Google's Sneaky Strategy of Increasing Ad Prices to Hit Targets

How would you feel one day you wake up and know that your most trusted partner, such as Google, is changing its nature? Ouch, hurts, right? Well, you haven't heard enough yet. In an unexpected turn of events, Google has admitted to a reasonably devious play in digital advertising. The search engine behemoth has been surreptitiously adjusting its advertising auctions, resulting in price increases of up to 10%, all in an effort to reach revenue targets. This information was revealed during a federal antitrust trial where Jerry Dischler, a Google Ad executive, spilt the beans.

Picture this: Google, the tech behemoth that it is, frequently alters the mechanics of the auctions used to sell search ads. This subtle changeup has led to a steady increase in the cost of ads and reserve pricing, affecting the average advertiser by as much as 5%. In some cases, the cost hike has been a whopping 10%. Shockingly, Google prefers to keep mum about these pricing shuffles, much to the chagrin of advertisers.

Why should you be concerned about this revelation? Because Google's revelation had a seismic impact on the digital marketing sector, leading some to ponder whether Google's Smart Bidding technology amounted to a clever scheme for manipulating ad prices in pursuit of profit. Anthony Higman, a digital marketing specialist, claimed that he had long suspected Google's techniques but was truly surprised to discover that the VP of advertisements had explicitly acknowledged them. He questioned the purpose of smart bidding, claiming that it was a clever way for Google to simply influence ad rates.

Be that as it may, why is Google even being investigated in any case? The U.S. Justice Department has Google targeted for purportedly utilizing devious strategies to keep up with its situation as the world's leading web crawler. They guarantee that Google, which flaunts a stunning 90% piece of the pie in the hunt business, has been dishing out gigantic aggregates to organizations like Apple to guarantee it stays the default web crawler on items like the iPhone.

Let's break it down a little more. When we talk about search advertising, we mean the text and shopping promos that appear at the top of Google's search results page when consumers type in their queries. These are the golden tickets for firms looking to attract potential clients' attention. Google earned more than $100 billion in search ads alone in 2020, accounting for more than 60% of total revenue. This is not a tiny sum of money.

Truth be told, Google's hunt promotion income has been in a reliable vertical direction, developing at rates in the "high teenagers" beginning around 2012, as confirmed by reports introduced by the Justice Department during the antitrust preliminary. Be that as it may, why is there a need to dabble with search promotion costs? As indicated by Dischler, Google's promotion group found themselves metaphorically "shaking the pads" to find ways of meeting income targets given over by Ruth Porat, Google's CFO. In a May 2019 email to his staff, he communicated his interest in neglecting to satisfy the portion for the second quarter in succession and missing the mark regarding the market's assumptions, which varied from what Ruth had communicated to the road. He expressed that such a situation would have serious market consequences.

He also stressed his preference for revenue over other factors, knowing that an additional $100,000 in stock price loss would negatively influence team morale, especially for those working in high-cost areas, and would significantly impact the sales force.

When questioned about this email during the antitrust trial, Dischler emphasized their objective was to become more innovative to achieve their quota.

Now, let's look at why this seemingly minor act of adjusting ad costs has such a large impact. If Google can raise ad costs without seeing significant competition, it might strengthen the Justice Department's case that Google has an illegal monopoly. Interestingly, they cannot use this argument against Google's search engine because it is a free user offering. They can, however, argue that increased competition has addressed other severe challenges in the search market, such as privacy regulations.

In conclusion, Google's behind-the-scenes pricing adjustments have sent shock waves through the digital marketing community, leaving many to wonder about the true motives behind Smart Bidding and its impact on the advertising landscape. While Google's revenue-focused tactics may have kept the Wall Street wolves at bay, they have also raised eyebrows and ignited a fiery debate about the ethics of its advertising practices.

Read next: How Do Creators Really Make Money? This New Influencer Marketing Report Has The Answer
Previous Post Next Post