Google winning 98% ad spots it auctions off, after order to treat others equally

https://www.wsj.com/articles/google-rivals-ask-eu-to-toughen-measures-in-antitrust-case-1517334038?mod=e2tw

by hadenew119 • 8 years ago

167 105 8 years ago

Paywalled, so obvious question. Does Google's deep pockets just bid high?

kyrra2• 8 years ago

I believe if you access it via twitter or facebook, WSJ still lets you in. Try the link from https://twitter.com/nat_droz/status/958396191531728896

dugmartin• 8 years ago

I have this bookmarklet I use when I hit paywalls and I don't care if Facebook knows I'm interested in it:

    javascript:location.href='http://facebook.com/l.php?u='+encodeURIComponent(location.href)

firloop• 8 years ago

https://archive.is/2a176

Analemma_• 8 years ago

Google claims that it operates the buying side as a standalone business that needs to be profitable so it doesn’t overbid. I don’t buy that claim for a second, and I don’t think the EU will either.

btian• 8 years ago

Why not?

I'm sure if you bid something ridiculous, say $1 billion for an ad, Google would rather show your ad than one of Google's.

clusmore• 8 years ago

Try outline.com: https://outline.com/a88hX9

natch3• 8 years ago

Tell me if I've got this right:

Say you have some businesses in industry X that all rely on advertising.

Say one of those businesses also happens to own the dominant advertising platform that businesses in industry X need to use, in order to effectively find customers. (Special note for those subset of HN readers who tend not to read: Yes there may be other platforms, but before you present that as an objection, note I just said let's say they need to use this one in order to effectively find customers.)

In this setup, the business that owns the advertising platform has an advantage over all other businesses in industry X, because it pays itself advertising revenue, where the other companies have to pay their competitor. So money is always being siphoned off to pay the advertising platform, with a cost to most businesses but a (near) zero cost to the business owning the platform. We can assume the platform is already paid for out of profits made from advertisers in industries A, B, C, X, Y, and Z.

It seems to me this is a fundamentally rigged game (rigged in fact, not necessarily by intent) in which all other things being equal, the owner of the advertising platform always has the upper hand. Even if the bidding process is made "fair."

benchaney4• 8 years ago

You are assuming that running and advertising business is profitable. If this is the case then yes, running an advertising business plus X always gives you an advantage over just doing X. This is true no matter what X is, even if X is unrelated to advertising, or even just doing nothing. I’m not sure in what sense this means that the game is rigged (unless of course the bidding process is unfair).

admax88q2• 8 years ago

I think you missed the point, it's not that doing two profitable things is better than one, which you're right is always the case.

It's the more specific case of running businesses X and Y where X is dependent upon buying services that Y provides.

If you have a monopoly on Y (advertising), then it's easier to complete in X, because everyone else in X has to buy their Y services from you.

So you end up paying your competitor in order to compete with them.

natch3• 8 years ago

Does it need to be profitable? It seems to me that if it siphons money off from competitors, that's already enough to hurt the competitors relative to itself. In fact not only does the advertising not need to be profitable, even the sales of X do not need to be profitable, for the competitors to be harmed... dumping would be the extreme example of that.

You are talking about a different aspect of the scenario, where the company is reaping profits from advertising. Sure, that's kind of beside the point though. Which is why it's important to recognize that the harm happens even without the advertising being profitable.

rocqua• 8 years ago

It raises the question, why is Google in the comparison shopping business.

Thinking about it, it makes sense for google though. Web scraping and data analysis is their forte. And it fits within google's approach of "answering any question someone has". If someone wants to know the cheapest place to get X, they just want someone to type X into google and get the best answer. For them it's not about making money on commission. Instead it's about getting buy-in into their ecosystem. Apparently they think they can provide a better experience than the commercial sites can.

prepend4• 8 years ago

They are in the business of making companies pay for placement in the comparison shopping business.

It seems obvious to me that this is just an artificial product to make more revenue.

Froogle was actually better for results a decade ago when they just sorted the normal web scraping for shopping items. Adding the forced ads to show up resulted in worse deals for consumers. This was part because advertisers had t pay for ads, thus raising prices. And part because advertisers didn’t have the best products, just the most efficient ads.

Ilverin• 8 years ago

I think this effect is small because of opportunity cost.

In Case A, google wins the bid, they gain the ad space, but gain no revenue.

In Case B, google does not win the bid, they lose the ad space, but do gain revenue.

Revenue and ad space are mutually exclusive, each is the opportunity cost of the other. Yes, in both cases google wins, but that is because google is the reason the ad space exists in the first place.

prepend4• 8 years ago

But since google auctions ads, Case A results in higher prices to the non-Google ad buyers. So it’s better than neutral.

taneq2• 8 years ago

Google can 'print' as many ad spaces as they want, and buy back the ones that don't reach their minimum price.

ikeboy• 8 years ago

Oh noes my vertically integrated company can out compete competitors

stuffedBelly• 8 years ago

I wish the fiduciary rule can be applied more broadly other than just in the financial industry.

jayd16• 8 years ago

It just comes down to Google gets to pay cost for ads and everyone else has to pay market price. The important factor here is any profit that could have been made between cost and market price for those ads is lost to Google as well.

At best, Google is just cheating revenue out of its ad division. I'm not sure this would actually be a huge advantage in the long run unless integration led to Google ads being cheaper to implemented than ads for others.

aoeusnth12• 8 years ago

Exactly. They pay cost for ads PLUS opportunity cost of selling the ads. If you assign the opportunity cost and revenue of selling the ad to the Ads department and the revenue of the camera business to the Shopping department, it seems obvious that it’s not unfair.

Eridrus2• 8 years ago

The end result of this is that Google has more money than you, but this is true any time you are competing against a large company with more than one line of business.

savanaly2• 8 years ago

In this setup, the business that owns the advertising platform has an advantage over all other businesses in industry X, because it pays itself advertising revenue, where the other companies have to pay their competitor. So money is always being siphoned off to pay the advertising platform, with a cost to most businesses but a (near) zero cost to the business owning the platform.

I don't think this is quite right. If I have a fixed quantity to sell (approximately true for advertising space on the web) then units I buy from myself cost me the same as they would cost other companies.

Suppose I have $100, and 5 advertising spots worth $20 each. I have two options here:

a) If I sell the spots to others then I have $100 + 5 * $20 = $200.

b) If I "sell" the spots to myself (the other wing of my company that needs to advertise) I have $100 and whatever 5 advertising spots are worth.

You are representing the situation of b as if it were "free advertising", thus giving my company an unfair advantage. But in fact, compared with situation a, it is clear I paid for the advertising, as I am up 5 spots and down $100 I could have obtained by selling the spots. So advertising's cost is not lower just because I also own the company that sells the advertising spots. If I'm better off than someone without advertising spots that's because advertising spots are worth something, not because of any purported shady synergy I get from owning both the advertising spots and the company that needs them.

comex• 8 years ago

But let’s say the spots are actually only worth $10, in terms of the ability to generate revenue. If you sell them to someone else for $20, you win because you get more money than the slots were worth. If you sell them to yourself for $20, you don’t lose any money and you can still make $10 (which is more than the slots originally cost you).

However, Google claims it is not doing this:

As part of the change, Google said it would operate its shopping-ad service as if it were a profitable, standalone business to ensure doesn’t overbid for ads.

Still, “profitable” could be by the slimmest of margins, and Google would still have a strong incentive to keep the “standalone” business going (that is, the profit to their other business), whereas an independent company wouldn’t.

cornholio• 8 years ago

However, winning ALL slots on a market dominant platform has a value unto itself, by denying competitors most revenue and forcing them to increase prices to cover fixed costs, and reduce price competition and market efficiency, strongly increasing the margins of the leader.

So the ability to pay yourself unlimited money guarantees a market dominant spot where competition is drastically diminished.

It also strongly affects Google's search incentives, making them prioritize advertising and create inventory where there was none, dying up organic trafic. This is something a profit oriented enterprise would tend to do anyway to maximize revenue, but it's a far cry from Google's original neutrality aspirations.

tinymollusk• 8 years ago

This sounds approximately correct, and is a good perspective for an entrepreneurial forum. This is what investors call a moat. It's such an effective one that we have legislation designed to deal with it.

This is not a comment on ethics or morality, it's simply one on strategic efficiency.

csomar• 8 years ago

It is not rigged. Google own the thing. It is not a public utility. If I put an ad, product, or something on my site do I need to care about you? nope. I only care about my own profit.

Same should be going with Google. However, people assume things should happen in a different way because Google has become very popular?

Many people scream "regulation" here. But look around: There is plenty of money in Tech and in funding, yet we have a single Google. I'm afraid regulation will kill and not innovate.

zitterbewegung• 8 years ago

Which is more expensive. The new system that google is designing? The fine that they will have to pay? Or the oversight they will have to have to comply with EU law? (or some combination of the previous?).

On the other hand could Google just quit putting ads on requests from the EU?

londons_explore2• 8 years ago

The system is cheap (it cost ~$15M of compute resources and $5M of engineering time).

The fine is much larger.

The oversight costs nothing now, but they're worried it might prevent them innovating in the future (as happened with Google Books)

muro• 8 years ago

Anyone can pull random numbers out of their ... :)

dsl• 8 years ago

Google is exceedingly good at extracting value from every ad impression. Even if the marketplace wasn't ran by Google, I have no doubt that they would still be bidding high enough to get the vast majority of impressions simply because they have a higher threshold at which bidding is profitable.

test6554• 8 years ago

Google: We compete against our competitors to see who can pay us the most money. And our competitors are complaining that they can't pay us as much money as we pay ourselves.

Beltiras• 8 years ago

Exactly. Google can artificially raise the price beyond their competitors means.

ggggtez• 8 years ago

I'm not convinced that percent of ad spots is the right measure of market share. But it's paywalled, so who knows.

Edit: ok so it's 98% of 2500 arbitrary keywords. Come on now, that's obviously a bs metric.

ucaetano4• 8 years ago

Kelkoo CEO Richard Stables says the firm’s revenue from general search traffic dropped by 62% last year, to €2.3 million. In 2018, he projects a two-thirds drop to €800,000.

I decided to go to http://www.kelkoo.co.uk/ to check it out. This website is so clearly a scam created for this antitrust case.

I went ahead to compare two cameras: the Canon EOS 1D X Mark II (a $4k camera) to a Canon Ixus 275 HS ($200 camera), here are the descriptions of each:

Canon EOS 1D X Mark II

The Canon EOS 1D X Mark II offers a good sensor resolution, allowing you to take an astonishing quality of picture. The Canon EOS 1D X Mark II has a very reasonable weight for this type of camera, with its LCD display providing a decent screen size compared to other similar digital cameras. The Canon EOS 1D X Mark II comes with internal memory, which is extendable with an external memory card to match the size of your photo and video collection. The lens aperture (the 'eye of the camera'), which makes your lens contract or dilate to allow more or less light in, is good for a digital camera in this price bracket. You can compare prices for the Canon EOS 1D X Mark II, read the full product details and check out expert reviews at our web site.

Canon Ixus 275 HS

The Canon Ixus 275 HS offers a good sensor resolution, allowing you to take an astonishing quality of picture. The Canon Ixus 275 HS has a very reasonable weight for this type of camera, with its LCD display providing a decent screen size compared to other similar digital cameras. The Canon Ixus 275 HS comes with internal memory, which is extendable with an external memory card to match the size of your photo and video collection. The lens aperture (the 'eye of the camera'), which makes your lens contract or dilate to allow more or less light in, is good for a digital camera in this price bracket. You can compare prices for the Canon Ixus 275 HS, read the full product details and check out expert reviews at our web site.

This is pure bullshit, and bullshit journalism.

sqdbps2• 8 years ago

This is pure bullshit, and bullshit journalism.

It's the "Wall Street Journal", a Murdoch business publication that approves of every business as long as it isn't Google.

bllguo• 8 years ago

Recently my impression of the WSJ is incredibly poor. Just BS article after BS article. To me the bias has never been more obvious. Though I only see their content on aggregators like HN, so perhaps that plays a part.

dsacco3• 8 years ago

It's the "Wall Street Journal", a Murdoch business publication that approves of every business as long as it isn't Google.

Please don't bring politics into this. If you have a substantive criticism about the WSJ's article, make that criticism. The one you've made is ideological and unpersuasive.

jasonmp85• 8 years ago

I'm hearing they are a publication who is right for the wrong reasons.

dmitrygr3• 8 years ago

No kidding. The "laptop" page says (emphasis mine):

Many of us have replaced our desktop systems with a laptop, as they are affordable, portable, and just as powerful as a traditional desktop PC. Laptops have screen sizes ranging from 9-inches to 17-inches, measured horizontally. Laptops with screens smaller than 11-inches are called netbooks while full-screened laptops are called notebooks. Some laptop models include built-in hardware to connect to wirelessly to a 3G or 4G networks and often require a data contract with a mobile phone carrier. Many laptops include built-in Wi-Fi modems and software to make portable computing easy. Some of the most recognized names for laptops are Apple, Dell, Sony and Acer. Kelkoo has all of these brands and more. You can be assured that you’ll find the best laptops at the absolutely lowest price from online retailers you know and trust.

And the third product lsited under laptops is a razor: https://www.shaver.eu/en/shavettes/proraso-shavette?utm_camp...

But look in archive.org and it is clear who they are and what their beef with google is: they are Yahoo. See the "a yahoo company" at the very top of this archived page: https://web.archive.org/web/20050701004143/http://www.kelkoo... (you'll need to collapse the archive.org banner on top - it is hidden behind it by default)

115100• 8 years ago

It took less than 30 seconds to find out that they're not.

https://www.ft.com/content/4044d354-b825-11dd-ac6d-0000779fd...

phpnode• 8 years ago

This website is so clearly a scam created for this antitrust case.

I can't speak for the quality of their product but this is absolutely not true, Kelkoo has been around since 1999[0], almost as long as Google itself.

[0] https://en.wikipedia.org/wiki/Kelkoo

dmitrygr3• 8 years ago

If by "Kelkoo" you mean "a yahoo proxy", then yes

See the "a yahoo company" at the very top of this archived page: https://web.archive.org/web/20050701004143/http://www.kelkoo... (you'll need to collapse the archive.org banner on top - it is hidden behind it by default)

ucaetano4• 8 years ago

From your "source":

In November 2008, Kelkoo was sold by Yahoo! Inc to the private equity firm Jamplant Ltd.

The current CEO has been there since 2009, shortly after the acquisition.

Jamplant was incorporated in October of 2008, one month before the acquisition. The director was Andrew Simon Davis, who is frequently listed as a director of shell companies and trusts. In the same month he was appointed director to dozens of other companies.

https://beta.companieshouse.gov.uk/officers/LQ_FXmuiSA4f8cOG...

The Kelkoo Group is based out of the same office as Jamplant, along with dozens of other companies, what indicates a virtual office or company registration service.

https://www.google.com/search?q=6th+Floor+Portland+House+Bre...

It has 5 employees, and seems to have consistently lost money over the past years, and its largest shareholder (and only institutional shareholder) is Kelkoo Group itself.

Kelkoo itself was already dead on the water by the time of the acquisition: https://trends.google.com/trends/explore?date=all&q=kelkoo

That was shortly after the initial complaints against Google:

https://www.lawyersandsettlements.com/legal-news-articles/ca...

logicallee• 8 years ago

This website is so clearly a scam created for this antitrust case.

What makes you think so? It starts with "We at Kelkoo have been helping our customers find the best products at the most affordable prices for the past 18 years." I clicked on the merchant sign up page, seemed fine.

pas2• 8 years ago

https://news.ycombinator.com/item?id=16269595

andy_ppp2• 8 years ago

Haha, having worked at Kelkoo when it was owned by Yahoo! so I have to disagree here. The management at Kelkoo really believe Google is shafting them but they used to do crazy things like change the location of the website every time they deploy. They were bad at SEO and blamed Google.

ucaetano4• 8 years ago

having worked at Kelkoo when it was owned by Yahoo! so I have to disagree here

The issue isn't when it was part of Yahoo, but after. It was bought by a virtual shell company registered at the same office as Kelkoo, with generic directors and almost no employees. It now has bogus product descriptions, which are the same for every single product (read the rest of the post).

They were clearly bought for the sole purpose of filing a claim against Google.

jarnix• 8 years ago

This is a text made for SEO, it's not journalism obviously!

NelsonMinar• 8 years ago

It's kind of a clever solution by Google, if a bit troll. They can make that ad auction 100% fair and still win it because they have more expertise on running efficient ad campaigns than anyone. IMHO that just doubles down on the danger of their monopoly power, but perhaps it complies with the antitrust requirements.

londons_explore2• 8 years ago

Most importantly they have more information about each auction than their competitors.

They know for each user every other search result clicked. They know what the users interests are. They know which users prefer stuff delivered fast, which prefer the cheapest items, and which will be wooed by 50% off deals.

They can use that data to present the best possible results, get the highest click through rate, and sell the most products.

Therefore they can afford to pay more for the ad spots than someone without that data, who gets less precisely targeted ads, and fewer product sales per advertisement shown.

kyrra2• 8 years ago

Ad auctions have 100ms to reply to an auction request.[0] This does not give you a lot of time to display the perfect ad for a given customer or search. Especially when you need to do this at the volume that Google shoes ads.

[0] https://www.quora.com/How-do-ad-exchanges-and-real-time-bidd...

bonesss• 8 years ago

Therefore they can afford to pay more for the ad spots than someone without that data, who gets less precisely targeted ads, and fewer product sales per advertisement shown.

Isn't this fundamentally an argument to outsource a greater portion of ad creation and campaigns, or parts thereof, to Google?

Google isn't just the best ad platform, it's likely the smartest user of that ad platform, and has the automation/ML chops to be the fastest and most competent user of that platform.... To my business eyes that sounds like a company that can offer services deeper into the advertising value chain than 'just' hosting the ad-canvas.

On the flip side, even as the #1 advertising company in the world it's still darned hard for Google to be the #1 Shoe Manufacturing company in the world at the same time. If that dynamic holds then Googles growth in this area should be a massive threat to advertising agencies to the collective benefit of businesses in the rest of the market who can leverage their services more efficiently, n'est pas?

starwind0• 8 years ago

Can we not link paywalls?

Whitestrake2• 8 years ago

While it doesn't address your request not to link them in the first place... For anyone looking to bypass the paywalls when they are linked: you can copy the article's title and search Google for `site:wsj.com [title]`.

alant• 8 years ago

Worked for me. what? Bypassing the paywwall is this simple? Does this work for other news sites with paywall?

danjoc• 8 years ago

This is similar to the old eBay scam where the seller bid on his own items under a different account. If the price was too low, the seller could always bid to drive the price up. If the seller won, it didn't matter. The seller is just relisting the item again after paying himself or cancelling.

I can't imagine how anyone thought this would work; Google participating in their own auctions. At least on eBay, sellers tried to hide the fact that the game was rigged.

luispedrocoelho• 8 years ago

There are variations where this works out in google's favor, but there is a big difference to the ebay situation where you just keep relisting the same item until it sells for a "good enough" price: each ad impression is only sold once, there is no relisting.

deecewan2• 8 years ago

I just don't really get why Google shouldn't be allowed to advertise on their own platform however they want. Say what you want, but there are other options for people to use to advertise if they aren't happy with Google.

Google is powerful because they provided a product so good that everyone used it. And now they're making other services that are also good, otherwise people would try the second link on the page. And, like all their competitors, they're advertising their new product.

If I owned a building next to a highway, I wouldn't have to auction off the side of that building for advertising - I can put my own ad on there (as far as I'm aware). I also think that dining Google billions of dollars is a tad ridiculous. Is there truly that much lost opportunity from whatever they're accused of doing?

Google winning 98% ad spots it auctions off, after order to treat others equally

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