Christian Nielsen's Blog

There are a lot of reasons, but I think the main one is that their basic business model is not what I would call "fair". The idea of an auction-based marketplace seems like it's ok, but when you are dealing with something of a monopoly, it isn't. Sure, you can stop your AdWords account and use other systems and marketing methods, but if you vote with your business choice, will it make any difference to anyone besides you?

The real turning point was a couple of years ago when Google lifted the $100 cap on bidding. Before that you could only bid up to $100 and that kept things somewhat sane although it seems unsane to say that a click that costs you $100 is reasonable. That click could be a bot, a click fraud scammer, a competitor, or just someone who is curious because your ad was written in a way that doesn't discourage idle passers-by. Ka-ching.

The thing that got me started on this hopefully coherent rant, is the realization that while an expensive click may be worth it to the advertiser, the cost to provide that click is very small. We're talking tiny folks. How small? Well, without access to financial data I have to guess, but I would say it makes the soda pop industry look like one with massive overhead.

It's not "fair" because one player selling Yak Butter will be able to pay a fairly small amount of money to reach their customers, while others selling cars, homes, and other high price items have to pay a much higher percentage of their profits to maintain sales levels. Of course, the advertisers COULD band together, declare a periodic "Bid Reset Day" where all bidding is set back to some low level and people can start out-bidding each other again while saving money during the process. Or they could just agree to not bid more than a certain amount and let CTR, Quality Score, and other factors determine whose ads should be ranked higher. But of course people will cheat and raise their bids and not tell anyone.

So I don't have an answer for that. I do have an answer for the problem of click fraud and that is to offer a system when people can "bid" for exposure. You pay a certain amount and your ads are shown for a certain amount of time. If the ads work for you, you may have to bid higher to continue. If they don't work, you lower your bid or stop advertising on that loser site. This is nothing new as a concept but large search companies don't like it because it benefits the advertiser and not them. Why should they put your ad on a site and let you get 100 clicks for $30 when they can give you those 100 clicks for $300 or more?

Look, someone one told me that when I sell a domain name, I should not take into consideration what that person can "afford" to pay. The price should be the price without that consideration. When you sell something for thousands of percentage points over what it costs to produce, is that price gouging or just a nice business to have...?

I just think it's a shame that some of that bloated profit could not be kept in the hands of the advertisers, that's all. Wouldn't that benefit the economy more than going into Google's pockets or those of it's shareholders? I guess it's a matter of your point of view.