Archive for the ‘Adwords’ Category

Google Conflict Of Interest?

May 6, 2007

“Google makes almost all of its revenues from two ad networks:-AdWords: Customers advertise on Google web sites.

-AdSense: Customers advertise on Google partner sites, which includes many media companies.

Google’s revenue in 2004 was about evenly split between AdWords and AdSense.

Since then, Google’s revenue from its own sites has grown by 24 percent to 62 percent of total revenues. AdSense has fallen.”

And this is where it has a mammoth conflict of interest:

Which advertising network should Google invest in?

-A dollar invested in its AdWords produces far more profit than invested in AdSense, its partner network. Management has a fiduciary duty to its shareholders to maximize profits.

-Google can boost overall profits by undercutting AdSense at anytime it wants, say  by offering a discount on AdWords compared with AdSense. A 20 percent discount on AdWords would make more money for Google than the corresponding loss of business through AdSense partners.

-Google can undercut AdSense in other ways, and is already doing it, by investing in technology that improves AdWords conversions over AdSense. Google can apply technologies to its own sites that make them more efficient at selling ads. It can’t do that with partner sites. And partner sites don’t have the resources to improve their advertising conversions at a similar pace.”

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