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    Google control system part 1 mobile Google control system part 1 mobile Presentation Transcript

    • Google’s System to Control Advertising Inventory on Multiple Platforms Examples of Company Practices with Supporting Facts and Data PART 1: MOBILE Simon Buckingham April 14th, 2010 PRIVATE AND CONFIDENTIAL
    • Background- Simon Buckingham is a New York based Internet and Mobile Entrepreneur- Founder andCEO of 3 companies- Simon has spent nearly 20 years in the mobile industry since starting at the carrier groupVodafone in 1991 where he launched SMS text messaging and its business partnerprograms- Perspective is as an advertiser and customer of Google in the US and globally spendingsignificant sums on digital marketing to raise awareness and drive sales of our products andservices- Google has been not just a tool and a supplier with keyword search (AdWords) but alsoour ad agency for digital, TV and print inventory buying- Have been generally happy working with them until I read a blog post in December 2009which mentioned they had extended ad campaigns to run on smartphones which I wasn’taware of. This led me to research Google’s mobile extensions and led ultimately to theproduction of this presentation 2
    • Google’s Economics – Google’s economics revolve around a bidding/ auction system to sell inventory that is based on keywords and driven by Cost Per Click (CPC) charges to advertisers – Because there are a finite number of premium keywords but a potentially unlimited number of advertisers, Google is incented to increase the size and liquidity of the advertiser pools where bidding occurs for different keyword auctions so that the Cost Per Click (CPC) rates increase – Our analysis leads us to believe that in order to keep growing its business, Google needs to continuously but gradually introduce new ways to: - Reduce the blended cross-program Click Through Rates (CTR) that advertisers see over time but only gradually so as not to cause too much advertiser dissatisfaction - Increase the overall blended Cost Per Click (CPC) costs but gradually in a managed way over time so as not to cause too much advertiser fallout – Google maximizes revenues by selecting the most expensive ad in real time every time a page loads. The bids for that ad inventory come in from a large pool of advertisers comprising not just AdWords advertisers but also other competing ad networks and buyers who have access to the AdSense ad space through the DoubleClick Ad Exchange etc., pushing advertisers down the list of search results and necessitating higher bids to maintain the same positions in paid search listings and visibility above the fold on Google’s search results page – Google’s large acquisitions such as DoubleClick and its proposed acquisition of AdMob enable Google to maximize the revenue it earns from advertisers by aggregating advertiser pools and gain new inventory by extending their campaigns to the new platforms of display and mobile respectively 3
    • Google’s Strategic Direction and SystemWe believe that Google has developed a system of automatic program and platform linkages, opt-ins and extensions that are opaque and costly for their advertisers. These systems are designed toextend Google’s Internet search dominance into commerce, advertising and apps on the Internetand mobile platforms, giving them disproportionate control of advertising inventory on multipleplatforms: Desktop Search Internet Advertising System Mobile Internet Advertising, and Keywords commerce and Apps Google’s Product Set allows for complete Estimated 75% coverage and control of Internet advertising. Together Google and AdMob Products include AdSense, AdWords, would have an estimated 75% Market Share DoubleClick, Mobile, Checkout, Search, of the in-app mobile advertising Nexus One, Android, YouTube, Gmail, Affiliate market (whilst Google’s Network, New separately auctioned Search program is still in beta and with Products (Sitelinks, Product Ads, Local/ Map no ads in most of its own apps. Ads, Comparison Ads) Unlike the Internet, Yahoo and Largest single provider of Advertising and Microsoft have no presence in Audience on the Internet the in-app ads space 4
    • Inception of Google’s SystemOur analysis indicates Google began employing the system it uses to extend its business ofcreeping ad inventory by migrating and aggregating advertisers to new products nearly 8YEARS ago whilst the company was still Google Technology, Inc. and a year before its IPO: – On June 18th, 2003, when Google AdSense was launched, it appears that all AdWords advertising campaigns were automatically opted into the new program – Ad campaigns designed and set up in AdWords for Google’s own site and search network were suddenly automatically opted into and appeared on the new AdSense content network which included tens of thousands of blogs and personal websites that were running AdSense – Advertisers paid dearly as suddenly their ads started turning up on a vast array of different sites that they hadn’t planned for or vetted. As well as increased administrative overhead, advertisers have told us that this change resulted in significantly higher levels of Click Fraud as some of the site owners who had signed up as AdSense publishers clicked on the ads on their sites to generate income for themselves which the advertisers paid Google for 5
    • Automatic Program ExtensionsGoogle has built a system that includes regularly launching new programs, services and featuresand: – Automatically opts its advertisers and customers into them – Retroactively alters all advertiser’s existing campaigns to reflect these new programs irrespective of whether those ad campaigns were designed for different programs, targets and audiences – Does so without the explicit consent of their advertisers or email notifications to them. The onus is squarely on users of Google’s services to be ever-vigilant to the opaque introduction of these new services. Google opts its customers in and then backpedals later if they are found out- refunding only those advertisers that notice that their campaign settings have changed and take the trouble to ask for a refund- leaving Google with significant extra revenue and profit from those who don’t notice or request – Google bundles together different products and programs across multiple media; for example, Google’s Search Network (own sites) and Content Network (third party sites), Internet and mobile, publishers and affiliates- when their management knows they are not the same from either an ad quality or engineering perspective 6
    • Automatic Extension of AdWords to MobileOn 8th December 2008, Google extended their Internet products to the mobile platformsimply by changing the default campaign settings for AdWords from Desktops and Laptopsto Desktops, Laptops and mobile devices with full Internet browsers (smartphones), and thishas remained the default ever since. The default AdWords campaign setting of “AllAvailable Devices” which is “Recommended for new advertisers”. You must click on the “?”do you learn that “Desktop and Laptop Computers: Formerly the default setting forcampaigns”: Google not only changed the default for new AdWords campaigns to automatically include smartphones, it also retroactively altered the campaign settings for all active AdWords campaigns to run across both platforms populating smartphone ad inventory with those campaigns 7
    • Automatic Extension of AdWords to MobileThis change ignored the fact that the mobile and Internet platforms are verydifferent: – Unlike Internet browsers, smartphone Browsers do not support the Adobe Flash format that many ads and websites use – Smartphone screens are small in size and websites are typically not designed optimally for viewing on mobile devices – Google itself recommended to advertisers in an AdWords blog post to “Put your call to action in a spot on your landing page thats easy to find. Keep in mind that its a bit more difficult to navigate websites on a mobile device, so consider shortening your checkout process” (but not until December 10th 2009, a year after the smartphone campaign extensions were introduced) 8
    • Automatic Extension of AdWords to MobileThere is a marked difference in both the presentation and results from a Google Search for“GPS” on a Laptop compared to a Smartphone: Searches conducted on 11/ 12th April 2010 9
    • Launch of AdSense for Mobile Apps Program On June 29th 2009. Google launched its AdSense for Mobile Applications in-app advertising program with the Beta designation. The program has remained in beta for nearly a year. Even in Beta, Google has signed up many top mobile app developers including National Public Radio, Concentric Sky, Textplus, Twitteriffic and Craigsphone. Google lists some of the other app developers it serves in-app ads for on its program page: 10
    • Automatic Extension of AdSense to MobileOn October 5th 2009, Google extended its AdSense programs to high-end mobile devices(smartphones). Google would now automatically detect and run a larger ad optimized forhigh-end mobile devices, creating and populating yet more new inventory: 11
    • Automatic Extension of Checkout to MobileOn January 10th 2010 for the Nexus One launch, Google automatically extended its Checkoutpayment service from Internet ecommerce stores to mobile transactions and commerce.Transaction fees for the Checkout payments program are linked to usage of the unrelatedAdWords advertising program. When consumers browse a Checkout supporting website on theirmobile device, they see the Checkout logo, after which they are automatically directed to themobile version of Google Checkout: 12
    • Automatic Extension of YouTube ads to MobileIn March 10th 2010, Google changed the default YouTube Internet ad campaign settings toautomatically run the mobile version of its website: Information about this new ad program was published not on the Google YouTube Blog or the Google Mobile blog, instead it could only be found on the YouTube Business Blog 13
    • Automatic Extension of YouTube ads to MobileIn a test ad campaign on YouTube, mobile wasn’t mentioned at all during set up.After activating the campaign, it was necessary to go into “Edit your video” andat the bottom left corner click on “Syndication” where you can opt out of the adshowing on mobile and TV: 14
    • Automatic Extension of AdWords to the iPadOn April 2nd 2010, automatic serving of AdWords campaigns to the iPad goes live (the day beforethe device shipped to consumers). This was an extension to yet another platform. The iPad is considered a separate platform that is a hybrid device between a smartphone and a netbook computer. Google can and is delivering its ad programs to new Apple devices and platforms. 15
    • Automatic Extension of Site Search to MobileOn April 6th, 2010, Google announced that any enterprise that uses the Google Site Searchproduct on their website on the Internet will automatically now have site search with the samefeatures when that website is visited from a mobile device: 16
    • Expanding Google Mobile Apps Portfolio In fact, Google has rapidly created mobile versions of its Internet products and services and extended from the Internet to mobile platforms at an accelerated rate: Of the 22 apps listed here, the following four are the most popular and pre- installed on smartphones and mobile devices: Google Mobile App, YouTube, Maps and Search. With the exception of Google Search, these apps have not yet been fully rolled out with in-app advertising 17
    • Google’s Mobile Vertical IntegrationAs a result, Google is highly vertically integrated across every part of the mobile industry valuechain to a degree that it never achieved in the Internet market: Operating App In App Devices Browsers Search Store Apps Payment Systems Stores Ads •Open •Tablets •Chrome •Predictive •Google •Android •Calendar •AdSense •Checkout Handset Text Online Market •Search Alliance/ •E-Readers •Device Store for •YouTube •AdWords Android OEMS •By Voice Phones and •Gmail Platform •Set top •Mobile Display Apps •Voice boxes Browsers: •Local/ Maps and Text •Maps •Chrome Opera OS •Nexus One Skyfire •Image •Augmented Search •Droid Reality •Enterprise •etc. •Carriers (Goggles)By comparison, Apple does own or operate several key parts of this mobile advertising ecosystem- it does notlicense its operating system to external companies, it does not have its own browser or search engine (Google isthe default search engine for all of Apple’s devices) and doesn’t own and operate such a range of popular appsand destination sites. Apple’s mobile advertising acquisition (Quattro Wireless) has a much smaller share of the in-app advertising market. The acquisition is primarily defensive to protect itself against Google. With theannouncement of iAd, Apple’s acquisition has already become focused on ad serving for an increasingly closedecosystem serving only Apple devices. Google on the other hand will simply proliferate both its search engineand apps on more and more devices and platforms as the free open source Android platform is deployed onmore and more devices and device types 18
    • ImplicationsAdvertisers pay dearly when an ad that is designed for the Internet is automatically servedon a smartphone. For example, a Lexus banner ad on the start up page of the ESPN ScoreCenter iPhone app on Saturday March 6th 2010 led to an error message due to the non-support of Flash on the smartphone. Clicks on the same ad on a PC browser howeverpreserved the intended Flash based experience. Irrespective of whether the ads deploysproperly, the advertiser pays for the click that leads to this ad. 19
    • ImplicationsThe process is not seamless for advertisers as stated by Google: “Note: We maytruncate ad text when displaying ads on high end mobile devices”: It’s the advertiser who is left with the responsibility of sorting out what copy works on which devices and platforms. However, beyond this note, Google provides no specific information on which devices truncate ad copy or what length of messages will appear on which devices 20
    • Implications - Given its dominance of web search traffic, Google has been able to repeatedly increase the advertiser pool for a given search term by linking its programs on the Internet and extending those programs to mobile mostly without the advertiser’s knowledge or consent - In the case of mobile extensions, advertisers who were interested in mobile results were bidding against Internet advertisers whose ads were suddenly appearing on mobile devices because the Internet advertisers were automatically opted into mobile and were therefore unknowingly serving ads to mobile devices - Since fewer ads are displayed on mobile devices due to small screen sizes, competing with the newly enabled Internet advertiser pool pushed mobile advertisers down the list of search results, necessitating higher bids and CPC maximums to get the same traffic. All advertisers whether they wanted to only target desktops and laptops or target mobile devices only for services both ended up paying Google more for clicks - Advertisers are unlikely to notice that they were paying for mobile visitors because they have apparently been getting inaccurate mobile visitor tracking data from the Google Analytics tool that is built into Google’s ad products. This is because Google’s standard analytics packages use JavaScript technology for counting clicks which works on the Internet. However, since this technology format isn’t widely supported on mobile devices, it causes some mobile phones to crash, meaning the click may not get counted at all. One digital advertising specialist tested Google Analytics side by side with a specialist mobile analytics package and found that it only tracked 12% of the page views that a specialist mobile analytics package that didn’t have the JavaScript issue counted (http://www.brysonmeunier.com/mobile-analytics-with-google-analytics/) 21
    • Lack of Information TransparencyIt is a very opaque process to find out the important information needed tounderstand these program extensions and linkages, probably by design. There are atleast 114 separate blogs are listed in the Google Blog Directory (as of 9th April 2010).Distributing pertinent information across so many different blogs serves to make itdifficult for advertisers and others to discover key information about new programs andchanges that impacts them since there is no central location for this information: 22
    • Lack of Information TransparencyBroken Link when requesting more information about the change in campaign servingdefault settings:
    • Lack of Information TransparencyThe first 6 months of data necessary to compare clicks, impressions, CTR [Click Through Rates] andother performance metrics for Internet vs. high-end mobile devices between the introduction ofthe new mobile default campaign targeting option on December 8th 2008 until June 3rd 2009 suchthere was no way assess or split how the addition of the mobile targeting was performing: 24
    • Lack of Information TransparencyBecause of the lack of information transparency, advertisers need to spend an inordinate amount of timeoverseeing changes that Google makes to its programs. For example, we run mobile campaigns butdidn’t know that our Internet campaigns had been running on mobile devices until passing reference wasin the fourth paragraph of a blog post made a year after the policy introduction: “With this new option, you’re opted-in to show ads on the G1 and iPhone, and you’re also eligible to show on additional devices that use full Internet browsers as these devices enter the market”. “If you currently have an AdWords campaign running, by default your campaign will show ads on desktop and laptops computers, as well as iPhone and G1”. 25
    • Contravention of its own Ad Program Terms Google’s Advertising Program Terms governing all advertising programs include the following statements: “Customer is solely responsible for all: (a) ad targeting options and keywords (collectively "Targets") and all ad content, ad information, and ad URLs ("Creative"), whether generated by or for Customer; and (b) web sites, services and landing pages which Creative links or directs viewers to, and advertised services and products (collectively "Services"). Customer shall protect any Customer passwords and takes full responsibility for Customers own, and third party, use of any Customer accounts.” With respect to AdWords online auction-based advertising, Google may send Customer an email notifying Customer it has 72 hours ("Modification Period") to modify keywords and settings as posted. The account (as modified by Customer, or if not modified, as initially posted) is deemed approved by Customer in all respects after the Modification Period. Google retrospectively altered the ad targeting to include smartphones when they changed the default campaign settings which the customer should have been solely responsible for. Google also infringed the advertiser’s sole right to set all ad content and information given that Google states that “We [i.e. Google} may truncate ad text when displaying text ads on high end mobile devices.” (https://adwords.google.com/support/aw/bin/answer.py?hl=en&answer=107264) Additionally, Google did not send us as the Customer an email giving us 72 hours to modify the settings back to the default settings we had set our campaigns up to target. Furthermore, given that we did not modify our account settings, the account should have remained as initially posted 26
    • In Conclusion – Google built a Internet business that allowed them to control the majority of advertising inventory on the web. Google has been able to leverage better returns from its Internet search dominance for a few different reasons: - Google’s first act to create a way to index and rank the vast array of content on the Internet was brilliant and innovative which caused a lot of consumers and investors to admire and even revere the company and its founders (myself included) - The laissez faire regulation free environment during the eight years of Bush Junior’s Republication Administration coincided almost perfectly with Google’s exploitation of its dominant market power and acquisitions that extended that dominance from search to display advertising (via Double Click) and online video (via YouTube) - Google avoided regulatory oversight when it came within three hours of being formally declared a Internet search monopoly in late 2008 by the US Federal Government when it withdrew its deal to take over the running of a potion of Yahoo’s online search business - Advertiser reluctance to speak out due to Google’s dominant Internet market share, their agencies are getting 12-15% of the ad fees and are not therefore incented to complain 27
    • In Conclusion – Google has stealthily and systematically leveraged the same system to extend their Internet dominance to the Mobile Internet and apps – The results have not been good for the Internet- Google has arguably been more innovative with its economic extensions than with its engineering prowess- advertisers have ended up paying more and getting less whilst Google has been by far and away the leading beneficiary – The Black Box has become the Black Hole – The mobile internet and apps industry is still nascent and because marketing and advertising of these new services is so critical, competition and innovation needs to be protected so that the inventory doesn’t get controlled and leveraged through Google’s system – Google should not be allowed to do the same in the mobile world and at the very least, the AdMob deal needs to be blocked- Google does not need help extending themselves to mobile- allowing the AdMob deal will just give them an unassailable advantage and dominant control of mobile ad inventory – If the acquisition is approved, Google will have a dominant position in digital advertising on both ends of a converging Internet, as well as in the middle where the hybrid devices such as eBook Readers, tablets etc. are, thanks to the Android and Chrome operating systems – The implications will be even more severe as Google will get to collect and leverage even more search data including the geo-location information to target more localized ads and services to consumers and enterprises – Federal regulators are the only agencies that have the power to stop this monopoly – This is a unique moment in time to influence how business is conducted in the digital world of the future 28
    • Contact DetailsFeel free to contact me with any Questions or Comments on this presentation: Simon Buckingham Appitalism, Inc. 909 Third Avenue 28th Floor New York NY 10022 o: 212-451-9854 m: 917.573.6067 e: simon.buckingham@appitalism.com w: http://www.appitalism.com 29