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Conflict of Interest

Written on
Apr 9, 2008 
Author
DM Confidential  |
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Conflict of Interest

doubleclick_google_small.jpgADOTAS — When Google purchased DoubleClick, no one really believed the deal wouldn’t go through, but had you listened to the noise, which ranged from regulatory scrutiny to legal action by its competitors, it seemed anything but certain. We will only know, in a couple years from now, whether the deal did more harm than good by allowing for increased market concentration. Regardless of your view on the Google DoubleClick deal on the issue of diminishing the competitiveness of the landscape, it made incredible strategic sense. The two companies have exactly opposite core competencies and thus incredibly complementary business units — search versus display, clicks versus CPM, actionable versus branding, and so on. In other words, Google and DoubleClick revolved around Internet advertising domination; outside of googleopoly concerns there wasn’t much made of the deal. As those who follow the online advertising space relatively closely know, DoubleClick, through the course of its operations acquired a company called Performics. Its focus was not on display but search, specifically, acting as the company of record for placing search buys for their clients.  If it did its job well, then their clients would have high rankings on relevant keywords at the lowest possible cost.

As Tom Phillips, Director, DoubleClick Integration explains yesterday, Google does “not want to be in the search engine marketing business. Maintaining objectivity in both search and advertising is paramount to Google’s mission and core to the trust we ask from our users.” This has nothing to do with their Don’t Be Evil attitude and more to do with playing the moral high ground. Performics was a tiny piece to the DoubleClick business, something that helped round out the picture to the DoubleClick puzzle but not something that qualified as essential by any stretch. As a result, the company looks to sell off that particular unit. In that same post addressing the potential sale, Phillips also discussed the other half of the Performics piece, their affiliate business, which Google intends to keep.

Google and affiliate marketing go about as well together as oil and vinegar, like putting a round peg in a square hole. That’s because we tend to approach the two from the perspective of the affiliate trying to use Google for traffic. Google has no problems with affiliates running their offers, and if I had to guess, I’d say their affiliate business does more than anyone outside of the inner sanctum would imagine. Strengthening their affiliate business means increasing their hold on third-party inventory and an obvious channel for growth. Naturally, it’s too bad that by affiliate marketing, the company doesn’t mean helping affiliates who want to do search.

That Google will look to sell Performics doesn’t clear up the conflict of interest issue. Frequent users of Google will notice the varying number of house ads that Google runs, especially in Gmail. They usually promote Google products and/or employment. The house ads will look to get advertisers to run AdWords, publishers for AdSense, and let you know what positions and where Google is hiring among other things. By using their own inventory to promote their services, Google already begins to walk a slippery slope. Each ad unit that promotes a Google product represents an ad unit that doesn’t go to a paying customer. The company certainly accounts for those clicks, where hypothetically they might assign them a value and charging the clicks back to a particular division’s marketing budget. We don’t know, but I would wager that the internal advertisements probably don’t have an issue with Quality Score, and no matter how fair they might try to make it seem, do you really think that someone inside Google is using AdWords editor or their web interfaces and managing these internal campaigns? Maybe the management of the internal campaigns is what they give to certain employees to learn the system. Who knows. The real issue is one of precedence, that once you start, how do determine what constitutes gray from black or white. If I’m running an ad with Google to promote an AdSense competitor, how do I know that I’m getting fair representation. There’s nothing that states Google has to or that they couldn’t always make sure their ads appear higher. Google should either hand those campaigns over to an outside firm or not at all.

The internal campaigns do raise the issue of conflict of interest, but most people can overlook it because of the relatively small percentage of ads at stake. How much volume is there really, and how many people do they potentially hurt? It feels low enough so people don’t complain. What happens, though, if Google had other ads, if they had another product, one that wasn’t limited to a narrow set of keywords. What if they more actively promoted their eBay competitor, Google Base? That puts them in direct competition with one of the big spenders. What if they did this in comparison shopping, or travel? What if they purchased one of their largest advertisers in one of their largest categories? What would that mean for all the others buying and the integrity of the system? That’s the situation that we could see, unbelievably enough. Rumors have surfaced that Google might buy Expedia. Unlike Google DoubleClick, Google Expedia has none of the elegance. It would make incredible sense for Google to own its largest advertiser just like advertisers often purchase some of their publishers. It’s just not often the opposite happens. If it does, it’s scary. Were it any other company considering that, the competitors to the advertiser being purchased would flee, but when that publisher owns a majority of the market, if they run, they might not fly again. And, again, while not necessarily illegal, it’s a slippery slope for us all.

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DM Confidential

www.dmconfidential.com 

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