Reality Check: Google Is Already Fixing Ad Prices

Danny Sullivan on Search Marketing

By Published on .

Google and Yahoo are expected to move ahead soon with a partnership for Yahoo to carry some of Google's ads. This comes regardless of what a "voluntary" regulatory review might decide and despite public fears expressed recently by two publisher and advertiser associations that the deal will make Google too powerful or lead to price fixing.

Price fixing? Really? Because if that's what folks are worried about, Google's been fixing prices for ages.

Danny Sullivan
Photo: Jason Meyer
Danny Sullivan has been covering the search-marketing industry for more than a decade and is editor in chief of
Reality check time: There's no rate card for the ads that appear on Google. The company runs tens of thousands of ads that show up against millions of keywords, and prices are set automatically in real time. There's simply no way Google could sit down with Yahoo and decide that an ad for the word "shoes" is going to sell for $2 a click rather than $1.

So let's skip the collusion talk. But while Google-Yahoo price fixing might make me roll my eyes, as I said, Google already fixes prices within its own network. How can that be, given that it's an auction model?

In an auction, the highest price wins. Since AdWords began, Google's never sold to the highest bidder. And these days it uses a "quality score" as a way of causing some advertisers to pay a premium to show up. Let's be clear: Quality scores mean advertisers with ads deemed "good" pay less. But the bottom line is that Google is interfering in the auction in ways only it knows.

Google interferes for good reasons. It tries ensure that searchers will find its ads relevant. "Search-ad blindness" caused by irrelevant ads would hurt Google and advertisers both. Still, more and more advertisers seem concerned over the "black box" that quality scoring and the overall ad-pricing system has become, in which only Google itself fully understands why something has been priced the way it has.

As pricing comes under renewed focus, here's a suggestion: Perhaps it's time for Google to do what GoTo/Overture did years ago when it launched: Show how much each ad costs at the time a search-results page loads.

Google needn't do this on its regular results. That would be distracting. But for advertisers seeking more transparency in pricing, an interface where they can see the actual prices being charged -- for all advertisers -- might let them feel more empowered or better able to serve as a check on the Big G.
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