Is Google's Self Promotion in AdWords a Conflict of Interest?

Google says thatit is fair game for its internal departments to bid on keywords to promote Google products using Google’s AdWords advertising services,but those departments have to go through the bidding process, without special treatment, like anyone else. That’s not enough for Santa Clara University law professor Eric Goldman, who wrote on his personal blog that this still isn’t kosher and is calling out the search giant on its questionable practice.

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According to Professor Goldman, “Google differs from most publishers because it auctions ad space on its network. Thus, when Google runs house ads, it simultaneously conducts the auction that it is bidding in—an impermissible conflict of interest…Google house ads undercut the auction integrity…”

The reason that the practice is being criticized is that in traditional auctions, auctioneers are not even allowed to bid in their own auctions. In this case, Google–via its self-owned and controlled individual departments or divisions–is in fact bidding in its own auction for key words to place ads next to search results when certain search term(s) are used. These ads are called house ads.

The conflict of interest occurs because Google knows too much about the internal practices, which may help it negotiate better pricing. According to Google AdWords policy, ads are priced based on two factors: price that advertisers are willing to pay per click and quality of the ad. According to Goldman, “Google has never publicly addressed how its house ads affect the prices paid by other bidders.” Additionally, being that Google is both auctioneer and bidder, it has too much knowledge about quality scores and prices that other bidders are willing to pay.

If you’re interested in the topic, you can visit Professor Goldman’s personal blog for a much more detailed read.

Filed in Computers >General..