10 ms·

Google changed ad auctions, raising prices 15%, witness says

177 points by mikerg87 3y ago

kakwa_ 3y ago
I'm wondering what was the overall effect on prices in the end. Did the prices really increased by 15%? Or did the bids, specially the second highest, roughly dropped by 15% meaning the price stayed the same. Or something in the middle.
jqpabc123 3y ago
In other words, Google's advertising customers lack any real insight into the rates they are being charged for "personalized advertising". They have no choice but to take Google's word for it. It is effectively a "black box" and only Google is allowed to look inside.
- deleted 3y ago
  [deleted]
- seydor 3y ago
  This is so obvious to everyone who has used their ad system. They get away with that because they know marketing departments don't care - they have ad budgets to spend. Google gives them enough dashboards and excuses to satisfy their bosses. It is still unknown which half of advertising works.
  - danpalmer 3y ago
    Ad attribution is difficult, but it's difficult everywhere because customer behaviour is complex. It's much easier to attribute digital ads sources than it is to attribute out of home advertising. This isn't anything Google specific.
    - espadrine 3y ago
      Very true. At work, our data science team had to employ subtle methods to truly be convinced that a particular offline ad channel was ineffective: https://medium.com/qonto-way/how-to-invest-better-in-acquisition-channels-a-1-million-question-for-data-science-591c82b3e0e4 https://medium.com/qonto-way/how-to-invest-better-in-acquisi...
      - disgruntledphd2 3y ago
        Hey look, it's another online-first startup reinventing media mix modelling! (Sorry for the snark but this is a very well studied technique in the offline world that gets completely ignored by online advertisers, rather like AB testing gets mostly ignored by offline advertisers).
    - naijaboiler 3y ago
      this is true but why does Google and all other ad-sellers provide dashboards that pretend to make it easy
      - disgruntledphd2 3y ago
        Because it makes them more money.
      - danpalmer 3y ago
        Because compared to the alternatives, they significantly easier. Attribution is arguably the biggest challenge in marketing. If you know that someone bought because of an ad you know you can spend more on that ad, if you know no one is buying from it you know not to. With almost all digital marketing there's some amount of tracking, not necessarily of users, but of ads. When you make a sale you know which ad it came from. Now that's not perfect attribution, users might take a few views to click through, may go direct rather than clicking through, or may click through multiple different ads, but it's pretty good. With non-digital marketing there's nearly zero information. Billboards, TV adverts, magazines, radio, even podcasts which are digital, etc. The way that attribution is done is based on times of day (did you get a spike after your TV advert aired), or it's based on location (did you get a spike in the area of the billboard). Sometimes discount codes are used for attribution (use code TUBE10 to save £10 on your next order), but those only work for some types of product and users forget more often than not (yes, even with discounts). Marketing on Google, Facebook, affiliate marketplaces, etc, is all automatable, and more accurate, more precise, and therefore it's easier to understand marketing ROI, and easier to justify more spend.
  - pyrale 3y ago
    > They get away with that because they know marketing departments don't care Even if they cared, they have no leverage. In the financial sector, any market-maker in Google's position would be heavily regulated, and the kind of shit Google pulls would land people in jail. Even without the market manipulation, there's no way a company like Google could operate without a clear separation between departments. The reason for that is that centuries of playing that game have shown that it's the only way to keep market makers honest.
    - RandomLensman 3y ago
      It's not a two-way market really, so no real market making. One seller auctioning things of.
      - pyrale 3y ago
        Google doesn't only sell their own eyeballs, they also are the de facto marketplace for other people to sell space.
        RandomLensman 3y ago
        Is there ad space to ad space business? Interesting.
        strongpigeon 3y ago
        While true, this is in the context of the search monopoly trial. In which case they only sell their own inventory.
        pyrale 3y ago
        It's always useful to show the otherwise fraudulent nature of the business, and the moral bankruptcy of the people running it. Inevitably some google exec will testify that they "strive to bring the best to their customers and bring a public-good service". By then, everyone will have been warned that this person is unquestionably a swindling weasel.
  - beefield 3y ago
    > This is so obvious to everyone who has used their ad system. This. I tried once and am still a bit confused if I understood it correctly. Google seemed to refuse "too low" bids completely for no other disclosed reason than that they were too low. And the UI was hellbent to make me give google authority to bid on my behalf on googles own ad auction. Like, WTF? Who on their right mind would agree to that? I'd very much like these folks to be my customers. I guarantee, I will sell you whatever (legal) you want, as long as you agree that I can set the price to whatever I want. It just boggles my mind.
    - urbandw311er 3y ago
      This was my reaction to it too, and that was after a few days diving pretty deep into it.
  - sixothree 3y ago
    I've always kind of assumed buying more ads increases your search ranking. I wouldn't be surprised to find out if that's true at this point.
- Rastonbury 3y ago
  This is the case for "auction" based ad platform, I don't see how there is anyway to ever police this especially when they run the auction and have full view of all bids, essentially letting them perfectly price discriminate. Where are customers gonna go? Bing? This and all the dark patterns to nudge the user to turn on "ad optimizations" without explaining what it does, anyone who has dabbled in google ads can surely attest
  - jgalt212 3y ago
    > This is the case for "auction" based ad platform, Not stricly true for a second price auction. If you win the auction, you are know both the first and second place bid prices.
    - jqpabc123 3y ago
      "... know both the first and second place bid prices." Really? Maybe for a public auction but done using Google's hidden "black box" system, how would you know that the second place bidder wasn't Google?
      - jgalt212 3y ago
        Google bidding in its own auctions is a separate problem from bidders' lack of access to top of book.
- marcosdumay 3y ago
  That's every advertising venue ever. The modern insight is that you should be estimating your ads results instead of looking into detailed proxy metrics. And all that they lying on their metrics means is that you'll have a hard time optimizing your ads there, and thus move into other, more friendly platforms. But, of course, I have no idea how much of this is real (it certainly is real to some extent), and how much is propaganda created to fool people into spending more on ads (it certainly is also propaganda to some extent). On some contexts, that estimation is incredibly hard to do correctly, and I don't know if people even try it.
robg 3y ago
What laws did they break? I’m confused by the sudden interest in monopolies when the duopolies have developed over 20 years. It’s like after Microsoft government assumed Google / Facebook and Google / Apple and EBay / Amazon had each other so all was good?
- abofh 3y ago
  So you agree none of them did well? Or you think blasting everyone without a point made one?
  - j16sdiz 3y ago
    (not OP) This behaviour (misleading the customers) should be a standalone crime, unrelated to the monopoly case
- dannyw 3y ago
  Fraud, i.e. falsifying bid numbers.
AlbertCory 3y ago
The auction code was worse than a Google-only black box, when I was in Ads. The code itself was in a "high intellectual property" subdirectory that most engineers could not access. There's an elaborate economic rationale for second-price auctions, including that they avoid "winner's remorse." Leave it to the late-stage "improvers" to say, "hey, we can capture some of that gap between first and second place!"
- EGreg 3y ago
  That’s what happens when you don’t have open source and open protocols. I see people on HN constantly complaining but very little support for distributed systems, especially byzantine fault tolerant with proper incentives, why? Incentives are key to such distributed systems working, but it sounds too much like Web3? FTX? Or what? I guess many people don’t want to see viable alternatives appear. So then all you can do is keep complaining about black boxes and secret actions.
  - alt227 3y ago
    What are you talking about? Do you realistically expect all companies to open source all internal software in a capitalist market?
    - RetpolineDrama 3y ago
      I believe he is mocking the average HN commenter, who simultaneously complains about these types of opaque-black-box systems but attacks transparent distributed systems.
      - zeruch 3y ago
        That's how I interpreted it. Everyone seems to want the advantages of the FOSS model for general benefit, but want firms to have their advantages at the same time, and not acknowledge the inherent adversarial aspect of that.
    - arthurofbabylon 3y ago
espadrine 3y ago
Ironically, this is reported on Yahoo!, which invented the practice of ad squashing that ~their journalist~ (edit: a Bloomberg journalist) accuses Google of: https://web.archive.org/web/20080827230455/http://research.yahoo.com/project/205 https://web.archive.org/web/20080827230455/http://research.y... The formula is interesting: ad selection uses bid ⨯ relevance^q, where q is the squashing value, which is lowered when the second-highest bidder is likely to bid low, creating a tradeoff: > [David Pennock] adds that squashing can significantly improve revenue, at the expense of advertiser and user satisfaction. As a result, it is necessary to set acceptable thresholds for loss of relevance, and then optimize revenue based on those thresholds.
- hn_throwaway_99 3y ago
  This is a Bloomberg article, reported by a Bloomberg journalist.
karaterobot 3y ago
Maybe it's too early, but that article was not clear to me. Is it alleged that Google incorrectly stated the value of the second place bidder in order to make it look higher, in order to pressure the first place bidder to bid higher? Even that doesn't make much sense, so I'm missing something. > The shift sought “to raise the prices against the highest bidder,” Whinston told Judge Amit Mehta in federal court in Washington... To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said... Whinston’s comments Friday described Google’s technique, called “squashing,” that seeks to make the runner-up’s bid more competitive. If they're inflating the second-place bid to be higher than the first-place bid, I'd wonder why that wouldn't backfire for them and result in the second highest bid winning a lot of the time. And if they didn't inflate it above the first-place bid, why would the winning bidder feel any pressure to increase their bid? I'm sure it all makes sense, it's just not clear to me from this explanation.
- iandanforth 3y ago
  Correct way: Winner bids $1.00, 2nd Place bids $0.80, Winner pays $0.81 New way: Winner bids $1.00, 2nd place bids $0.80, Google adds 15%* markup to 2nd bid, Winner pays $0.93. *used as example, not a verified number
  - karaterobot 3y ago
    Ahh okay, the missing piece is that the winner pays the second-highest bid, plus a penny. I can definitely see how this would be fraud, and how it could be justified internally by Google as "it's still less than they bid".
    - junon 3y ago
      I'm not understanding this, how can it be fraud? (Genuine question, I'm not insinuating anything.)
      - 3y ago
wslh 3y ago
My company spent a lot (relatively to our size) of money in AdWords withour a correlated conversion rate. Not saying we could not be completely wrong but the intuition is that more conversions are expected.
- CoastalCoder 3y ago
  How much history does Google retain regarding from the auctions? I'm wondering about discovery in any lawsuits this might trigger.
- bpicolo 3y ago
  Conversion rate, or velocity? I might expect people that click ads to have worse conversion that other traffic sources. The hope is that volume overcomes that?
  - wslh 3y ago
    We tried different strategies, even hired competing agencies targeting different locations. Obviously a common feedback was that we need to increase the budget. I would love to to that once I see good conversions. We were using AdWords since 2003.
charcircuit 3y ago
>Google gave the second-place bidder a built-in handicap to make their offer more competitive What does this even mean? The way this handicap works is very important. What if it is just based off ad relevancy.
- pyrale 3y ago
  In this kind of auction, the winner pays the runner-up bid. Google simply increased that bid before it was communicated to the winner. The only effect, as this doesn't change the bid order, is that Google pockets the "built-in handicap" on top of the runner-up bid, without telling the winner what the actual bid is.
j16sdiz 3y ago
I wonders how did this witness gain insight into that, if it is so secret
- klyrs 3y ago
  > To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said, citing internal emails and sealed testimony by Google finance executive Jerry Dischler earlier in the case.
- pyrale 3y ago
  The source quoted being an expert witness in a trial, the source is likely discovery.
noizz 3y ago
I work with NGO (property law) and couple of months ago we were awarded a grant for ads, around €2000/mo. Initially, I was pretty surprised with how generous this was, but later realized that it's both - a way for Google to brag how much they help "good causes", but most importantly - to raise the ad costs for others. All in all - we made a few spammer operations less profitable, a couple wealthy assholes were angry about us helping people defend themselves and we brought quality traffic to the website and FB group. Thanks Skynet!
- urbandw311er 3y ago
  Thanks for sharing this, until now I hadn’t made the mental leap that their “benevolence” had a secondary effect of pushing up revenue.
jeffbee 3y ago
What is the role of “secret” in the headline? Every internal action of every company is secret, so it adds nothing other than innuendo to the article.
- sourcecodeplz 3y ago
  This is for private companies. Google/Alphabet is a public company.
  - jeffbee 3y ago
    That's ... not what that means.
- hotnfresh 3y ago
  If some parts of how their ad auctions work have been published by them, then a distinction exists.
londons_explore 3y ago
At the end of the day, Google can set the price however they like for ads on Google Search. Previously they ran an auction. Now they have a very complex price-setting algorithm that has elements of an auction within it, but also secret factors which push bids up or down. But they're well within their rights to just roll a dice.
- londons_explore 3y ago
  I'm kinda surprised they don't have some human/AI combination that estimates how much profit you are earning from Google Ads, and charge most of that. The whole idea of having a price for each individual impression seems outdated - what businesses care about is "how much did we pay Google this month, and how many widgets did we sell, and was it worth it or should we advertise elsewhere?". Therefore, why bother with the middle man - just make an algorithm to predict exactly how much the business thinks the ads are worth.
  - discmonkey 3y ago
    They do have this, you can choose to bid for a target conversion cost (I want to pay at most $x per conversion). In general I find all of this pretty silly as a Google employee.. I don't think you can distill the complexity of any change down to one article. Say for example that Google did just raise how much advertisers paid per click across the board, why would that lead to billions of dollars in profit? I would bet that the majority of advertisers on Google already spend their whole budget, so that would mean that now they would just be getting less clicks and conversions per dollar of budget spend. Logically they would then move some of this budget to other advertising channels such as Facebook. Charging more per impression always has second order effects, but who cares about that on hackernews
    - deleted 3y ago
      [deleted]
    - londons_explore 3y ago
      Of course - pricing is a maximization game. But thats why modelling businesses has such a large opportunity. Some businesses will be prepared to pay more if you send them more conversions... Others have a fixed budget. Some use many platforms, and certain things might persuade them to move more budget to you. Some might be persuaded by "tricks" like handing out airmiles, vouchers or free stuff to the marketing team in return for ad spend. All of those things require a higher level strategy than just doing everything per-impression.
GeekyBear 3y ago
Just a reminder that the EU started a preliminary antitrust action over Google's ad business earlier this year. > Google’s advertising business should be broken up, European Union officials said Wednesday, alleging that the tech giant’s involvement in multiple parts of the digital advertising supply chain creates “inherent conflicts of interest” that risk harming competition. “@Google controls both sides of the #adtech market: sell & buy,” tweeted Margrethe Vestager, the commission’s top competition official. “We are concerned that it may have abused its dominance to favour its own #AdX platform. If confirmed, this is illegal.” https://www.cnn.com/2023/06/14/tech/google-eu-antitrust-ad-tech/index.html https://www.cnn.com/2023/06/14/tech/google-eu-antitrust-ad-t...
- strongpigeon 3y ago
  To be clear though, the article is talking about search ads which run on a separate auction. The actions you are referring to concern the display side where Google runs a different exchange with multiple sellers for the inventory.
  - GeekyBear 3y ago
    Sure, but if the EU is looking for evidence of Google abusing it's dominant position in ad tech for it's own benefit, the US antitrust case certainly gives them a good place to start looking.
  - pyrale 3y ago
    ...On which fraud was also uncovered. https://en.wikipedia.org/wiki/Jedi_Blue https://en.wikipedia.org/wiki/Jedi_Blue
daft_pink 3y ago
Is anyone really shocked that when you tell the seller the maximum rate you are willing to pay that will be motivated to get that maximum rate when the seller is running the auction?
- deleted 3y ago
  [deleted]

177 points by mikerg87 3y ago

I'm wondering what was the overall effect on prices in the end. Did the prices really increased by 15%? Or did the bids, specially the second highest, roughly dropped by 15% meaning the price stayed the same. Or something in the middle.

jqpabc123 3y ago

In other words, Google's advertising customers lack any real insight into the rates they are being charged for "personalized advertising". They have no choice but to take Google's word for it. It is effectively a "black box" and only Google is allowed to look inside.

deleted 3y ago
[deleted]
seydor 3y ago
This is so obvious to everyone who has used their ad system. They get away with that because they know marketing departments don't care - they have ad budgets to spend. Google gives them enough dashboards and excuses to satisfy their bosses. It is still unknown which half of advertising works.
- danpalmer 3y ago
  Ad attribution is difficult, but it's difficult everywhere because customer behaviour is complex. It's much easier to attribute digital ads sources than it is to attribute out of home advertising. This isn't anything Google specific.
  - espadrine 3y ago
    Very true. At work, our data science team had to employ subtle methods to truly be convinced that a particular offline ad channel was ineffective: https://medium.com/qonto-way/how-to-invest-better-in-acquisition-channels-a-1-million-question-for-data-science-591c82b3e0e4 https://medium.com/qonto-way/how-to-invest-better-in-acquisi...
    - disgruntledphd2 3y ago
      Hey look, it's another online-first startup reinventing media mix modelling! (Sorry for the snark but this is a very well studied technique in the offline world that gets completely ignored by online advertisers, rather like AB testing gets mostly ignored by offline advertisers).
  - naijaboiler 3y ago
    this is true but why does Google and all other ad-sellers provide dashboards that pretend to make it easy
    - disgruntledphd2 3y ago
      Because it makes them more money.
    - danpalmer 3y ago
      Because compared to the alternatives, they significantly easier. Attribution is arguably the biggest challenge in marketing. If you know that someone bought because of an ad you know you can spend more on that ad, if you know no one is buying from it you know not to. With almost all digital marketing there's some amount of tracking, not necessarily of users, but of ads. When you make a sale you know which ad it came from. Now that's not perfect attribution, users might take a few views to click through, may go direct rather than clicking through, or may click through multiple different ads, but it's pretty good. With non-digital marketing there's nearly zero information. Billboards, TV adverts, magazines, radio, even podcasts which are digital, etc. The way that attribution is done is based on times of day (did you get a spike after your TV advert aired), or it's based on location (did you get a spike in the area of the billboard). Sometimes discount codes are used for attribution (use code TUBE10 to save £10 on your next order), but those only work for some types of product and users forget more often than not (yes, even with discounts). Marketing on Google, Facebook, affiliate marketplaces, etc, is all automatable, and more accurate, more precise, and therefore it's easier to understand marketing ROI, and easier to justify more spend.
- pyrale 3y ago
  > They get away with that because they know marketing departments don't care Even if they cared, they have no leverage. In the financial sector, any market-maker in Google's position would be heavily regulated, and the kind of shit Google pulls would land people in jail. Even without the market manipulation, there's no way a company like Google could operate without a clear separation between departments. The reason for that is that centuries of playing that game have shown that it's the only way to keep market makers honest.
  - RandomLensman 3y ago
    It's not a two-way market really, so no real market making. One seller auctioning things of.
    - pyrale 3y ago
      Google doesn't only sell their own eyeballs, they also are the de facto marketplace for other people to sell space.
      - RandomLensman 3y ago
        Is there ad space to ad space business? Interesting.
      - strongpigeon 3y ago
        While true, this is in the context of the search monopoly trial. In which case they only sell their own inventory.
        pyrale 3y ago
        It's always useful to show the otherwise fraudulent nature of the business, and the moral bankruptcy of the people running it. Inevitably some google exec will testify that they "strive to bring the best to their customers and bring a public-good service". By then, everyone will have been warned that this person is unquestionably a swindling weasel.
- beefield 3y ago
  > This is so obvious to everyone who has used their ad system. This. I tried once and am still a bit confused if I understood it correctly. Google seemed to refuse "too low" bids completely for no other disclosed reason than that they were too low. And the UI was hellbent to make me give google authority to bid on my behalf on googles own ad auction. Like, WTF? Who on their right mind would agree to that? I'd very much like these folks to be my customers. I guarantee, I will sell you whatever (legal) you want, as long as you agree that I can set the price to whatever I want. It just boggles my mind.
  - urbandw311er 3y ago
    This was my reaction to it too, and that was after a few days diving pretty deep into it.
- sixothree 3y ago
  I've always kind of assumed buying more ads increases your search ranking. I wouldn't be surprised to find out if that's true at this point.
Rastonbury 3y ago
This is the case for "auction" based ad platform, I don't see how there is anyway to ever police this especially when they run the auction and have full view of all bids, essentially letting them perfectly price discriminate. Where are customers gonna go? Bing? This and all the dark patterns to nudge the user to turn on "ad optimizations" without explaining what it does, anyone who has dabbled in google ads can surely attest
- jgalt212 3y ago
  > This is the case for "auction" based ad platform, Not stricly true for a second price auction. If you win the auction, you are know both the first and second place bid prices.
  - jqpabc123 3y ago
    "... know both the first and second place bid prices." Really? Maybe for a public auction but done using Google's hidden "black box" system, how would you know that the second place bidder wasn't Google?
    - jgalt212 3y ago
      Google bidding in its own auctions is a separate problem from bidders' lack of access to top of book.
marcosdumay 3y ago
That's every advertising venue ever. The modern insight is that you should be estimating your ads results instead of looking into detailed proxy metrics. And all that they lying on their metrics means is that you'll have a hard time optimizing your ads there, and thus move into other, more friendly platforms. But, of course, I have no idea how much of this is real (it certainly is real to some extent), and how much is propaganda created to fool people into spending more on ads (it certainly is also propaganda to some extent). On some contexts, that estimation is incredibly hard to do correctly, and I don't know if people even try it.

robg 3y ago

What laws did they break? I’m confused by the sudden interest in monopolies when the duopolies have developed over 20 years. It’s like after Microsoft government assumed Google / Facebook and Google / Apple and EBay / Amazon had each other so all was good?

abofh 3y ago
So you agree none of them did well? Or you think blasting everyone without a point made one?
- j16sdiz 3y ago
  (not OP) This behaviour (misleading the customers) should be a standalone crime, unrelated to the monopoly case
dannyw 3y ago
Fraud, i.e. falsifying bid numbers.

AlbertCory 3y ago

The auction code was worse than a Google-only black box, when I was in Ads. The code itself was in a "high intellectual property" subdirectory that most engineers could not access. There's an elaborate economic rationale for second-price auctions, including that they avoid "winner's remorse." Leave it to the late-stage "improvers" to say, "hey, we can capture some of that gap between first and second place!"

EGreg 3y ago
That’s what happens when you don’t have open source and open protocols. I see people on HN constantly complaining but very little support for distributed systems, especially byzantine fault tolerant with proper incentives, why? Incentives are key to such distributed systems working, but it sounds too much like Web3? FTX? Or what? I guess many people don’t want to see viable alternatives appear. So then all you can do is keep complaining about black boxes and secret actions.
- alt227 3y ago
  What are you talking about? Do you realistically expect all companies to open source all internal software in a capitalist market?
  - RetpolineDrama 3y ago
    I believe he is mocking the average HN commenter, who simultaneously complains about these types of opaque-black-box systems but attacks transparent distributed systems.
    - zeruch 3y ago
      That's how I interpreted it. Everyone seems to want the advantages of the FOSS model for general benefit, but want firms to have their advantages at the same time, and not acknowledge the inherent adversarial aspect of that.
  - arthurofbabylon 3y ago

espadrine 3y ago

Ironically, this is reported on Yahoo!, which invented the practice of ad squashing that ~their journalist~ (edit: a Bloomberg journalist) accuses Google of: https://web.archive.org/web/20080827230455/http://research.yahoo.com/project/205 https://web.archive.org/web/20080827230455/http://research.y... The formula is interesting: ad selection uses bid ⨯ relevance^q, where q is the squashing value, which is lowered when the second-highest bidder is likely to bid low, creating a tradeoff: > [David Pennock] adds that squashing can significantly improve revenue, at the expense of advertiser and user satisfaction. As a result, it is necessary to set acceptable thresholds for loss of relevance, and then optimize revenue based on those thresholds.

hn_throwaway_99 3y ago
This is a Bloomberg article, reported by a Bloomberg journalist.

karaterobot 3y ago

Maybe it's too early, but that article was not clear to me. Is it alleged that Google incorrectly stated the value of the second place bidder in order to make it look higher, in order to pressure the first place bidder to bid higher? Even that doesn't make much sense, so I'm missing something. > The shift sought “to raise the prices against the highest bidder,” Whinston told Judge Amit Mehta in federal court in Washington... To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said... Whinston’s comments Friday described Google’s technique, called “squashing,” that seeks to make the runner-up’s bid more competitive. If they're inflating the second-place bid to be higher than the first-place bid, I'd wonder why that wouldn't backfire for them and result in the second highest bid winning a lot of the time. And if they didn't inflate it above the first-place bid, why would the winning bidder feel any pressure to increase their bid? I'm sure it all makes sense, it's just not clear to me from this explanation.

iandanforth 3y ago
Correct way: Winner bids $1.00, 2nd Place bids $0.80, Winner pays $0.81 New way: Winner bids $1.00, 2nd place bids $0.80, Google adds 15%* markup to 2nd bid, Winner pays $0.93. *used as example, not a verified number
- karaterobot 3y ago
  Ahh okay, the missing piece is that the winner pays the second-highest bid, plus a penny. I can definitely see how this would be fraud, and how it could be justified internally by Google as "it's still less than they bid".
  - junon 3y ago
    I'm not understanding this, how can it be fraud? (Genuine question, I'm not insinuating anything.)
    - 3y ago

wslh 3y ago

My company spent a lot (relatively to our size) of money in AdWords withour a correlated conversion rate. Not saying we could not be completely wrong but the intuition is that more conversions are expected.

CoastalCoder 3y ago
How much history does Google retain regarding from the auctions? I'm wondering about discovery in any lawsuits this might trigger.
bpicolo 3y ago
Conversion rate, or velocity? I might expect people that click ads to have worse conversion that other traffic sources. The hope is that volume overcomes that?
- wslh 3y ago
  We tried different strategies, even hired competing agencies targeting different locations. Obviously a common feedback was that we need to increase the budget. I would love to to that once I see good conversions. We were using AdWords since 2003.

charcircuit 3y ago

>Google gave the second-place bidder a built-in handicap to make their offer more competitive What does this even mean? The way this handicap works is very important. What if it is just based off ad relevancy.

pyrale 3y ago
In this kind of auction, the winner pays the runner-up bid. Google simply increased that bid before it was communicated to the winner. The only effect, as this doesn't change the bid order, is that Google pockets the "built-in handicap" on top of the runner-up bid, without telling the winner what the actual bid is.

j16sdiz 3y ago

I wonders how did this witness gain insight into that, if it is so secret

klyrs 3y ago
> To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said, citing internal emails and sealed testimony by Google finance executive Jerry Dischler earlier in the case.
pyrale 3y ago
The source quoted being an expert witness in a trial, the source is likely discovery.

noizz 3y ago

I work with NGO (property law) and couple of months ago we were awarded a grant for ads, around €2000/mo. Initially, I was pretty surprised with how generous this was, but later realized that it's both - a way for Google to brag how much they help "good causes", but most importantly - to raise the ad costs for others. All in all - we made a few spammer operations less profitable, a couple wealthy assholes were angry about us helping people defend themselves and we brought quality traffic to the website and FB group. Thanks Skynet!

urbandw311er 3y ago
Thanks for sharing this, until now I hadn’t made the mental leap that their “benevolence” had a secondary effect of pushing up revenue.

jeffbee 3y ago

What is the role of “secret” in the headline? Every internal action of every company is secret, so it adds nothing other than innuendo to the article.

sourcecodeplz 3y ago
This is for private companies. Google/Alphabet is a public company.
- jeffbee 3y ago
  That's ... not what that means.
hotnfresh 3y ago
If some parts of how their ad auctions work have been published by them, then a distinction exists.

londons_explore 3y ago

At the end of the day, Google can set the price however they like for ads on Google Search. Previously they ran an auction. Now they have a very complex price-setting algorithm that has elements of an auction within it, but also secret factors which push bids up or down. But they're well within their rights to just roll a dice.

londons_explore 3y ago
I'm kinda surprised they don't have some human/AI combination that estimates how much profit you are earning from Google Ads, and charge most of that. The whole idea of having a price for each individual impression seems outdated - what businesses care about is "how much did we pay Google this month, and how many widgets did we sell, and was it worth it or should we advertise elsewhere?". Therefore, why bother with the middle man - just make an algorithm to predict exactly how much the business thinks the ads are worth.
- discmonkey 3y ago
  They do have this, you can choose to bid for a target conversion cost (I want to pay at most $x per conversion). In general I find all of this pretty silly as a Google employee.. I don't think you can distill the complexity of any change down to one article. Say for example that Google did just raise how much advertisers paid per click across the board, why would that lead to billions of dollars in profit? I would bet that the majority of advertisers on Google already spend their whole budget, so that would mean that now they would just be getting less clicks and conversions per dollar of budget spend. Logically they would then move some of this budget to other advertising channels such as Facebook. Charging more per impression always has second order effects, but who cares about that on hackernews
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  - londons_explore 3y ago
    Of course - pricing is a maximization game. But thats why modelling businesses has such a large opportunity. Some businesses will be prepared to pay more if you send them more conversions... Others have a fixed budget. Some use many platforms, and certain things might persuade them to move more budget to you. Some might be persuaded by "tricks" like handing out airmiles, vouchers or free stuff to the marketing team in return for ad spend. All of those things require a higher level strategy than just doing everything per-impression.

GeekyBear 3y ago

Just a reminder that the EU started a preliminary antitrust action over Google's ad business earlier this year. > Google’s advertising business should be broken up, European Union officials said Wednesday, alleging that the tech giant’s involvement in multiple parts of the digital advertising supply chain creates “inherent conflicts of interest” that risk harming competition. “@Google controls both sides of the #adtech market: sell & buy,” tweeted Margrethe Vestager, the commission’s top competition official. “We are concerned that it may have abused its dominance to favour its own #AdX platform. If confirmed, this is illegal.” https://www.cnn.com/2023/06/14/tech/google-eu-antitrust-ad-tech/index.html https://www.cnn.com/2023/06/14/tech/google-eu-antitrust-ad-t...

strongpigeon 3y ago
To be clear though, the article is talking about search ads which run on a separate auction. The actions you are referring to concern the display side where Google runs a different exchange with multiple sellers for the inventory.
- GeekyBear 3y ago
  Sure, but if the EU is looking for evidence of Google abusing it's dominant position in ad tech for it's own benefit, the US antitrust case certainly gives them a good place to start looking.
- pyrale 3y ago
  ...On which fraud was also uncovered. https://en.wikipedia.org/wiki/Jedi_Blue https://en.wikipedia.org/wiki/Jedi_Blue

daft_pink 3y ago

Is anyone really shocked that when you tell the seller the maximum rate you are willing to pay that will be motivated to get that maximum rate when the seller is running the auction?

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