11 ms·
Google takes two-to-four times as much as the fees charged by rival ad networks
- Justsignedup 5y agoI would like to note... Google is the big bad competitor who you're trying to out-compete. You can't out-compete google without going below it in price. Everyone is desperately trying by charging FAR less. I just want to note, it doesn't necessarily mean google is overcharging, but that nobody can enter a well established market by charging more and providing no other real value.
- whimsicalism 5y agoFor off-site ad marketplaces, yes.
- prepend 5y agoI’m not aware of any industries where competitors charge 25-50% of the price of their main competitor. Perhaps temporarily, but search has been stagnant for 5-10 years.
- rvba 5y agoGoogle search seems to have regressed in quality. I guess those various people need to prove that they are needed so they make changes for the sake of doing something.. and quality of the product declines.
- makeitdouble 5y agoIt happens on most industries where there is a de facto standard. MS Windows alternatives cost way less down to 0. Photoshop competitors also are cheaper. Same for Word competitors, GoPro alternatives etc.
- throwaway2048 5y agoThose have one commonality, they are all software platforms that are practical monopolies on their space.
- mupuff1234 5y agoIt's actually hard for me to think of any consumer driven industry where that isn't the case: cars, fashion, fitness & tech all have brands that come with a significant premium.
- sofixa 5y agoISPs and mobile network providers? On the French market Orange (the former state monopoly) is usually 25%-50% more expensive, with less features, slightly better coverage (for mobile networks) and "enterprise support" than the 3 other competitors. Having them as an ISP makes absolutely zero sense - no IPv6, IPv4 gets rotated daily, shit hardware. They have time limited exclusivity for some places (e.g. if they put down fiber in a city, they have exclusivity over the network for 2-3 years and then anyone can use it), but that really doesn't explain their market share.
- penteract 5y ago25%-50% more expensive means that competitors are charging 66%-80% of the price.
- Jensson 5y ago> I’m not aware of any industries where competitors charge 25-50% of the price of their main competitor. Alternative smartphone app stores charges way less than 25-50% of Google or Apple. You need to compare electronic markets with electronic markets like this, and the big players tend to take out extremely high fees in those areas. Although, I agree that charging high fees in these areas is a problem and should be fixed, but it isn't like this sort of thing is uncommon. Edit: As an example, Apple takes 30% cut. A competitor taking 7.5% cut would cost 25% of Apples app store.
- hnaccount_rng 5y agoAny kind of hardware tools? Furniture? I’m pretty sure I can come up with more examples if I’m thinking about it. But those just came immediately to mind
- phkahler 5y ago>> Everyone is desperately trying by charging FAR less. I thought these advertisers paid per-click, so in some sense Google and any competitor are fungible. Do people really care where their ads are shown so long as people click on them? Are the competitors placing ads in those crappy web sites that encourage accidental clicks?
- mdavis6890 5y agoEmpirically they care - they are willing to pay 2-4x as much per impression through Google than others. Maybe they are correct to do so, maybe not.
- Mikeb85 5y ago> Do people really care where their ads are shown so long as people click on them? Of course they care. They pay per click, so they want the ads well-targeted so they have a high conversion rate, otherwise it's wasted money. Some ad networks literally scam businesses by placing ads everywhere so they get clicked on accidentally but of course this does nothing for conversion.
- nova22033 5y agoSo there are rival ad networks that charge way less than google? How does this fit with the anti-trust narrative? The customer clearly has choices. You're entitled to a choice...you are not entitled to the ad network with the most reach.
- dantyti 5y agomight have something to do with Alphabet’s subsidiaries winning their other subsidiary’s auctions
- whimsicalism 5y agoI agree that this is problematic - although in principle since they are paid by the click they would be incentivized to direct the bids towards the site most likely to generate a click.
- Retric 5y agoNo, Google receives 100% of the profit from directing traffic to their own properties. However, they receive whatever percentage their competitors chose to allocate to advising which can’t be 100% while maintaining profitability.
- prepend 5y agoI think it fits the anti-trust narrative in that they are charging above the “natural” price because of their market dominance. A bit part of US antitrust law is harm to customer. And higher prices is a harm to customers. I assume the argument is something like “Google is monopolizing search and charging higher prices as a result”
- JAlexoid 5y agoFor an ad network it's a B2B market. You're the person seeing the ad, but you're not party to the transaction. Websites often run an auction at request time. The ad networks are actually competing, even if you get targeted by Google exclusively, personally.
- 5y ago
- mijoharas 5y agoHahaha! I first read this as "two to the four" as in 2^4 == 16x, and I was pretty surprised that they could manage to sustain that kind of pricing!
- tech_tuna 5y agoStill their cash cow. They may have been the first company to build a useful internet search engine but they are also mostly an advertising company.
- dantyti 5y ago> The share the Alphabet Inc. subsidiary takes of each advertising transaction on its exchange—a marketplace for ad buyers and sellers—is typically two- to four-times as much as the fees charged by rival digital advertising exchanges If I understand this correctly, this is about auctions/exchanges (middlemen which have little to do with ad targeting and quality), not ROI, as some commenters have suggested. Correct me if I’m wrong, my adtech knowledge is limited.
- whimsicalism 5y agoI believe that it is the exchange that does the matching to optimize for revenue.
- kuroguro 5y agoReminds me of a local story about contraband cigarettes in the central market - the sellers had set up agreements on who cans sell where. By far the best spot was near the entrance since more traffic = more sales. The guy selling there was charging ~2x more and still got more sales than anyone deeper inside.
- everydaybro 5y agonice story
- ocdtrekkie 5y agoWhile many behaviors of big tech monopolies are hard for laws from the Standard Oil era to wrap around, this is one of the most straightforward issues in monopoly law: Lack of competition and internal collusion between products means they can charge extreme and excessive markup. While it might be hard to break up any given monopoly that offers "free" products with existing laws, this is the avenue that is straightforward.
- sam0x17 5y agoI think someday the regulation of this (i.e. government forcing Google's fees to be no larger than X%) will be Google's downfall ;)
- dasKrokodil 5y agoThere are rival ad networks?
- com2kid 5y agoFacebook ads are really popular, ~84B in revenue. I believe Microsoft still operates a large ad network. Taboola is everywhere. Amazon has a huge ad network as well, ~14B in revenue, though obviously limited in terms of what is advertised. Verizon Media also apparently operates a sizable ad network.
- Jensson 5y agoThe publishers of this article owns a rival ad network. The difference between PR pieces and news is getting thinner. https://newscorp.com/2017/12/05/news-corp-launches-news-iq/ https://newscorp.com/2017/12/05/news-corp-launches-news-iq/ (from putlake's comment above)
- JAlexoid 5y agoThere's quite a lot of networks. It's not a complex business to start, you know.
- celestialcheese 5y agoOff the top of my head, googles Display Product has quite a few. - Magnite (Formerly, Rubicon) - Xander (Formerly, AppNexus) - GumGum - Index Exchange - Facebook - Sovrn - Unruly - Sharethrough - Triplelift - OpenX - Amazon A9 - Conversant - Yahoo (AKA Gemini) - Outbrain - Revcontent - Medigo That's most of the bigger players, but there are hundreds. Many aren't worth the time, and are spun up when one rep takes some budget from a large brand and does "Direct" deals and tries to start their own shop with "Guaranteed CPMs". It's all bullshit
- soared 5y agoI can’t read the article due to the pay wall, but this makes sense. If you own the software to buy, the software acting as the intermediary, and the software to sell, you’ll make 3x more than a competitor who only owns one piece. (I don’t use the products and I’m sure the names have changed, but dv360/dcm, whatever they call their exchange, and dfp) I’ll leave the morality/legality/etc of as an exercise for the reader.
- HillRat 5y agoYeah, it’s worth noting that, roughly speaking, advertising supply chains provide 51% of spend to publishers and 7% to agencies, which means the middle of the chain (supply/demand-sides, DSPs, analytics, etc.) consumes 42%, or what GOOG allegedly takes at the high end. Given that they represent a fully-integrated supply chain, this doesn’t seem unreasonable, especially given how many competing ad networks are just bubble gum and duct tape.
- disgruntledphd2 5y agoSo, if they have access to more information than their competitors such that they can maximise their own chances of winning proifitable auctions, it's problematic as its unfair competition.
- HillRat 5y agoI think the issue is more around GOOG allegedly using illegal tactics to keep people inside their integrated supply chain — e.g., trying to discourage header bidding.
- whimsicalism 5y agoMaking better decisions because you have done a better job collecting and analyzing info is not "unfair competition" a priori. I think there are much more compelling arguments around regulating Google.
- prepend 5y ago
- NAR8789 5y agoDevil's advocate: as a consumer, google's ads seem 2-4x higher quality than ads out of other networks. I'd be curious whether the conversion rates on the marketing side back up my gut instinct on the consumer side. Any marketers here with numbers?
- soared 5y agoMost major brands use multiple dsps, as performance is easy at low spend volumes and gets more difficult as you spend more. Dsps have access to unique inventory (through direct deals, pmps, etc) and unique technologies. For example, many companies use google, a vendor for mobile, one for ctv, one for retargeting, etc.
- dustymcp 5y agoThis its also dependendant of the country/region which ones perform better.
- partiallypro 5y agoI don't think I've clicked on a Google ad in a long long time, but I get ads on Facebook and Instagram that on occasion lead directly to a purchase. I'd say Instagram being the most frequent, especially for clothing.
- deleted 5y ago[deleted]
- reayn 5y agoJust curious, what constitutes the "quality" of an ad for you? I've never really thought about ads that way; for me it was just whichever service can stuff their name down your throat the most often was the most successful.
- treeman79 5y agoWas in adtech for awhile. Making sure clicks are real is a massive challenge with many ads networks. There are a lot of tools that help in sure spambots aren’t stealing all the ad money but they also slow down serving of the ads and sometimes they mess up and block things that shouldn’t. We’ve had campaigns where we had to allow more spambots simply because the client couldn’t spend enough money, they were willing to waste more to get better reach. But most clients absolutely love the results when you have really good filters in place. Very low spend and good lead generation.
- geodel 5y agoMeanwhile, WSJ charges same as New York Post for their services.
- MaxDPS 5y agoAt the end of the day, ROI is what matters right? If Google is providing that much better of a service then people will keep paying.
- Lamad123 5y agoAds they show only to people who are going to buy that thing featured in the ad anyways, or ads they keep showing you weeks after you buy something!!
- erhk 5y agoI wish that HN users had to disclose their potential conflict of interest when commenting. If google writes your paycheck or makes up a portion of your portfolio I want to know that when you are defending them online.
- criddell 5y agoAlternate take: advertisers are willing to pay 2-4x more for Google ads.
- epivosism 5y agoThis way of writing headlines can be exploited. situation: A has 0% take rate, B has 1% => "B charges infinitely more than A" Perhaps better in that case would be just stating the facts "A takes 0%, B takes 1%" or "A leaves you 100% , B leaves 99%". The point is, from a consumer pov the take rate actually doesn't matter as much as the opposite, the "keep rate". And just adding in multipliers is so easily exploitable. Not defending google, just as written the implied math has multiple interpretations, some okay some bad.
- mdavis6890 5y agoGood argument in general, but doesn't apply here. There's no keep rate, in the same way there's no "keep rate" when you buy a hamburger. It's just a fee to serve adds, and this article says that the fee is 2-4x with Google. There's nothing to "keep" in this sense.
- jtsiskin 5y agoNo, the price paid out to the publisher is the “keep”, and the fees google collects is the “take”. If typical ad networks charge 1%, and google charges 2-4%, you could also phrase this as a “keep rate” of 99% vs 96-98%. It would be a lot clearer to give the actual amounts rather than say “2-4x”
- putlake 5y agoIt should be noted that the WSJ is owned by News Corp, which runs an ad network of their own for their properties. This launch announcement even talks about how they combine their first party data about their subscribers with data from Mastercard Ad Intelligence to "create bespoke marketing and advertising solutions" : https://newscorp.com/2017/12/05/news-corp-launches-news-iq/ https://newscorp.com/2017/12/05/news-corp-launches-news-iq/
- gremloni 5y agoThat’s like saying an 18 wheeler costs more than an economy sedan.
- paulpauper 5y agoOutside of Facebook-owned websites, twitter, and Google-owned websites, so few alternatives. This needs to change.
- mikequinlan 5y agohttps://archive.ph/dZVAu https://archive.ph/dZVAu
- ksec 5y agoI am not trying to defend Google. But The headline and even the article completely ignores quality, value and click rate? Assuming people who dont know how ads industry works all they see is an article about an evil monopoly over charging.
- gerash 5y agoWSJ takes ten times as much the subscription fees as their rivals
- franczesko 5y agoIf you have monopoly, you can set up prices anyway you want.
- Mikeb85 5y agoPretty sure advertising on a billboard in Times Square is also more expensive than on a highway billboard in Nebraska...
- nmca 5y agoVarious comments here talking about the conversion rate of FB/Goog. But for me personally Spotify is the one way ahead - I get ads for gigs I want to go to, and buy tickets a double-digit percentage of every time they come up. A dreamy business model.
- jeffybefffy519 5y agoWhats a legit hood alternative to adsense for small websites?