Prof. Eric Goldman at the Search Engine Land writes a pretty interesting article arguing against Google’s practice of publishing self-promoting ads on its search engine results pages. According to Professor Goldman, while it is true that most companies use their own services to cross-promote their offerings, Google is different in that the company runs its advertisements through a keyword-bidding auction system. Now, with all the internal information about keyword prices available, Google may be in a position of conflict in their interest by using their Adwords system to promote their products.
Let me put in an example here. Google has a finance website at Finance.Google.com and as you all know, Finance is one of the most competitive segments in online advertising. Now, will Google benefit from knowing the right price to bid for keywords since they own the algorithm? That means when Google’s rivals in the finance segment lose money guessing a bidding amount, Google will exactly know how much to bid and thus effectively improving their returns on marketing. Alternately, will Google be inflating the ad spend from advertisers by taking part in the advertising themselves. Let’s for a moment assume that advertisers bid $1 per click to take the top position on the sponsored listings. Will Google be affecting this bid amount by, say bidding for a keyword at $3? This would imply advertisers will have to increase their ad spend in order to beat Google’s house ads and take the top spot. That’s most definitely a conflict of interest.
It will be interesting to see Google’s response on the issue. Is a lawsuit likely? I think so.