Saturday, May 27, 2006

How unfair is AdWords?

Robert X. Cringely has a very intriguing write-up on Google's AdWords program and how it may not be as democratic as most of us assume. Generally speaking, if you bid on rarely used words then you should be paying less per click on that word due to the lack of demand. This enables many small web publishers to profitably sell all types of content.

Unfortunately, it seems that Google does play favourites when it comes to pricing, and we are not talking about small discounts for large advertisers. All this happens with some really fuzzy math:

Luis decided to sell his program online using a Google ad campaign, targeting terms like "physics equations," "equation editor," and of course "LaTex." Because he didn't expect much competition selling equation editors, Luis thought that he could get most of these words for about Google's minimum price, which in the UK is 1p. In practice, though, he found that the minimum price was 3p for most words, and that minimum shortly jumped and then jumped again until some words cost as much as £2.75 (about $5.15). Since there was no competition for these ads, Luis couldn't figure out what was going on, and frankly, Google wasn't much help. They said that his words had low "Quality Scores," which meant that the minimum charge per word had to go up by the amount specified.

Google would be wise to keep in mind the customers that made AdWords a success - long before Amazon started spending millions of dollars on advertising with Google it was the small web publishers that proved the concept for Google and helped make Google what it is today, the number 1 Internet search site. Google may be able to make more money in the short term catering to large companies but taken together small businesses have enough pull to potentially send droves of Google visitors elsewhere.


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