Tuesday, September 23, 2008

Google, Ads Monopoly?

The search engine ads seem to be the buzz word for online advertising nowadays. I find this recent NYT article particularly interesting: it points out when placing ads on Google, not the advertisers who paid the highest price received the most displays.

Google does better supplying search ads partly because it has a larger inventory of ads. But it is also the result of the algorithms Google uses to select which ads are displayed. The auction systems at all the search engine sites incorporate some complexity. They don’t simply award places to the advertisers with the highest bids. They also factor in “quality scores,” based on the advertiser’s prior history and the relevance of the advertiser’s own destination page to the search term. The higher the quality score, the lower the price that the advertiser must pay to be chosen to appear on a page. It’s widely acknowledged in the advertising industry that Google’s software comes up with matches more likely to bring customers to advertisers who will complete a purchase than do systems used by other search engines. Advertisers pay more to bring in those customers.

What would this add to the recent anti-trust litigation against Yahoo and Google? Would Google become the “evil monopoly” who can set the ad price as high as they want?

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