Law professor slates Google's house ads

A law professor has slated Google, claiming the company has created a “conflict of interest” with the adverts it places for its own services using its Adwords auction system.

In a blog Law post, which he claims took him seven months to write, Eric Goldman  said: “Many publishers run ‘house ads’ to self-promote their own offerings – Google does too.

“However, Google differs from most publishers because it auctions ad space on its network. Thus, when Google runs house ads, it simultaneously conducts the auction that it is bidding in — an impermissible conflict of interest. I think Google house ads undercut the auction integrity.”

House ads are run by publishers to advertise other products from the same company. However, because Adwords is effectively an auction in which the highest bidder benefits from priority placement, if Google places adverts through that system it is bidding in an auction that it is actually running.

Mr Goldman said that when the company runs the house ads it “simultaneously conducts the auction that it is bidding in”, which he claims is an impermissible conflict of interest.

He said that Google told him that house adverts “are subject to internal marketing budgets,” however he said that rival bidders are unfairly disadvantaged because they don’t have the same access to data as Google.

He said he had seen Google house ad campaigns in at least three circumstances. Firstly, he said, occasionally Google uses AdWords ads to explain problematic organic search results. Two prominent examples are the search results for “Jew,” which regularly displays an anti-Semitic organisation as a top organic result, and “Michelle Obama,” which last year displayed an offensive image as a top organic result. “In these situations, Google runs an AdWords ad that links to an explanation of its search algorithms,” he said.

He also claimed that Google promotes its own services to increase their visibility. He gave an example of when he approached the company earlier this year whilst preparing the post about its usage of house ads.

“A Google spokesperson informed me that Google has “run search marketing campaigns on Google for search products like iGoogle, Google Maps, and mobile products as well as for specific issues in order to provide information to our users.” Barry Schwartz recently gave an example of an image house ad promoting image ads. The latter point may include defensive keyword purchases, such as when it displayed ads for some of the search terms it highlighted in Google’s Super Bowl commercial,” he added.

Goldman also suggested that in some cases, Google’s house ads appear in ad spots unavailable to other advertisers, such as its promotion of Nexus One on its home page. They also appear as “type of public service announcement, Google runs house ads in AdWords during crises to promote a crisis response page—mostly recently, in response to the BP oil spill.

“In theory, the scarcity of marketing budgets forces Google departments running house ads to internalise the opportunity cost, even if no cash changes hands,” Goldman said. “Google’s behaviour lacks any auditability or verifiability; as outsiders, we have no idea what Google is doing under the hood”

Although Google wouldn’t speak to us directly it did send Professor Goldman this response: “As we’ve always said, all search engines run ads to inform users about services that they provide. Google is no exception to this practice. We believe in the value of our advertising platform and use it in the same way that other advertisers do.”