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A Closer Look at Google Adwords 224

zaphle writes "This article describes an interesting experiment with the Google Adwords service; in an effort to fine-tune the price per word, a mirror site was set up, paying a different price per word. I turns out the second site had to pay more in order to reach a similar click-through rate. My questions to the slashdot community: are organizations like Google redefining the law of demand and answer? To what extent does this imply a competitive advantage for larger companies? Do we need an ethical framework to direct companies to make such algorithms open source?"
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A Closer Look at Google Adwords

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  • Huh? (Score:5, Insightful)

    by antifoidulus ( 807088 ) on Thursday December 15, 2005 @04:29AM (#14262791) Homepage Journal
    Do we need an ethical framework to direct companies to make such algorithms open source?
    Correct me if I'm mistaken, but I keep on hearing that "open source" is about freedom. Since when is forcing someone to behave in a certain manner considered "freedom"?
    Google can do what google wants to do as long as it's within the limits of the law, you don't like it? Start your own damn company that is more ethical.
    • Re:Huh? (Score:5, Insightful)

      by commodoresloat ( 172735 ) on Thursday December 15, 2005 @05:47AM (#14263021)
      Since when is forcing someone to behave in a certain manner considered "freedom"? Google can do what google wants to do as long as it's within the limits of the law

      The law, of course, is about forcing someone to behave in a certain manner; there is always a tradeoff between the decrease in freedom in telling someone what to do and the payoff which may be an increase in freedom. The law restricts your freedom to lock me in a closet without my consent because that leads to a net increase in freedom for me and anyone else you might think about locking up.

      Open source licenses like GPL are intended to force people to behave a certain way (decreasing someone's freedom) because its net benefit enhances everyone's freedom. Now, requiring open source in an industry by law is a little different than a license like the GPL -- it's debatable whether the increase in freedom is worth the cost in any particular situation; personally I would not be in favor of mandating open source across the board, though I probably would support mandating open source in public sector agencies for example. But it is overly simplistic to simply take the perspective that you do, that restricting people's behavior with regard to software development, or anything else, is automatically "anti-freedom."

    • Re:Huh? (Score:5, Insightful)

      by shmlco ( 594907 ) on Thursday December 15, 2005 @06:39AM (#14263139) Homepage
      And speaking of ethics, it's been shown that there are plenty of people out there with none. Should the exact details of the algorithm be public, I have no doubt that hordes of Search Engine Marketers and Optimizers would use that knowledge to game the system.

      There are times when secrecy has its benefits...

      • If Microsoft says what you said about Windows source code, how would you feel?

        "And speaking of ethics, it's been shown that there are plenty of people out there with none. Should the exact details of the source code be public, I have no doubt that hordes of hackers and virus writers would use that knowledge to corrupt the system.

        There are times when secrecy has its benefits..."

        It is unfortunate that whatever Google does gets a free pass on Slashdot.

        • Actually, should MS ever open up its source I have no doubt that hordes of hackers and virus writers would immediately do just that.
    • Easy (Score:2, Insightful)

      by Anonymous Coward
      Since when is forcing someone to behave in a certain manner considered "freedom"?

      When you believe that "government is the people", or that the voting process somehow removes the element of force from the definition of government.

    • Re:Huh? (Score:4, Insightful)

      by deetsay ( 703600 ) on Thursday December 15, 2005 @07:29AM (#14263263) Homepage
      Correct me if I'm mistaken, but I keep on hearing that "open source" is about freedom.
      Correction: "Open source" is buzzword meaning a various bunch of licences that corporations use, that are usually watered down versions of "free software".

      Anyway, I also don't see how Google would be more "ethical" if they made their AdWords algorithm/program "free software" or "open source" or anything. A big community of developers looking at it could find the algorithm's faults and be able enhance it for everyone's benefit, but if it's already good enough for Google, then why give it out to others, who would just use it for competing AdWords services? Maybe the poster means that the algorithm should just be made "viewable" to people, while retaining all the rights to using it... The way to implement that would probably be a patent... Are you sure it's not already patented?
    • http://www.madd.org/stats/1298 [madd.org] sez less than 17k killed in 2004 due to alcohol related deathe

      http://en.wikipedia.org/wiki/Vietnam_war#Casualtie s [wikipedia.org] says 58,226 were killed in action or classified as missing in action.

      can you 'splain the difference?
  • by hug_the_penguin ( 933796 ) on Thursday December 15, 2005 @04:34AM (#14262801) Homepage
    Google IMO has the best advert service because it's unintrusive and they're ads you want to see because they're context sensitive. To me that makes it more likely you'll be interested in what the ad's selling and you'll want to get it more because the ad doesn't piss you off. Because of this, google can charge whatever they like and most people will pay it.
    • by KiloByte ( 825081 ) on Thursday December 15, 2005 @05:50AM (#14263028)
      I have yet to see a Google ad that is relevant to what I would like to see. And, I'm afraid that they already wasted their chance.

      So... what ads
      http://adblock.mozdev.org/ [mozdev.org]
      are
      zone "googlesyndication.com" {type master;allow-query {any;};file "/etc/bind/db.blackhole";};
      you
      apt-get install adzapper
      talking
      http://www.customizegoogle.com/ [customizegoogle.com]
      about?

      I don't ever pay for random software -- I buy only things I need to (because @#$%^& customers won't switch to usable systems), and I sometimes help with Free Software projects (donating code, not money). For non-software related things, the banking system in Poland is so abysmal that purchasing material things online is simply out of the question; also, I have a strong negative response to ads -- I make conscious decisions to boycott products that are advertised in an annoying way.

      Losing the clicks from the rest of the company I happen to admin the servers for is just collateral damage.
      • I have yet to see a Google ad that is relevant to what I would like to see.

        They don't try to show you ads that are relevant to what you want to see. They show you ads that are in the same context as the page you're reading (or try to). Thereby increasing the chances that you will be interested in the ad.

        And, I'm afraid that they already wasted their chance.

        Well, since you "don't ever pay for random software," "buy only things I need," and "purchasing material things online is simply out of the question," th
    • by Motherfucking Shit ( 636021 ) on Thursday December 15, 2005 @06:51AM (#14263166) Journal
      Because of this, google can charge whatever they like and most people will pay it.
      They'll also get ripped off.

      Here's a common story:

      "I put Google AdSense on my website. I earned about $140.00, and Google was just getting ready to send me a check. Then, out of nowhere, Google sent me an email telling me I'd generated 'invalid clicks' and that my AdSense account was terminated, and all of my profits would be returned to the advertisers."

      Hundreds, if not thousands, of AdSense displayers just like me have faced this fate. But here's the question to AdWords advertisers. Have you ever seen a "refund" on your AdWords account due to some AdSense advertiser generating "invalid clicks" for your ad? I never did. Google confiscates the money from the AdSense displayer, but does not return the money to the related AdWords advertisers! That is to say, Google keeps the money that the AdWords advertisers paid to display their ads; and also keeps the money that they were supposed to pay out to the AdSense webmasters for displaying those ads.

      Google is making a killing on displayed advertisements for a lot of keywords and phrases, without paying out a penny to those who are displaying the ads on their pages. They're arbitrarily cancelling AdSense displayers' accounts for unspecified reasons, and if you try to determine why, you wind up in formletter hell. "Do No Evil," my arse.

      I've been on both sides of the fence. I advertised through AdWords, I displayed AdSense ads on my site. And Google decided to kill my AdSense account while I was on vacation, for "invalid clicks," and despite emails requesting details, they wouldn't bother to explain what that meant.

      I immediately pulled the AdSense ads from my sites and replaced them with Yahoo Publisher ads. Good news on that front, Yahoo is actually sending me checks. And I can guarantee you that I'll never again spend a penny on any Google service, be it AdWords or any other fee-based product they come up with.
        • I wonder if it's any coincidence that if you search for a phrase in Google's "you had invalid clicks so we aren't going to pay you" letter (that phrase being "that invalid clicks have been generated on") in Google, you get 545 results [google.com], but if you perform the same search at MSN, you get 832 results [msn.com].

          Things that make you go "hmm." MSN is rarely if ever better than Google at search results.
      • by Anonymous Coward
        If you have a problem with Google, follow them up with your local Trading Standards, or take them to the Small Claims Court.

        In the UK, this become increasingly easier to do - http://tradingstandards.gov.uk/ [tradingstandards.gov.uk] (free, quick and easy) and http://www.hmcourts-service.gov.uk/ [hmcourts-service.gov.uk] (£30 for a small claim which you will get back if you win).

        If Google won't tell you what they cancelled your payment, then I am sure that they are legally required to give you your money.
      • by Bill Dimm ( 463823 ) on Thursday December 15, 2005 @11:12AM (#14264717) Homepage
        Have you ever seen a "refund" on your AdWords account due to some AdSense advertiser generating "invalid clicks" for your ad?

        Yes, I have. As per Google's documentation [google.com], you can click on the "My Account" tab and look for "Service Adjustment" in your billing summary. I have received some small refunds.
      • Hundreds, if not thousands, of AdSense displayers just like me have faced this fate.

        Hmm.

        Let's take a high estimate of 100,000 AdSense publishers having this happen. That'd be $14 million if the average lost is $140. Most of the people I've seen complain note numbers somewhere between $30 and $200, so it's probably a high estimate too.

        $14 million. For a company worth $120+ billion. They probably spend more than that on staplers.
  • by luvirini ( 753157 ) on Thursday December 15, 2005 @04:34AM (#14262802)
    Like making a site with the $ .05/word.. and few others.. the total cost and time to do that should be quit low as said in the artickle. anyone using adwords to generate sales should definitely try to find the best results by doing those types of doubleblind tests.
    • by Anonymous Coward on Thursday December 15, 2005 @06:54AM (#14263171)
      On the contrary, Cringley has utterly misinterpreted these results and they actually prove that you should not do these tests.

      If Google does anything with AdWords the obvious thing to do is examine the BIDS for AdWords that it receives and figure out a VALUE for each AdWord.

      By setting up a rival site and BIDDING AGAINST HIMSELF this guy drove up the VALUE of his AdWords.

      How is this not obvious? Google just coded the free market.
      • I may be mistaken, but I also believe that he may have tripped a dupe content type filter. If he created another website with completely duplicate content, and then created an adwords account with completely duplicate ads, google could interpret that as attempting to game the adwords.

        It may appear that he is trying to own the advertising space to the right by paying for the same ads at differnt levels, effectively owning all positions. Google does not want that to happen as it will allow those with larger b
        • That's a pretty good theory. Also a proven track record probably figures into their algorithm somewhere. So when one account had generated a lot of click thrus for a long time, and one was brand new (and overpaying) they probably looked at the new account with suspicion. If the new account is willing to throw money away with $1 per click, google will be glad to help them. But if they pick a more moderate amount, they probably stop getting the "I've got money to burn" special treatment. I think if the e
  • by EmoryBrighton ( 934326 ) on Thursday December 15, 2005 @04:34AM (#14262805)
    To be honest, I just checked, and while there are 1,030,000 Google results for "Cringely," there are no ads at all on the results page, indicating -- as many have long suspected -- that I have no commercial value whatsoever.
    No Way! I'd pay for you NOT to write!
  • by mister_llah ( 891540 ) on Thursday December 15, 2005 @04:35AM (#14262812) Homepage Journal
    I've said it before, I'll say it again. Google is a company. They are out to make a profit.

    Companies grow from profit, Google has grown a lot. To maintain growth percentages (which as you become gi-normous like Google, becomes harder to do) ... you need to branch out and you may also do things that may be questionable.

    I think that paid search priority is somewhat ethically questionable, but I am not at all surprised.

    Given that Google has been taking efforts to make themselves appear even more friendly to the open source community (those huge contributions awhile back) ... I think with enough contact/interest from people in the community that Google may become interested in sharing these algorithms (good public relations never hurt) ...

    Who knows, though?

    ===

    However, Google doing things that are questionable and quite publically, in my opinion, spin a dangerous message for the future. They may be progressing into a more pervasive position than Microsoft in the years to come, with increased power comes increased corruption.

    Scary stuff!
    • Then start your own non-profit search engine company.

      Seriously, why do people here think they should be allowed to do anything they want, but others should not be afforded the same liberties? Google is a company made up of people that are exercising their freedom to create a company. You don't like it? Start a competitor that isn't evil. Can't do that? Well then cry me a river about your freedoms, you don't have to use google, and they don't owe you a god damned thing.
      • I said nothing but that it is ethically questionable. I don't recall saying that they should be stopped, nor do I remember crying about freedoms being infringed.

        I was pointing out the fact they are a company, it seems obvious to you or me, however, some people seem to think they are the second coming.

        ===

        They are not breaking the law, doing what they are doing, while I wouldn't do it and think that it is only a sign of future problems... if they want to do it, that's their business (pun not intended)...

        Cheer
    • by Anonymous Coward on Thursday December 15, 2005 @05:18AM (#14262952)
      Google scares me! This I know,
      for ibiblio tells me so.
      Little ads to It belong;
      My site is weak but It is strong.
    • To take the seat from google, is actually fairly easy. It can be done in as little time as a year or two. You simply have to come up with a superior product, or take away one of several other advantages (that part is far easier than anybody realizes).Google is not a monopoly and can not aquire one via network services. To be fair, google can still aquire a monopoly via other products, but not via a network service.

      taking away MS's power is a very different matter. MS holds it power via monopoly. That monop
      • The only comment I'd make is that MS didn't recently realize that owning the standard was king, they most likely knew it all along (or figured it out sometime around the DOS/IBM deal. Most of the damning evidence from the anti-trust trial was executive statements expressing fear that they would loose ownership of several standards in the Internet era and so they were killing the obvious usurper while they pulled together an internet strategy.
  • by NathanBFH ( 558218 ) on Thursday December 15, 2005 @04:38AM (#14262818)

    Cringely, near the end of his article, drones on and on about how he has "no idea what the heck is happening here." But, in fact, he very clearly states what is going on at the beginning of the article:

    Google places you higher in the rankings of of paid search results based partly on your volume of click-throughs because, again as Cringely very claearly pointed out, the more people click the more money Google makes.

    Why then, Cringely, is it so hard to understand that since the first site has been opperating for what I assume to be months or even years, it would more easily place at the top of the paid search results than the brand new experimental site you created?

    Your experiment proves what you already knew: popular click throughs means higher placement for less money. What don't you get?

    • by pmc ( 40532 ) on Thursday December 15, 2005 @05:16AM (#14262944) Homepage
      The point is that the test site (at $1 per click) had similar ad word performance with the original site. When the adwords cost is dropped by a factor of two the effectiveness of the ad drops by an order of magnitude. Which seems a little weird.

      There are two possible explanations here. The first is that by a pure fluke the tester managed to pick the adwords cost/click that exactly compensated for the newness of the site (as the performance of the test site and the adwords site was the same) and that when the price was reduced the ad went into a twilight zone of uselessness. The second is that google, as part of the algorithm to place adwords, punishes people who reduce their adwords cost/click.

      I think the first is pretty unlikely.

      The test that needs done is to start a third trial site at $0.40 and look at that - if it shows similar effectiveness as the $1 test site and $0.10 original site, then that would demonstrate reasonably convincingly that Google punishes people who reduce their adwords cost/click.

       
      • by TallMatthew ( 919136 ) on Thursday December 15, 2005 @05:42AM (#14263006)
        There's another possibility ... depending on the search term used, the placement of the ad in relation to other ads bound to the same search term might have shoved it to the second page of search results.

        My experience has been unless you're somewhere near the top of the adwords list on the first page (and you pay more per hit obviously), your hits will plummet precipitously, not necessarily because Google is spiking the algorithm, but because people who conduct searches get what they want in the first few listings and don't see your ad.

      • by shmlco ( 594907 ) on Thursday December 15, 2005 @06:32AM (#14263115) Homepage
        Try a third answer. Many factors make up the price a click and and ad placement, including the AGE OF THE SITE. Newer sites, and ads, have been simply found to be less relevant that more established sites and ads. The only way to compensate (to a certain degree) is to pay more.

        So start a new site with zero page rank and it will have to pay more to get the same placement, if it can do so at all. Older sites will pay less because they've been around longer, and their ads will have shown themselves to actually have been relevant.

        It boils down to a simple axiom: Google rewards relevance.

        • by aug24 ( 38229 )
          I think you're right. In fact the grandparent appears to have misread the articles slightly, as Cringely never states that the new site got the same or even similar performance to the old one (although he goes on to describe a drop from 15,000 to 1,200 clicks when the adwords price was dropped).

          So it makes perfect sense to suggest that the algorithm is:

          Established site @ 10c -> 15,000 clicks
          New site @ 1$ -> prolly about 15,000 clicks because the high price counteracts the newness
          New site @ 4

          • New site @ 1$ -> prolly about 15,000 clicks because the high price counteracts the newness

            The point I was making is that it unlikely (but possible) that the site owner happened to pick the adword cost/click that counteracted the pagerank boost the old site got.

            I even suggested how to test for it. Here's another one: setup two identical sites, advertise one with $0.25 and one with $1.00 per click for some suitable adword. See what the click rates are. Then change both to $0.50, and see what the click rate
            • I think we are in violent agreement ;-)

              If you read carefully though, Cringely doesn't even state the click rates were even. So there's not even enough data to support his own conclusion.

              Incidentally, I would suggest even your test won't prove it, unless the two sites got the same click-throughs at different rates, because we know (well, we think) that google puts well-clicked-on sites higher, and there will be a feedback between high price and high click rate that creates higher apparent relevance. This w
              • Incidentally, I would suggest even your test won't prove it, unless the two sites got the same click-throughs at different rates, because we know (well, we think) that google puts well-clicked-on sites higher, and there will be a feedback between high price and high click rate that creates higher apparent relevance. This will then skew the results when the prices are equalised.

                Actually, this will be a good way to test if price change is one of their criteria. If price change is NOT a criteria, then the

      • It's *ADVERTISING*... The more you pay the more you get... Did anyone really ever believe any different? The more you pay the bigger the incentive Google has to stick *your* advert on someone's page and on the more popular pages at that. Now say DOH! and slap your forehead.

        "Punishes" ...

         
        • The whole point of the article is that Google does not work on "the more you pay the more you get". When the test site was at $0.40 it was getting less than the site at $0.10. Now, it is just barely possible that this is purely related to pagerank, but it is unlikely. I have also suggested a test to determine is it is pagerank that is causing the difference.
      • Since Google *wants* to fill every advertising position, my guess is that decreasing your pay-per-click has more to do with how much others have bid than with some scheme to punnish cost reducers. Example, if you were paying $1, and for your experiment you dropped that to $0.50, but 10 other advertisers were each paying $0.75, then you're going to drop pretty drastically in the ranks since there's now 10 other people paying more than you.

        Without knowing how much your competing advertisers are bidding, you
    • He drones on because at the time (a couple of months ago) the analisys was just starting and he wanted to stir up some activity in his inbox. The results of come out in the weeks following and really should have been linked in the original post but oh well, you can find them easilly enough.

      http://www.pbs.org/cringely/archive/ [pbs.org]
  • Just a thought (Score:5, Interesting)

    by mikkom ( 714956 ) on Thursday December 15, 2005 @04:43AM (#14262835) Homepage
    Just a speculative thought because no one really know about googles algorithms.

    The result may be due to the original pages higher pagerank. I wouldn't be surprised if google would give higher position to "better" sites even in ads. In Googles context, higher pagerank means "better" site.
  • Hmm... (Score:5, Interesting)

    by TheSHAD0W ( 258774 ) on Thursday December 15, 2005 @04:45AM (#14262844) Homepage
    I have an alternate explanation. I believe what existed before the guy's experiment was a more-or-less stable "ecology" around those particular keywords. There were probably a number of people paying a premium for a limited number of clicks for those keywords, well above the 10-cent level he was originally paying for. Google probably sorted the higher-paying advertisers onto the best pages and left the dime-a-click ones for others and everyone was more-or-less happy.

    Then when the experiment began, it disrupted things. The advertisers who were initially offering a premium found themselves with fewer clicks as their ads were placed on less advantageous pages, or when their ads were displaced entirely. They then changed their own behavior, perhaps by choosing different keywords and/or paying higher rates. This would have cascaded, causing other advertisers to change their behaviors.

    The end result would've been a shift in AdWords' performance with those keywords, one that wouldn't easily be reversible, and which could account for the poor performance when the experimenter reduced his bids for clicks.
    • Re:Hmm... (Score:5, Insightful)

      by xtracto ( 837672 ) on Thursday December 15, 2005 @05:07AM (#14262922) Journal
      I agree, I think what he saw was just the result of the typical supply/demand theory. The demand/supply combination of that specific word stated an average value for it. He payed $0.10 for a steak of 15,000 hits per day.

      When he increased the price to $1.00 he also changed the demand, so of course all the "market" (for that specific word) was modified, until his demand changes where assimilated by the market. When he lowered again the price, the supply/demand was not the initial one, and that was the reason of the changes in the number of clicks. With the new combination, $0.40 per click was "worth" 1200 clicks.

      The only missing piece is (and was not clear for me from the article) if the original site clicks decreased after doing the price change.
    • That would have resulted in a change in his original site's clickthroughs. Cringely says (less clearly than I would like..) that this did not happen.
  • by gtoomey ( 528943 ) on Thursday December 15, 2005 @04:46AM (#14262847)
    I use Google adwords for various sites. Adwords seems to "reward" longstanding customers with lower rates like other businesses. I see the "minimum bid" changing all the time in relation to the mixture of bids for keywords

    If you ask google to justify every detail of their pricing, you may as well demand it of oil companies & every other business.

    If you don't like it, dont use it.

  • by nettdata ( 88196 ) on Thursday December 15, 2005 @04:48AM (#14262860) Homepage
    No, I don't think Google is redefining the "law" of demand and answer... they are just better set up to take full advantage of it.

    And I don't see anything wrong with this.

    Sure, in some cases, larger companies have a competitive advantage when it comes to this.

    Mind you, larger companies also have a competitive advantage when they have a crap-load more money than smaller companies... they can hire a boat-load of top-knotch engineers, spend way more on advertising, etc. Does this mean it's unethical? No. That's the way it works.

    Of course, there could be Monopoly issues, but I doubt that they are of issue in this case.

    So, do we need an ethical framework? No. The smaller company needs a better negotiator to enter into the agreement and get the better rate and the service they want.

  • ...the law of demand and answer?

    Google on the law of demand and answer [google.ca]. It would seem the law of demand and answer doesn't register. Maybe it's outside the law, maybe an outrage. "I demand an answer", with an implied, or else I'll tell my Mom!

    Maybe it's the law of the hidden CIA prisons, but, surely, if it's the law, well then, as we demand so shall we receive an answer.

  • Why? (Score:4, Insightful)

    by Chris Bradshaw ( 933608 ) on Thursday December 15, 2005 @04:51AM (#14262875)
    I don't see why this would be necessary... It's important to remember that the company paying to put their ads up is fully capable of seeing where their business is coming from (http referer:), even down to the very search terms used to find thier site, or the contrary... The ball is in the advertisers court to research and fine-tune their site, as well as cultivate a good relationship with Google in order to generate the best results. If we look at cable television for a comaprison of ad services, you have way more information at your disposal in the online marketplace than you do anywhere else, and the let's face it, the free market has and always will be a cut-throat arena where things are not always fair. As long as paid search terms stay out of the "true" search results, then "GAME ON" as far as I'm concerned.

    I'm assuming that the lawsuit [slashdot.org] posted earlier this week was what prompted this - which by the way, in my opinion is total nonsense and has a snowballs chance in hell of winning in court.

  • by xoip ( 920266 ) on Thursday December 15, 2005 @04:56AM (#14262891) Homepage
    Long gone are the days of getting a simple answer from Google without advertising. As a search engine, it still does a very good job but, there are far too many people out there thinking that Google is the Only online advertising platform. This may have begun skew the results in favor of sites that have no real content other than a bunch of google ads. Google wins either way, click on the paid ads based on the search or ads loaded on the landing page of the search result. At some point, Google will loose it's lustre.
  • Google are doing whatever they want to in order to make a profit, even if that means messing around with the price per click like this. There is a reason that they are number one in the market place right now and by being in this position it enables them to set the prices they want to charge, it maybe not be ethical but it is profitable and that is all that matters in today's world of e-commerce. With businesses such as spyware and spamming still being huge
  • by tod_miller ( 792541 ) on Thursday December 15, 2005 @04:58AM (#14262896) Journal
    It works for all, it is capitalism at its best:

    Anyone can bid prices, but the costs you need vary based on how well your ads do.

    Useful pages that are well typed to keywords (lemonhead ads for a search for lemon chicken would have to pay more for instance) are good for us, which means good for google, because google want to make more money.

    Advertisers are stupid, they want to be top of EVERY SEARCH no matter how useful it is, and they want it cheap.

    Google says, the less relevant you are to the search, the higher the click through, the higher the cost.

    If you happen to convert your audience, and you now become more relevant, you prices go down.

    So if I start selling neckties to skaters, I might have to stump up a bit in the long run, but if I hit a craze, they would go down, until some chump makes his own neck ties and starts bidding above me.

    I think it is dumb to make this public, and the guy behind this has an ulterior motive anyway.

    Misleading ads change the equation, but what can you do.

    please type the word in this image: revamps
    random letters - if you are visually impaired, please email us at pater@slashdot.org
  • Adwords (Score:5, Informative)

    by softplus ( 107897 ) on Thursday December 15, 2005 @05:03AM (#14262906) Homepage
    Adwords does placement on more than just the cost-per-click. This fact is spelled out all over their website, try something like https://adwords.google.com/support/bin/answer.py?a nswer=10215&topic=114 [google.com] :

    "We want to ensure that your keywords get a fair chance to run and that we do all we can to properly gauge their performance. We use a Quality Score to do this. Each keyword is given a Quality Score based on data specific to your account, including your keyword's clickthrough rate (CTR), relevance of ad text, historical keyword performance, the quality of your ad's landing page, and other relevancy factors.

    Quality Score = keyword's CTR + relevance of your ad text + historical keyword performance + other relevancy factors

    Your keyword's Quality Score and maximum CPC (at the keyword or Ad Group level) determine your ad's rank on Google search and content sites. (For the top positions above Google search results, however, we use your keyword's actual CPC.) Remember that improving the relevance of your ad text and keywords will increase your keyword's Quality Score and reduce the price you pay when someone clicks on your ad."

    If you start a new campaign, it is no wonder that Google will not be able to give you the same placement as with a campaign that has run for years. It's new, it's unknown, the visitors / clicks are unknown, heck - even the cost-per-click value is jumping around. It looks weird to the system, it gets placed lower or even removed from some of the results.

    What happens in the end: those who target properly (right keywords) and have a good ad copy get lots of clicks, those clicks end up making your placement better (while paying the same amount of money). The users are voting for your ad (whether they buy or not is partially unknown to Google -- "partially" because you can track it through Google if you want to).

    A new factor coming into play is the landing page - the page that the ad takes you to. According to their blog ( http://adwords.blogspot.com/ [blogspot.com] ) they are now evaluating the quality of the landing page. So if you search for "children" and click on the "Get children at ebay" ad, and the page they link to does not offer "children", then sooner or later (heh, hard to guess, it depends on the amount of automatisation behind the checks) Google will either remove the ad or move it down, while the advertiser is still paying the same amount per click.

    Is that evil? Is that being greedy? or is that just watching out for the "user experience"?
  • I wonder.... (Score:4, Interesting)

    by squoozer ( 730327 ) on Thursday December 15, 2005 @05:09AM (#14262925)

    .... if this guy didn't trip over a duplicate content filter. I would be very surprised if Google didn't check to make sure it wasn't being fed the same content from multiple sources. From Googles point of view checking for duplicates is a good thing. They don't want their natural listings (or ad listings I imagine) to be filled with hundreds of copies of exactly the same site.

    I would have been more interested to see the results of a test that modified the wording of ads and how that affects placement.

    Finally, I wish I was getting 15000 click throughs a day. Sigh.

    • Re:I wonder.... (Score:2, Informative)

      by softplus ( 107897 )
      The duplicate content filter is for search results. It IS against Googles TOS to submit multiple ad units to the same keyword with the same site behind it, however if you have two sites you can gladly compete for adwords placement with yourself :-)
  • by core plexus ( 599119 ) on Thursday December 15, 2005 @05:13AM (#14262933) Homepage
    I know there's a lot of google-haters, but I have to say...

    I was thrilled with the ad-block extensions of Firefox, and welcomed the relevant ads from google. I'll admit, I have actually clicked on, and even (shocked) bought a few things.

    I hate desperate ads, like those on TV and everywhere else. Advertisers realise that they are failing.

    When/if google starts flash, popups, then start to complain.

    Tired of online retailers charging extra to ship products to Alaska? [suvalleynews.com]

    • You'll see all of them around 1, 0, and -1.

      For some reason... there is a tendency for anything that isn't directly supporting Google to get modded down.

      This includes relevant points.

      ===

      So for the most part, unless you have something against Google to say, you're pretty much 'preaching to the converted'...

      Cheers!
  • by Idimmu Xul ( 204345 ) on Thursday December 15, 2005 @05:44AM (#14263013) Homepage Journal
    Google not only knows what you like, thanks to the things you search for, but it also knows who your friends are, and what they like thanks to relationships formed through GMail invites and Orkut which could come in very handy when it comes to targetted advertising in the Christmas season (and any other gift buying season).

    And I'd be quite appreciative of that as I've no idea what to get my Dad this year, and a few casually placed Google Adwords undermining my own thought process wouldn't go a miss!
  • by Proto23 ( 931154 ) on Thursday December 15, 2005 @05:53AM (#14263034)
    First of all if he gets 15000 @ 0.15 clicks per day he is paying $1500,- a day in advertising that is $547.500 per year in advertising alone. His friend must be an internet miljonair! I somehow doubt that such a large operation would execute the test as described in the article. I think the figures are a bit inflated to make it a better story. Furthermore I use Google Adwords for my company (http://www.tiouw.com/ [tiouw.com]). I spend around $5000 a year on Google. As everyone who has ever worked with AdWords knows is that when you change your ad, it changes your click through rate. Changing URL's, text, anything has a direct result. It takes some time before the system gets used to the changes and then you are back on track. I expect that if the company in the article would have run for some time with the new settings it would generate more and more hits. Finally, tests have shown that people do not click on the no.1 position, but prefer no. 2 or 3.
  • by Heembo ( 916647 ) on Thursday December 15, 2005 @05:59AM (#14263046) Journal
    are organizations like Google redefining the law of demand and answer?

    You mean supply and demand, the cornerstone of capitalism? More like - Google is redefining the rules of advertising and IT for the entire world.

    To what extent does this imply a competitive advantage for larger companies?

    Well, just like the superbowl, only companies with big bucks can get prime time advertising real estate.

    Do we need an ethical framework to direct companies to make such algorithms open source?"

    Keep your ethics and morality out of my consumer choices. If I dont like how google does business, I will stop buying from them. I live on Kauai, and I turned my girlfriends dying massage business into a thriving business (www.kauaioutcallmassage.com) spending only 20$/month over the last 2 years. Google has been incredible for my family, please don't rain on or change my parade with Google!
  • Too expensive (Score:3, Insightful)

    by trollable ( 928694 ) on Thursday December 15, 2005 @06:07AM (#14263059) Homepage
    To be honest, I just checked, and while there are 1,030,000 Google results for "Cringely," there are no ads at all on the results page, indicating -- as many have long suspected -- that I have no commercial value whatsoever.

    Minimum price for 'cringely': $0.42
    Too expensive for me..

    BTW, the article is quite bad. All the important information is missing like the positions, CTR, minimum prices and CPC. OTOH, the algo is probably quite complex and it seems the higher bidder is not the winner.
  • by JanMark ( 547992 ) on Thursday December 15, 2005 @06:10AM (#14263068) Homepage
    I think Google puts a stiff penalty on lowering your price-per-click. I am sure most advertisers will (sooner of later) try is they can lower their rice-per-click. Google's algorithm will start to give them bad ratings immediately and most will be back to the old price in no time. The few that accept the hit in click troughs, will cost Google some money, but the ones that go back to the higher price will more than make up for that. Just do the math...
  • by sstidman ( 323182 ) on Thursday December 15, 2005 @06:27AM (#14263103) Journal
    Not to burst anybody's tin-foil bubble, but there's possibly another less nefarious explanation to what is going on. As we know, Google wants to keep their Adword algorithm secret. It's quite possible that Google realized long ago that folks could map out their algorithm by simply playing with the input parameters just like Cringely's friend was doing. In order to prevent the inevitable reverse engineering of the algorithm, they might have put in some code to randomize the effectiveness of the results when Google has detected that someone is changing the parameters. If that guy wants to see if Google is really punishing him for lowering his price, he should try setting the price back to $1 and see if things go back to what they were before. I'll bet they won't.

    Of course, another possibility is that they have a bug in their code. I've heard that some programmers actually make mistakes sometimes.
  • This just shows that a newcomer company that is pouring a bucket of money into advertising can be about the same as successfull as an established one that does not. But once the newcomer decreases the ammount of advertising it starts sinking rapidly.

    From my point of view this is just normal, not some EVIL doing of Google.
  • For companies, ethics usually conflicts with maximizing profits for shareholders so, no.

    If you want an ethical framework, you have to practice what you preach.
  • "My questions to the slashdot community: are organizations like Google redefining the law of demand and answer?"

    Anyone have any idea what the "law of demand and answer" is? Wow, a completely nonsensical slashdot summary -- must be Thursday.
  • What is the "law of demand and answer"? I've never heard this term before. What language is this from?
  • That's outrageous!

    Get over it, big companies, (or anyone who is willing to pay more per word) are going to get shown more frequently. That's just basic economics. I'm sorry to burst the Open Source Free love bubble, but money does still have a role in many everyday transactions.

    I guess you'll just have to accept that.
  • Open Source (Score:3, Insightful)

    by the eric conspiracy ( 20178 ) on Thursday December 15, 2005 @09:13AM (#14263700)
    Do we need an ethical framework to direct companies to make such algorithms open source?

    Since a corporation's primary charter is to make money for it's owners, revealing information like this could be considered unethical under current norms. This is why we have the concepts of patents and other IP. A patent is a contract betwwen the government and the patent holder in which the patent holder is granted a limited term monopoly on an invention in exchange for publishing the details of the implementation of the invention. The strength of the patent system determines how willing the corporation will be to publish the details of their invention.

    The main alternative to patents is trade secrets where (like in the case of the Coca-Cola formula) the corporation decides that that it is not in it's best interest to publish it's invention.

    This is the framework we have now. An ethical framework that would result in a company publishing all of it's inventions without any compensation would be a very different society and much more collective than what we have now. Whether such a thing would work is not well supported by history.

  • You gotta buy more to get more kick, but if you cut back the increased dosage you go into withdrawal.
  • by G4from128k ( 686170 ) on Thursday December 15, 2005 @09:29AM (#14263796)
    This experiment is deeply flawed because he compared Adword performance of a new site to that of an existing successful site. This flaw biases the results in two ways. First, it assumes that Google's ranking system isn't biased by click-through history -- that Google doesn't up-rank a site with 12 months 15,000 click-throughs per day versus one with only 1 month of 15,000 click-throughs per day. This seems very very unlikely. If I were Google I would always up-rank incumbents that had a good history of click-throughs (and payments). Second, it assumes that people don't remember site names (that the existing successful site has no brand value). I know that I often refind casually interesting sites (those not worth remembering or book marking) by rerunning a search that found that site the first time. How many of that existing site's 15,000 click-throughs are repeat customers who recognize the site's name?

    The better experiment would create two or more new sites and test adword on an even footing of history with both Google and searchers.

  • One of my readers makes his living selling goods over the Internet, and his sole means of obtaining customers is through Google AdWords. His business is robust for a one-man operation and he makes a good living. Knowing the actual numbers, I would say he makes a VERY good living, which shows the effectiveness of Google and AdWords as an advertising medium.
    ...
    "It's like Vegas," said my friend. "They want you to lose. Try to game the system and they cut off one of your legs."

    If they "want him to lose", w
  • So the best strategy would then be to start low at $0.05 and then very gradually increase it to $0.10? On the other hand, the system could then give lower click-throughs to encourage the advertiser to keep raising the price.
  • I understand from the article that the guy got approx. 15k clicks for $1 per click. That means that he paid $15k for that experiment, which seems quite unlikely to me.

    The article is a little shaky. It's not clear what happened with the first site: how were those click-throughs changed from day 1 to 2? Certainly, the "market" for that word isn't large enough to sustain two identical campaigns with two identical sites?
  • Hmmmmm, very timely. Since I started reading reddit [reddit.com], I rarely see anything new on slashdot.

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