Google Adwords Quality Score Debacle Continues; Is Google Price Gouging Advertisers?
Google Adwords is causing ulcers within the marketing divisions of tens-of-thousands of businesses and agencies across the globe.
Let me attempt to shed some light on this issue. Let me also STRESS the point that it’s my personal and professional opinion that this issue didn’t just begin this past weekend; instead this issue has been going on for months, it’s just that this time around it’s effecting more advertisers.
In short, the Google Adwords system is becoming more and more of a black box and too often the system is ahead of itself and just doesn’t treat ALL advertisers fairly. It would not be unfair to conclude that, in general, the Google Adwords system is actually unfair and doesn’t work.
In addition, there appears to be growing fear among advertisers that Google has too much power to control market prices, which has resulted in apparent price gouging. If the Google Adwords Quality Score debacle that occured this past weekend is an example, I believe advertisers should be seriously concerned about price gouging.
In many cases, Google is penalizing trademark owners from bidding cost effectively on their own trademark. In other cases Google is increasing bids as high as $10.00 for keywords that in the past cost advertisers pennies on the dollar. Previously, this issue has primarily hit search arbitragers. However, the problem continues to spread like a nasty virus unjustly hitting advertisers of all shapes and sizes, including some Pepperjam clients who spend lots and lots of money on Google Adwords.
And with Yahoo Search Marketing starting to look more and more like Google Adwords, advertisers need to be concerned.
I’ve made the argument multiple times over the last 12-months that Google’s Adwords system is rampant with false positives and injustices.
Here’s the problem - since the Google Adwords system lacks transparency, advertisers are forced to rely on Google’s Adwords algorithm to determine how much they pay for an ad. There is no way for an advertiser to make sure that Google’s system is being fair - the advertiser just has to rely on the fact that Google’s system works and treats everyone the same (fairly).
Google does provide some direction of what Quality means, but keep in mind that Google controls the system - they provide very boilerplate language to advertisers, which provides little or no direction on how their automated system actually works.
Here is what Google says of Quality Score:
“Quality Score is the basis for measuring the quality and relevance of your ads and determining your minimum CPC bid for Google and the search network. This score is determined by your keyword’s clickthrough rate (CTR) on Google, and the relevance of your ad text, keyword, and landing page.
We believe high quality ads attract more clicks, encourage user trust, and result in better long-term performance. To encourage relevant and successful ads within AdWords, our system defines a Quality Score to set your keyword status, minimum CPC bid, and ad rank for the ad auction.”
On its face, Google’s “Quality Score” system makes sense. However, in practice it just doesn’t treat all advertisers fairly and in other cases the system just doesn’t work at all.
To appreciate what I mean by “doesn’t work” think with me about the scale of Google Adwords - hundreds of thousands of advertisers are part of the Google Adwords system, which results in quarterly profit for Google of over $1 billion. If the system isn’t fair, for instance by charging thousands of Adwords advertisers an extra 20 cents per click because that advertiser has a low landing page quality score, Google ends of reaping millions in profit and the advertiser has no way of knowing they were treated unfairly. That is a serious problem.
Is Google Price Gouging its advertisers?
It is well known that paid search is in high demand and that Google controls the market. Google is one of the fastest growing companies of all time and has generated almost all of its revenue from paid search. Since Google controls the market and sets market prices, there is no way of knowing whether they are price gouging advertisers. What do you think?
Based on the widespread negative reaction discussed within the blogosphere this weekend where advertisers were forced to pay higher prices because of a malfunction in the Google Adwords algorithm, the answer to the price gouging question is yes.
What is Google going to do to make this situation right?
In my opinion, probably nothing since they control the market and set the prices.
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February 20th, 2007 at 1:46 am
Up until this weekend, one of the few bloggers I’ve seen scrutinizing the quality score has been Greywolf. Increasingly, I am seeing more and more negative publicity about PPC advertising in the mainstream press. This is not a good sign.
It occured to me last month (and I wrote about it) that this is kind of like shill bidding. At the very least, it achieves the same effect. Can you even call it an auction if there is no auction function?
In defense of Google, they really do need to be able to control ad quality. Unfortunately, entry-level employees reviewing ads is hardly a solution either.
At this point Google runs several risks. First, scaring away existing and new advertisers — which would kill their growth momentum. Second, attracting regulatory oversight. Its going to be very hard for Google to function if some Department of Pay Per Click Advertising has to review every algorithm change. Thirdly, it increases the incentives of individuals to game the system.
It used to be that SEO was reserved for the power users and PPC was seen as the reliable source of traffic. Thats changing. I always ask “How is this experience for the casual business user?” Someone who wants to spend a few hours a week managing their PPC ads is going to be in trouble. I can sit at my computer 7 days a week to solve a problem; they can’t. Google needs to consider putting the massage chairs and big red bouncy balls in the closet for a few months while they solve this problem.
February 20th, 2007 at 1:52 pm
They seem to always be in the spot light about click fraud and things like this. Since they are monopolizing over 50% of search, users really have no other alternative besides lower level search engines and ad networks.
I don’t think they care because they know what user’s alternatives are.
February 22nd, 2007 at 7:11 pm
[…] Man, this Google stuff is getting out of control. Kris blogged earlier this week about the problems that just about everyone seemed to be having with their Minimum Bids following the Quality update on Friday. Supposedly that has been corrected although I did hear some murmurs around the office today that led me to believe there were still some issues. I didn’t follow up on it; I have bigger and far more frustrating issues to deal with. […]
February 23rd, 2007 at 3:08 am
[…] Graywolf isn’t the only one closely watching the Adwords quality score, so are the guys over at pepperjam. […]
February 25th, 2007 at 5:53 am
[…] pepperjamBlog » Blog Archive » Google Adwords Quality Score Debacle Continues; Is Google Price Gouging Advertisers? n addition, there appears to be growing fear among advertisers that Google has too much power to control market prices, which has resulted in apparent price gouging. If the Google Adwords Quality Score debacle that occured this past weekend is an example, I believe advertisers should be seriously concerned about price gouging. […]
February 28th, 2007 at 6:49 pm
[…] Second, it’s been confirmed that I’ll be speaking on two panels at Search-Engine Strategies (SES) - New York, including (1) Search Arbitrage and (2) Affiliate Marketing Issues. I’ve spoken on these panels in previous SES’s and the Search Arbitrage one is especially hot. I can tell you now that Ive received some inside info that a senior person from Google will be on the arbitrage panel to defend Google’s arbitrage position. Remember, I’ve blogged about this before HERE and HERE - in short, Google has made a # of policy decisions regarding Google Adwords that has attepted to rid the system of Garbitragers (MFAer’s), but in the process have created a system that is rampant with false positives…most notably the fact that many affiliate marketers are forced to pay as much as $10 per click for a keyword that others pay 10 cents. Come to think of it, the Google Adwords product is resulting in quite a bit of collateral damage to advertisers these days - more on that HERE and HERE. More news on this soon. […]
March 20th, 2007 at 9:13 am
Great post, I can definitely relate to your frustration. I guess this is what happens when one company gets to close to monopoly positioning. Ideally, this would just result in a transfer of advertisers from Google over to MSN/Yahoo. The industry’s still young, though, and I wouldn’t be surprised if Google competitors start capitalizing on this sort of hazy/unjust quality score algo.
July 24th, 2007 at 1:45 pm
[…] pepperjamBlog » Blog Archive » Google Adwords Quality Score … To appreciate what I mean by “doesn’t work” think with me about the scale of Google Adwords - hundreds of thousands of advertisers are part of the Google Adwords system, which results in … http://pepperjamblog.com/?p=134 […]
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