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Is google guilty of price fixing?

February 4th, 2007

We have been running a campaign on Google AdWords, and I was recently looking at the numbers: It turned out each click through was costing us $5 – $7 and about 1/10-20 of the click through was resulting in people registering on the site. Which made our cost of acquiring that registration about $50-$150. That seemed crazy to me or it caught my attention anyway.

So I began asking our SEO specialists: Were the keywords we had chosen to blame, thats what google said anyway. If you didn’t bid more than $5 on them, then the keyword did not become active. So I began choosing obscure keywords, keywords for which searches on google did not display any ads. And google took several of those keywords and said $0.10 is too low, it should be atleast $0.50 or $0.25. Why should that be the case if it’s purely a bid system?

After asking around it seems how the google ad system works is a mystery. And part of their revenue growth comes from this mystery, because no one can challenge whether they are doing any manipulation or price fixing. Given that they are getting to the size of a monopoly one would think someone will go and check that they are not just ripping us off?

Accidentally I also read  in business week or fortune an article which said that several small retailers don’t find google profitable any more. Although Google spokesperson said that they were not experiencing this in a broad way. I decided to explore this further and went to adbrite.com and registered the keywords there at $0.10 cpc. The keywords got the same number of hits per day as they get at google and slightly better conversion rate.

Raises several questions: is google artificially raising bids? is it really the right option?

Entry Filed under: Kitchen Sink