1. 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

2. Background
- Simon Buckingham is a New York based Internet and Mobile Entrepreneur- Founder and
CEO of 3 companies
- Simon has spent nearly 20 years in the mobile industry since starting at the carrier group
Vodafone in 1991 where he launched SMS text messaging and its business partner
programs
- Perspective is as an advertiser and customer of Google in the US and globally spending
significant sums on digital marketing to raise awareness and drive sales of our products and
services
- Google has been not just a tool and a supplier with keyword search (AdWords) but also
our ad agency for digital, TV and print inventory buying
- Have been generally happy working with them until I read a blog post in December 2009
which mentioned they had extended ad campaigns to run on smartphones which I wasn’t
aware of. This led me to research Google’s mobile extensions and led ultimately to the
production of this presentation
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3. Google’s Strategic Direction and System
We 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 to
extend Google’s Internet search dominance into commerce, advertising and apps on the Internet
and mobile platforms, giving them disproportionate control of advertising inventory on multiple
platforms:
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
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4. Automatic Opt-In and Linkage of Services
Google repeatedly links separate programs to one another, leveraging its audience and
reach and strengths in one service to extend its dominant position on the Internet. By
migrating users (consumers and enterprises) from one Google product to another, Google
builds its total audience which creates new advertising inventory for it to sell. It then migrates
these 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 for
important 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
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5. Linkage of Consumer Services- Chrome
“New! Find more Checkout deals while shopping at stores across the web by installing our
Chrome extension” when you click on the link, you are told that:
“Google Chrome Extensions are not supported by your browser. Please download Google
Chrome to install extensions.”
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6. 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
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7. Linkage of Advertiser Programs- AdWords
“Upgrade your browser for faster account navigation. We suggest that
you upgrade to a recommended browser for optimal performance with
AdWords”
It is not clear
why installing
Google Chrome
enables faster
account
navigation and
optional
performance for
AdWords
advertisers
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8. 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:
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9. Linkage of Checkout fees to AdWords spend
When Google extended its Checkout commerce solution to mobile devices, it
linked the mobile transaction fees it charged to the amount of AdWords
advertising spend:
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10. Linkage of AdWords to Chrome
As you use Google’s products, you are constantly encouraged to to use other
products:
“Upgrade your
browser for faster
account navigation.
We suggest that you
upgrade to a
recommended
browser for optimal
performance with
AdWords”
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11. Extension and Automatic Opt-In of YouTube Ads
“Beginning on November 4th, 2009, all new and existing Promoted Videos may begin running
on search partner sites. Your existing bid for Search placements will be automatically
applied and your budget will remain unchanged (but keep in mind that expanding your
placements beyond YouTube may cause your budget to be consumed more quickly.”
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12. 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:
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13. 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 Customer's 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."
Google's Product
Search program
remains a beta
program despite
having been
launched nearly a
decade ago in 2002
under the Froogle
brand
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14. Linkage of Live and Beta Programs
-Google advertisers have told Appitalism that Google has “compelled” them to sign
up for the Google Affiliate Network and appoint Google as an affiliate selling their
products by covertly linking the Google Affiliate Network program to the
appearance of those advertiser’s products in Google’s Product Listings on its search
results page
-Google appears to shop the most popular product categories amongst competitors
who can’t afford to let their competitors occupy that prime real estate above the
fold on the Google search results page
-Instead of paying Google a Cost Per Click (CPC) through the AdWords paid search
program as before, advertisers seem now to be induced to pay Google on a Cost
Per Acquisition (CPA) percentage of revenue fee for completed purchases made on
the advertiser’s website that originate from Google
- Other successful specialist companies on the Internet such as affiliate networks like
LinkShare and Commission Junction aren’t able to compete with Google’s search
volumes and home page traffic and end up losing affiliate business to Google
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15. 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
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16. 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.”
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17. Linkage of Search Results to Use of Google Services
Paid ads dominate the search results page. Additionally, use of Google Checkout
as a payment mechanism appears to result in preferred advertiser placement in
Google’s paid search results:
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18. New Search Products- Products in Search Results
All of the product listings on the search results page here are paid ads, although
they aren’t clearly shown as product listings using a pink background:
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19. New Search Products- Site Links
Both the title of the advertiser link and the individual sub links below it are
paid for:
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20. New Search Products- Product Pictures
Advertisers can feature pictures as well as words in search ad results allowing
them to get premium placement at the top of the sponsored links and shopping
results:
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21. Integration of Ads with Google Maps
A search for this store results in one giant ad unit including a map, product
offer links and a built in location search:
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22. Integration of Ads with Google Maps
Sponsored Links are prominently featured at the top and side of the
search results page:
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23. New Search Ads- Comparison Ads
A Google UK test shows Comparison Ads between credit cards resulting in more
sponsored results, which don’t have the usual pink colored distinction:
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24. Google News: How Search Used To Work
Google’s Search Results page may have become polluted by commercial intentions over
the years but at least on Google News, the search results are determined impartially: “The
selection and placement of stories on this page were determined automatically by a
computer 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
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25. 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
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26. 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
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27. Contact Details
Feel 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
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