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Google control system part 2 internet
 

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    Google control system part 2 internet Google control system part 2 internet Presentation Transcript

    • Google’s System to Control Advertising Inventory on Multiple Platforms Examples of Company Practices with Supporting Facts and Data PART 2: DESKTOP INTERNET 18th April 2010 Simon Buckingham 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 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 3
    • Automatic Opt-In and Linkage of ServicesGoogle repeatedly links separate programs to one another, leveraging its audience andreach and strengths in one service to extend its dominant position on the Internet. Bymigrating users (consumers and enterprises) from one Google product to another, Googlebuilds its total audience which creates new advertising inventory for it to sell. It then migratesthese products from platform to platform such as from Internet to Mobile.Automatic opt-ins are something Google regularly uses as part of its control system forimportant company initiatives like mobile and social networking When Google introduced Buzz it automatically linked it with Gmail and opted everyone’s Gmail contacts into the program. Following consumer outrage about privacy, Google retreated on the auto opt-in but Google still links them and leverages a popular existing consumer product- Gmail- to build usage of a new one- Buzz 4
    • Linkage of Consumer Services- Chrome“New! Find more Checkout deals while shopping at stores across the web by installing ourChrome extension” when you click on the link, you are told that:“Google Chrome Extensions are not supported by your browser. Please download GoogleChrome to install extensions.” 5
    • Linkage of Advertiser Programs- DoubleClick– “The Ad Exchange is also gaining great traction as we move all buyers and sellers into the latest version of the platform.” (Google Q110 Earnings Call)– “DoubleClick Ad Exchange 2.0 offers all the best features from 1.0 plus access to even more buyers and sellers through integration with Google AdWords and AdSense, a new easy to use streamlined UI, enhanced reporting capabilities and more” “Google Ad Manager is upgrading to DFP Small Business” Google Affiliate Network plus AdSense = 1m plus AdSense publishers can instantly be affiliates 6
    • Linkage of Advertiser Programs- AdWords“Upgrade your browser for faster account navigation. We suggest thatyou upgrade to a recommended browser for optimal performance withAdWords” It is not clear why installing Google Chrome enables faster account navigation and optional performance for AdWords advertisers 7
    • Linkage of Advertiser Programs- AdSense Google mandated that all Google Affiliate Network members must have an AdSense account by October 31st 2009 to remain as affiliates. This allowed Google to turn all ad affiliates into ad publishers too: 8
    • Linkage of Checkout fees to AdWords spendWhen Google extended its Checkout commerce solution to mobile devices, itlinked the mobile transaction fees it charged to the amount of AdWordsadvertising spend: 9
    • Linkage of AdWords to ChromeAs you use Google’s products, you are constantly encouraged to to use otherproducts: “Upgrade your browser for faster account navigation. We suggest that you upgrade to a recommended browser for optimal performance with AdWords” 10
    • Extension and Automatic Opt-In of YouTube Ads“Beginning on November 4th, 2009, all new and existing Promoted Videos may begin runningon search partner sites. Your existing bid for Search placements will be automaticallyapplied and your budget will remain unchanged (but keep in mind that expanding yourplacements beyond YouTube may cause your budget to be consumed more quickly.” 11
    • Use of Beta Programs- Analytics for Mobile Google uses Beta Programs for new solutions stating that “Please also remember that this product is confidential, and not be shared with anyone outside of your companies under the terms of the Non Disclosure Agreement you signed with us.” Here is an example of us being invited to trial Google Analytics for Mobile: 12
    • Linkage of Live and Beta Programs Google’s Advertising Program Terms communicate that "Some Program features are identified as "Beta," "Ad Experiment," or otherwise unsupported ("Beta Features"). To the fullest extent permitted by law, Beta Features are provided "as is" and at Customers option and risk. Customer shall not disclose to any third party any information from Beta Features, existence of non-public Beta Features or access to Beta Features." Googles Product Search program remains a beta program despite having been launched nearly a decade ago in 2002 under the Froogle brand 13
    • Linkage of Live and Beta Programs-Google advertisers have told Appitalism that Google has “compelled” them to signup for the Google Affiliate Network and appoint Google as an affiliate selling theirproducts by covertly linking the Google Affiliate Network program to theappearance of those advertiser’s products in Google’s Product Listings on its searchresults page-Google appears to shop the most popular product categories amongst competitorswho can’t afford to let their competitors occupy that prime real estate above thefold on the Google search results page-Instead of paying Google a Cost Per Click (CPC) through the AdWords paid searchprogram as before, advertisers seem now to be induced to pay Google on a CostPer Acquisition (CPA) percentage of revenue fee for completed purchases made onthe advertiser’s website that originate from Google- Other successful specialist companies on the Internet such as affiliate networks likeLinkShare and Commission Junction aren’t able to compete with Google’s searchvolumes and home page traffic and end up losing affiliate business to Google 14
    • Linkage of Live and Beta Programs In Google’s Q1 2010 earnings call, a Google executive commented: “One additional thing I would like to add is we definitely see an opportunity to move to taking a percentage of the conversions. In fact we call this CPA, cost per acquisition. One of the products that was developed in this area that are optimistic about is the product ad product. The way that works is the way the retailer just gives us all of the information about their product; price, listing, description, etc. and then Google actually does the targeting to decide where to show those ads. Then we take a percentage when the product is actually purchased when the user actually converts. We do see that as an opportunity to really simplify the process for advertisers over time and it is something we are investing in.” Google has now taken on the role of deciding when to show ads, which has real risk of a conflict of interest issues as it relates to Google’s impartiality towards consumers and other advertisers who are using the traditional forms of CPC advertising. Consumers may not be getting the best recommendations and are unlikely to know that Google has changed its business model in this way. Advertisers who want their products to be listed in Google’s search results have no choice but pay Google on a CPA basis for the best positions in the search results. Google now appears to think it can target goods more effectively than the retailers of those products can 15
    • Increasing Monetization of Home Page - Over time, Google seems to have gradually given into the temptation of selling off more and more of its search results and home page real estate through the introduction of new types of paid search ads programs, following a path that the likes of AOL and Yahoo have taken in the past - This is despite Google’s corporate principle that: “Advertising on Google is always clearly identified as a "Sponsored Link," so it does not compromise the integrity of our search results. We never manipulate rankings to put our partners higher in our search results and no one can buy better PageRank. Our users trust our objectivity and no short-term gain could ever justify breaching that trust.” - On Google’s Q12010 earnings call, they commented that: “Starting about a year ago we asked ourselves why do search ads just have to be text links. In organic search the right results might be a video, a book or an update from a social network. We call this universal search. But ads are also information. They are commercial information and in many cases it may be more useful to the users and the advertiser if we show a video or picture or product in the ad.” 16
    • Linkage of Search Results to Use of Google ServicesPaid ads dominate the search results page. Additionally, use of Google Checkoutas a payment mechanism appears to result in preferred advertiser placement inGoogle’s paid search results: 17
    • New Search Products- Products in Search ResultsAll of the product listings on the search results page here are paid ads, althoughthey aren’t clearly shown as product listings using a pink background: 18
    • New Search Products- Site LinksBoth the title of the advertiser link and the individual sub links below it arepaid for: 19
    • New Search Products- Product PicturesAdvertisers can feature pictures as well as words in search ad results allowingthem to get premium placement at the top of the sponsored links and shoppingresults: 20
    • Integration of Ads with Google MapsA search for this store results in one giant ad unit including a map, productoffer links and a built in location search: 21
    • Integration of Ads with Google MapsSponsored Links are prominently featured at the top and side of thesearch results page: 22
    • New Search Ads- Comparison AdsA Google UK test shows Comparison Ads between credit cards resulting in moresponsored results, which don’t have the usual pink colored distinction: 23
    • Google News: How Search Used To WorkGoogle’s Search Results page may have become polluted by commercial intentions overthe years but at least on Google News, the search results are determined impartially: “Theselection and placement of stories on this page were determined automatically by acomputer program.” It is however a computer program has been programmed by and is controlled by Google and whose algorithm is completely proprietary and resides within the Company’s black box of search algorithms- and algorithm that appears to routinely return YouTube video links on the search results page 24
    • Google’s Leverage of its Market Power– Google has a dominant market share in Internet search which it seems intent upon leveraging to move into other areas of Internet commerce such as affiliate networks and enforce participation in new advertising programs as well as extend across Internet platforms– Because these advertisers have traditionally relied on Google AdWords for generation of much of the traffic to their websites, as the prominent positions on the home page have become more expensive, if advertisers want to maintain a visible presence above the fold on Google’s search results page, they appear increasingly to have no choice but to accept paying Google a percentage of the revenue generated from sales their search results generates– Since its advertising customers face competition within their business categories, Google is likely in a position to play advertisers off against each other for popular search terms on its homepage and significantly increase the advertiser fees it levies and change the economics from Cost Per Click (CPC) to Cost Per Acquisition (CPA)– It is not the new ad programs that are concerning here, as much as the new economics that Google seems because of its market power to be able to attach to them 25
    • Google’s Leverage of its Market Power– By keeping programs such as product listings in beta, and having non-public beta features such as the linkage between the affiliate network and product listings, Google appears to have been able to keep the details of the economics and the program linkages and non-public beta features confidential– Google appears to use beta programs to reward compliant uncomplaining advertisers with participation in new product beta programs before their competitors do or at least at the same time– Advertisers seem to have been unwilling to complain publicly about Google’s underhanded practices and constant new schemes to extract more ad dollars out of their budgets and deliver less value because of the lack of viable alternatives. Intelligent digital marketers appear to be frustrated but feel like they have no choice other than to accept that Google controls the vast majority of advertising on the Internet and will continue to leverage that strength with more and more costly programs– It is highly likely that Google will continue to dominate the monetization of the Internet as long as its able to leverage and extend its market power 26
    • 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 27