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Three small businesses can easily end up bidding against each other on Google Ads for the same keywords, higher and higher, until they drive each other to the p

by DenisM 7y ago

Three small businesses can easily end up bidding against each other on Google Ads for the same keywords, higher and higher, until they drive each other to the point of having precisely zero profit left to them, and all of the profit going to Google. Making money is all well and good, but this is not empowering anyone.

rogerkirkness 7y ago
Much of small business is about geographic monopoly where simply putting yourself in front of customers that didn't know about you before is wealth creating.
- DenisM 7y ago
  That's a good point, though I have to wonder how often is there an actual micro-monopoly? I imagine that two dry-cleaning places a mile away from each other would end up in competition eventually, and Google will drain all the profits from both. Something is fundamentally unbalanced about this.
  - rogerkirkness 7y ago
    Coffee shops can be make or break depending on the corner of the intersection they are on so it can be a little bit ridiculous in terms of how small the geography is. I agree re: Google capturing the spread. Always want to control the means of distribution for your own business, ultimately.
repolfx 7y ago
You can argue that about any limited resource for which firms are in competition, like land. Unlike most resources though, Google ads take into account a quality score, so if one of those merchants is lower quality than the rest e.g. users go back from the store to keep searching more often, then they'll have to pay more and all other things being equal, the more useful merchants will outcompete them. In practice AdWords does enable many businesses that would otherwise find it too hard to reach a niche audience, and wouldn't be able to rank organically for a keyword because they have no inbound links.
- DenisM 7y ago
  Land is similar, yes. Still one could get a 5-year lease and plan their business around it. AdWords rates can go up in price any minute, and if they don't they create a false sense of security which is shattered when they finally do. Could they enable a new business? They could, but as soon as they enable two businesses of the same kind in one place they will also take all the profits from both.
jjeaff 7y ago
But that's not really how it works. It's not winner take all with the auctions. And if there are 3 businesses bidding, all 3 are going to get placement even if they all 3 have large enough budgets to buy all available impressions. Because there are more than one space in search results and other AdWords placements. Even without that consideration, all 3 would also need to outbid one another while budgeting enough to take 100% of the traffic.

by DenisM 7y ago

rogerkirkness 7y ago

Much of small business is about geographic monopoly where simply putting yourself in front of customers that didn't know about you before is wealth creating.

DenisM 7y ago
That's a good point, though I have to wonder how often is there an actual micro-monopoly? I imagine that two dry-cleaning places a mile away from each other would end up in competition eventually, and Google will drain all the profits from both. Something is fundamentally unbalanced about this.
- rogerkirkness 7y ago
  Coffee shops can be make or break depending on the corner of the intersection they are on so it can be a little bit ridiculous in terms of how small the geography is. I agree re: Google capturing the spread. Always want to control the means of distribution for your own business, ultimately.

repolfx 7y ago

You can argue that about any limited resource for which firms are in competition, like land. Unlike most resources though, Google ads take into account a quality score, so if one of those merchants is lower quality than the rest e.g. users go back from the store to keep searching more often, then they'll have to pay more and all other things being equal, the more useful merchants will outcompete them. In practice AdWords does enable many businesses that would otherwise find it too hard to reach a niche audience, and wouldn't be able to rank organically for a keyword because they have no inbound links.

DenisM 7y ago
Land is similar, yes. Still one could get a 5-year lease and plan their business around it. AdWords rates can go up in price any minute, and if they don't they create a false sense of security which is shattered when they finally do. Could they enable a new business? They could, but as soon as they enable two businesses of the same kind in one place they will also take all the profits from both.

jjeaff 7y ago

But that's not really how it works. It's not winner take all with the auctions. And if there are 3 businesses bidding, all 3 are going to get placement even if they all 3 have large enough budgets to buy all available impressions. Because there are more than one space in search results and other AdWords placements. Even without that consideration, all 3 would also need to outbid one another while budgeting enough to take 100% of the traffic.