just like the superbowl, only companies with big bucks can get prime time advertising real estate.
Do we need an ethical framework to direct companies to make such algorithms open source?"
Keep your ethics and morality out of my consumer choices. If I dont like how google does business, I will stop buying from them. I live on Kauai, and I turned my girlfriends dying massage business into a thriving business (www.kauaioutcallmassage.com) spending only 20$/month over the last 2 years. Google has been incredible for my family, please don't rain on or change my parade with Google!
Horns are really just a broken halo.
To be honest, I just checked, and while there are 1,030,000 Google results for "Cringely," there are no ads at all on the results page, indicating -- as many have long suspected -- that I have no commercial value whatsoever.
Minimum price for 'cringely': $0.42
Too expensive for me..
BTW, the article is quite bad. All the important information is missing like the positions, CTR, minimum prices and CPC. OTOH, the algo is probably quite complex and it seems the higher bidder is not the winner.
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No, duh?!
That's the exact same link that the original poster provided.
Yes, an article from September is hardly "news".
Move along, nothing to see here.
I think Google puts a stiff penalty on lowering your price-per-click. I am sure most advertisers will (sooner of later) try is they can lower their rice-per-click. Google's algorithm will start to give them bad ratings immediately and most will be back to the old price in no time. The few that accept the hit in click troughs, will cost Google some money, but the ones that go back to the higher price will more than make up for that. Just do the math...
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Not to burst anybody's tin-foil bubble, but there's possibly another less nefarious explanation to what is going on. As we know, Google wants to keep their Adword algorithm secret. It's quite possible that Google realized long ago that folks could map out their algorithm by simply playing with the input parameters just like Cringely's friend was doing. In order to prevent the inevitable reverse engineering of the algorithm, they might have put in some code to randomize the effectiveness of the results when Google has detected that someone is changing the parameters. If that guy wants to see if Google is really punishing him for lowering his price, he should try setting the price back to $1 and see if things go back to what they were before. I'll bet they won't.
Of course, another possibility is that they have a bug in their code. I've heard that some programmers actually make mistakes sometimes.
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So start a new site with zero page rank and it will have to pay more to get the same placement, if it can do so at all. Older sites will pay less because they've been around longer, and their ads will have shown themselves to actually have been relevant.
It boils down to a simple axiom: Google rewards relevance.
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This just shows that a newcomer company that is pouring a bucket of money into advertising can be about the same as successfull as an established one that does not. But once the newcomer decreases the ammount of advertising it starts sinking rapidly.
From my point of view this is just normal, not some EVIL doing of Google.
Here's a common story:
"I put Google AdSense on my website. I earned about $140.00, and Google was just getting ready to send me a check. Then, out of nowhere, Google sent me an email telling me I'd generated 'invalid clicks' and that my AdSense account was terminated, and all of my profits would be returned to the advertisers."
Hundreds, if not thousands, of AdSense displayers just like me have faced this fate. But here's the question to AdWords advertisers. Have you ever seen a "refund" on your AdWords account due to some AdSense advertiser generating "invalid clicks" for your ad? I never did. Google confiscates the money from the AdSense displayer, but does not return the money to the related AdWords advertisers! That is to say, Google keeps the money that the AdWords advertisers paid to display their ads; and also keeps the money that they were supposed to pay out to the AdSense webmasters for displaying those ads.
Google is making a killing on displayed advertisements for a lot of keywords and phrases, without paying out a penny to those who are displaying the ads on their pages. They're arbitrarily cancelling AdSense displayers' accounts for unspecified reasons, and if you try to determine why, you wind up in formletter hell. "Do No Evil," my arse.
I've been on both sides of the fence. I advertised through AdWords, I displayed AdSense ads on my site. And Google decided to kill my AdSense account while I was on vacation, for "invalid clicks," and despite emails requesting details, they wouldn't bother to explain what that meant.
I immediately pulled the AdSense ads from my sites and replaced them with Yahoo Publisher ads. Good news on that front, Yahoo is actually sending me checks. And I can guarantee you that I'll never again spend a penny on any Google service, be it AdWords or any other fee-based product they come up with.
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When you believe that "government is the people", or that the voting process somehow removes the element of force from the definition of government.
But in the oil industry, the price goes up and down and every customer pays the same ammount
But that's just simply not true. Big refineries pay less than small ones. Big distributors pay less than small ones. Smart retailers that commit to longer-term contracts pay less than those living more hand-to-mouth. Prices paid at every level of the oil (and every other commodity) market and distribution chain fluxuate wildly, and the long-term viability and business flow of each player can impact what they pay. Just like Google rewards long-time customers, long-lived established (and relevent) sites, etc.
While not illegal this does not justify a claim of "NOT EVIL"
How is evaluating your customers and striking deals that seem appropriate, according to your own interests, evil? It's not like Google (or search, or advertising in general) is some natural resource or government service that Google is on the hook to spread around evenly in some utopian socialist model... they're a private sector company deliverying a service in a way, and according to methods that they have established. If you think it's Eeeeevil for them to evaluate their customers, looking at the big picture, then all you have to do is spend your money somewhere else. They have competition: Overture, MS, Yahoo, etc.
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The conclusion was that you don't get what you pay for. If you pay 0.10 you do about as well as if you pay 1.00. But if you pay 1.00 and then reduce it to 0.40, you do far worse then if you had always payed 0.10.
Do we need an ethical framework to direct companies to make such algorithms open source?
Since a corporation's primary charter is to make money for it's owners, revealing information like this could be considered unethical under current norms. This is why we have the concepts of patents and other IP. A patent is a contract betwwen the government and the patent holder in which the patent holder is granted a limited term monopoly on an invention in exchange for publishing the details of the implementation of the invention. The strength of the patent system determines how willing the corporation will be to publish the details of their invention.
The main alternative to patents is trade secrets where (like in the case of the Coca-Cola formula) the corporation decides that that it is not in it's best interest to publish it's invention.
This is the framework we have now. An ethical framework that would result in a company publishing all of it's inventions without any compensation would be a very different society and much more collective than what we have now. Whether such a thing would work is not well supported by history.
The better experiment would create two or more new sites and test adword on an even footing of history with both Google and searchers.
Two wrongs don't make a right, but three lefts do.
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Have you ever seen a "refund" on your AdWords account due to some AdSense advertiser generating "invalid clicks" for your ad?
Yes, I have. As per Google's documentation, you can click on the "My Account" tab and look for "Service Adjustment" in your billing summary. I have received some small refunds.
One thing that wasn't considered in this experiment is the fact that Google frowns upon websites that have duplicate content. By doing so, the tester may have notced he was experiencing a lower page rank as well as fewer listings in organic listings. This could have caused the Google ad to be discounted and even viewed as a SPAM website (obviously a big no-no). While we cannot contest the power of Google, the system is much more intelligent than the everyman and will not reward people trying to receive more traffic by creating duplicate websites (even if a test).
Oh please. Read the context of the discussion. The point I was responding to was the absurd argument that laws that restrict people's behavior are net reductions in freedom. There's no deception here; read the GPL yourself. It calls for restrictions on people's behavior. If you redistribute code, you must do so according to the terms of the GPL. Stop trying to distort the issue.