You might have noticed the price of Google's advertisements going up. Google confessed to subtly adjusting their advertising auction system to achieve its revenue objectives. Typically, the changes mean that an average advertiser could pay up to 5% more for their ads. During a federal antitrust trial, Jerry Dischler, a top executive at Google Ads, revealed that for certain searches, Google might have ramped up the prices by a whopping 10%. Even more surprising is that these alterations have been done without notifying the advertisers.
This move from Google has ruffled some feathers in the digital marketing world. Many wonder if Google's Smart Bidding feature is being used to fatten the company's pockets.
Google's legal woes and the significance of search ads
Google is under the microscope for supposedly sneaky tactics that help maintain its stronghold as the world's primary search engine. It's said that Google, capturing a staggering 90% of the market share in search, has been offering hefty payouts to giants like Apple to be the go-to search engine on devices, especially the iPhone.
Search ads, which are the text and shopping promotions that pop up at the beginning of Google's search results, are a significant revenue source for Google. In 2020, they raked in over US$100 billion for the company, contributing more than 60% of Google's total income. This trend of increasing revenues from search ads has been consistent since 2012.
Jerry Dischler explained that the price adjustments resulted from the pressure to meet the revenue targets set by Wall Street. During the trial, he mentioned that the main aim was to think outside the box to achieve their financial goals. If Google can up the prices and face no substantial pushback from competitors, it might prove the Justice Department's point: Google has an unfair monopoly in the market.