Uncovering the Dark Side of Google's Price Fixing

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I want you to imagine in your mind's eye, one of

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those old fashioned auctions.

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But there's some variables here.

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The auctioneer, instead of being an impartial third party, is actually

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the person that makes money from anything that you bid on or buy.

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So that's big change.

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Number one, big change.

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Number two, the auctioneer.

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Within the confines of this little dream environment we've built is

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omniscient, is effectively God.

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The auctioneer can see everybody willing to bid on.

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Everything that's available for bid, the auctioneer can see what

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those people are willing to pay.

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Even has permission to increase those bids.

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If the auctioneer thinks that whatever it is he's auctioning is of value

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to that person, and he can see how much money those people are going

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to make on the resale of whatever it is that they're auctioning.

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So he has complete and total.

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Visibility into all the available inventory.

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Everybody who wants that inventory, what those people are willing to

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pay and what they make long term.

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That's Google Ads.

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Google Ads is I.

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A fixed auction.

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Here's where things get crazier.

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Okay?

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So it's supposed to be an auction, and the auction is supposed to be based

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of the competitive landscape, right?

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The number of people bidding, and it's not a direct auction.

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Google in its documentation at one point said that it was based off of the

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Victory Auction Model, which says that the highest bidder wins the bid, but

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pays the second highest bidders price.

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But it's non-linear because you're not just being gauged off of money, which is

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actually brilliant by Google, by the way.

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it's you're being gauged.

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Your auction is a combination of how much you're willing to bid,

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but also how relevant you are, the context of the search, et cetera.

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And that's why the more relevant you are, the higher you'll pay in.

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The less, or the higher, higher you will rank and the list you'll pay, which

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is how we get people to trust our ads.

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All of that aside, because you're in an auction environment, it

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stands to reason that you would be subjected to the organic ecosystem

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that is the economy of that auction.

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So if it's a very competitive auction, you're going to pay more.

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Fine.

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Got it.

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And, and that's the way it works.

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By the way.

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More competitive the more you pay.

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But what if it gets less competitive?

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Doesn't it stand to reason that in a less competitive market, in a less competitive

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auction, you would pay less money?

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No it doesn't.

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Google has something called add rank thresholds.

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Google sets a minimum bid, which is effectively the reserve price that needs

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to be met before an ad can be shown.

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And this is variable across every key phrase, every placement in

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the entire Google ecosystem.

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the ad ranked threshold, if you're trying to buy blue light blocking glasses might

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be different than the ad rank threshold if you're, trying to sell vacation homes.

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What's crazy though is, Ad ranked thresholds are calculated

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dynamically in real time based on a myriad of opaque factors.

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So Google doesn't tell you how they calculate ad rank thresholds,

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but they do give us hints.

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One of the hints, this is exact quote from Google's documentation, the value

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advertisers place on users engagement with their ads, Google admits outright.

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That they're pricing this inventory, not according to the organic ecosystem.

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That would be an auction, which says that there's no competition, there's

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effectively no price, you know, and obviously they'd have to have a

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minimum, but you think that minimum would be ubiquitous across the entire

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network, but no Instead, Google goes, I'm gonna price my inventory based of.

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What I think it's worth to you.

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So no matter whether or not there's an auction here, oh,

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you're a personal injury attorney.

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I happen to know that personal injury attorneys will pay a whole lot for

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this, and I don't care that there's nobody bidding on this in your area.

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I'm gonna charge you a whole boatload of money anyway, which

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is, I think I'm not a law man.

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But isn't that like the literal definition of price fixing?

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why have we not all been together farmer with pitchfork style?

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rewind.

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First of all, you need to know that Google gets to have its cake and eat it too.

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When traffic is competitive, it charges you based off of competition.

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When there's no competition, it charges you based on the value of the traffic,

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and Google's the best ecosystem in the whole wide world in order to

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determine the value of the traffic.

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Here's why this is important, Google is moving from a search-based.

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The crown jewel of Google Ads is moving from search space,

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generative ai, and it's gonna happen no matter what, it's inevitable.

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In those instances, the auction.

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Becomes more blind to us because the likelihood of our ads appearing alongside

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other competitor ads slim significantly with the generative AI results.

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You're going to be given a answer, not a collection of options, which

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means with ads, you're gonna be given an ad, not a collection of options.

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This is the way that Bing's AI driven chat works right now, so it's not conjecture.

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And if that happens, then you don't get to see how competitive the auction is.

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So how do we reverse engineer the integrity of the auction?

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And the answer is you don't.

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You just trust Google and you pay whatever they ask you to pay.

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I'm depressed now.

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You're probably depressed too.

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I'm sorry I did this to you.

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I didn't realize this was gonna go so dark so quickly.

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But those are, that's ad ranked thresholds.

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Go look at Google's documentation on ad ranked thresholds.

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By the way, I include a link in the description of this video.

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It's unbelievable.

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Like just come right out and say it like, yeah, we charge you based on what

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we think this is worth, not based off Imagine any other auction doing that.

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Imagine like the stock market, the commodities like, oh, I know

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that I have an excess of corn and I know nobody wants this corn.

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I also know that you're starving to death and you need what are we doing?

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This isn't capitalism.

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Anyway, that's all I got.

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Like, comment, subscribe.

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I'd love to hear your thoughts in the comments.

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By the way, I'd love to hear, if you think I'm crazy, I'd love to

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hear what you think of these videos.

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Like, do you want more stuff like this?

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Lot of stuff like this.

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Lemme know what you want.

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I'll do it.