Google AdWords plus Google Analytics: Market Manipulation and Possibility of Mischief ?

montereyEricB’s recent post on his excellent blog Inside Analytics was on the topic of Analytics and Results. It covered two things (Eric correct me if I misstate anything):

1) Concern in the blogosphere and elsewhere around potential for misuse by Google of data they have from AdWords and Google Analytics and

2) Need for defining a new industry standard for measuring “conversions” or “actions”.

I started to write a comment on his post around the first point but it got so long that I thought it might be better off as a blog post.

Context and "Back Story":

There seems to be some concern in the industry, newspapers and blogs around the potential for “mischief” by Google if you do Pay Per Click (PPC) campaigns as well as use Google Analytics to report on that data. The core premise being that since Google will have access to both your ad spend and return on that ad spend (hence value) they can manipulate the market to make more money (because they know how much you  are making from that 50 cent ad click). Or variations of this theme.

Exploring an Alternative Point of View:

The concern is coming from different quarters, from Google’s current competitors, from Google’s perceived future competitors, from general folks who seem to be genuinely worried. 

If Google wants to be profitable and they have access to your spend and, say for ecommerce,“order size”, it is a simple small step to go manipulate market / customers to make even more revenue from Search Engine Marketing (SEM) campaigns. Is it genuine? Are there any flaws in the thinking behind the opinions?

There are some significantly smarter people talking up these concerns surrounding Google AdWords and Google Analytics, but I am a bit mystified that some obvious points have been overlooked. At the expense of sounding naive here are three thoughts for you to critique (in no apparent order):

1) The mountain is very high (and is it really worth it?) :

Most of you who read this blog, and I, actually work with Analytics tools and I think we can safely say that this is a non-trivial challenge to overcome even when we use dedicated analytics tools and just for one company. Think integration of WebTrends and Omniture and ClickTracks etc with our PPC data and getting even half decent insights fast enough. It is really complicated, no matter how you look at it.

If we can't even do it well for one company, ours, for Google to do it for the rest of the world and all the different business models and acquisition strategies is a non-trivial challenge.  Even though there are examples of extremely efficient arbitrage, specifically in the foreign currency markets, I am skeptical that it is “easy” for Google to find "insights" and do so in a timely manner to over charge us and do so while balancing that against real ROI Google would get for itself.

Now I'll admit that if Google's new mantra is "Only Do Evil", they most definitely have the brightest collection of people to actually pull this off. But with all the eyes and hard core scrutiny on Google how would this story look on the front page of New York Times, and what would be the impact on the company’s future?

2) Single acquisition channel vs a world of many :

All the concerns raised assume that Google is going to be the only acquisition strategy option for all companies out there. This is far from certain. PPC is important but for most Fortune 1000 companies it is hardly all their spending.  In as much PPC competes against all other acquisition strategies that we have at our disposal (direct marketing, email, affiliates, SEO, bill boards, crazy tv ads etc etc).

If I run a business and suddenly I see that Google PPC is not as cost effective for me as an acquisition channel,  we will pour money into other channels that get us better ROI. 

The Internet is beautiful and in the past switching acquisition strategies was complex, expensive and hard to pull quickly, now it takes me 10 minutes to switch strategies (don’t ya love the web!).

3) “Efficient Markets” and helping oneself vs customers :

I believe in efficient markets and the power of markets to constantly find optimal ways for companies to reach customers.

Google is not a monopoly, it is not the only option out there, there are larger companies out there trying to compete with Google (though some are in a process of getting their act together :) and Google will have to compete with all of them to be a part of my acquisition strategy.

If they change their mantra to Only Do Evil and they mobilize 5,000 PhD's to build artificial intelligence algorithms to mine my goal page data in Google Analytics to charge me more via AdWords , I'll simply shift to Yahoo! or MSN or a company that I don't know about today but is sure to come along.

Google is not omnipresent and it can't rest on its laurels or bank its existence on a strategy to "rip off" its customers (us). To stay in business for a long time (and at $380 per share for stock) they are going to have to compete for my marketing dollars with all other options I have. For that to happen their strategy will not be "how to make the most amount of money From Avinash" but rather “how to make the most amount of money For Avinash at the lowest cost for him". That will separate them from competitors, that is the difference, for any company, between a short-term strategy and a long term strategy.

A metaphor:

I recently gave a speech at Google at the nice Googleplex in Mountain View in Building 40. The reason I am being specific about it is because I spent almost four and half years working in those exact buildings when they were owned by SGI (Silicon Graphics Inc). 

When I joined SGI nine odd years ago there was a Business Week front page cover titled “coolest technology company on earth” (I am paraphrasing). Today SGI is almost bankrupt (and it truly breaks my heart because I loved that company).

As I walked in B40 for my Google speech it struck me that there could be a story in Business Week today with the exact same title and it would rightly apply to Google and they are in the exact same building.


If Google wants to avoid the fate of SGI (and it took SGI less than three years to go from the “coolest company” magazine cover to start layoffs), it has got to constantly keep innovating, stay relevant, fight in a dog eat dog world and most importantly maintain 1) a persistent focus on having the best damn customer experience for all that Google offers, search and beyond, and 2) be the best, and most competitive ROI, customer acquisition channel for companies.

The fastest way to a SGI like fate is to do the kinds of things the GA + AdWords concerns suggest, and I think Google is smarter than that.

Small but important point: 

Does this mean you should use Google Analytics? That you should link GA with AdWords? Or that you should not? All these are questions that you'll answer for yourself and do what makes best sense for your individual company.

Full Disclosure :

  • I think Google is a very innovative company and I have a favorable opinion of the company
  • I know three people who work at Google, I think they are nice (this could cloud my judgment)
  • I have given a speech at Google and they gave me a free drink (Odwalla Mango Tango)
  • I have absolutely positively no insights into Google’s strategy and I have no inside information into Google Analytics or AdWords

So what do you think? Is this a very naive view of the world? Do you think Google can “crush” all competition and become the “king of the world” forever? Is there something obvious that I should have considered that I am missing? Please share your feedback via comments (and I have a thick skin so please be as brutal as you have to be).

(Eric I am sure you’ll agree this was a really long comment on your post! Thanks for posting something that stretched the brain. : )).

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PS: Hello from the beautiful and historic Hotel Del Coronado in Coronado, California. Stock photo below.

Del_coronado

Comments

  1. 1

    Avinash,

    Thanks for offering some logical thought to this issue. I wanted to comment based on the exposure I've had to the Google Analytics team.

    I am a Google Analytics Authorized Consultant. As such I have had the opportunity to go to the Googleplex and work with the team that develops and supports Google Analytics. We learn about the product and make suggestions on how it can be improved.

    Every time we go to the Googleplex we always discuss data privacy and security. Google is adamant that user data is secured and inaccessible to employees and systems. They have never explained the exact security measures they have in place but I have no reason to doubt them.

    In my opinion there comes a point where Google can't do any more to calm people's fears. People will always speculate about conspiracies, it's what we do and it's fun to let the imagination run wild!

    BTW, I don't think this issue is dissuading people from using GA. We're seeing strong demand for GA and Web Analytics services.

    Just my $.02.

    Justin

  2. 2

    I would be interested in your perspective on industry standards for measuring conversion. It seems like there are several studies done across several industries, but with little common definitions of a "conversion"

  3. 3
    Jacques Warren says:

    Avinash,

    Your analysis is quite good. I believe too that Google has no interest in doing what they are rumored to do (or planning to do), even though doing it incognito would bring them a "ton of cash" if they did. Unless someday they officially announced that their model went from PPC to PPC (the latter being "conversion"), i.e. you get only billed for the visits that generated transactions (or however conversion would be defined).

    However, trying to get paid via a "piece of the pie" is not new in the world of business, but has always been a risky proposition, since the party waiting for its share cannot "see the books". GA could of course see the books, but I suspect that would create a lot of friction, needless to say complex (i.e. expensive) payment processes.

    So, even though we will all have to wait and see, I believe your position is most probably the correct one.

  4. 4

    This was an excellent post! The Google Analytics + AdWords "threat" has been in the back of my mind for some time – and you addressed it really well.

    I'm not worried Google is going to use the data it collects from AdWords and GA to profit because, as you, I pull data for large sites and I know how difficult it is to get insight from that data.

    People give Google a lot of extra slack – benefit of the doubt – because they are Google – but Google has earned that slack and they'd lose more than they'd gain by merging your web analytics and adsense data into one report they use to make money for themselves.

  5. 5

    Hershel: Your question is quite complex. But here is a standard definition for Conversion Rate:

    "Outcomes divided by Unique Visitors during a particular time period."

    (Lots of context and details at:
    http://www.kaushik.net/avinash/2006/07/excellent-analytics-tip5-conversion-rate-basics-best-practices.html)

    Beyond the definition there are two other challenges 1) Defining what the outcome is for your site (straight forward for ecommerce, orders, but not for others and 2) Please see below the note on "conversion value".

    Jacques: If media reports are to be trusted then Google is prototyping CPA, Cost Per Acquisition, (what you called "pay per conversion"). It might become a standard offering from them soon.

    But CPA is not a magic pill, if anything bidding via CPA is a bit more complex (though as you point out correctly it makes a lot of sense and is standard in other channels).

    The challenge for each business is that due to differing business models how to estimate the true value (say profit or margin) for each "conversion" and then bid optimally for each key phrase.

    Thanks so much guys for sharing your comments, they are very welcome.

  6. 6
    Jim Newsome says:

    This is a great post Avinash, the availability of alternative PPC marketplaces to Google's is key to why any abuse of the AdWords system would simply drive customers away – an open, informed marketplace should quickly expose and respond to such manipulation. If the cost of an AdWords campaign gets too high then as analysts we should spot it. You're also correct to point out that the resources required to manipulate AdWords CPC's and walk the fine line between positive and negative ROI would be just too much.

    I'd also like to support Justin's comments, (Disclosure: I am also a GA Authorised Consultant, although based in the UK). In a recent e-consultancy.com interview the European Head of Web Analytics at Google was quoted as saying "we will never artificially adjust bid prices" and along with the data privacy and security issues, this is something we hear repeated from the Google team constantly.

    To quote a response on our own blog that echoes your comments:

    "If you're getting great ROI from a cheap keyword, then this is *exactly* what Google Analytics is designed to show – Google are more likely to make a Case Study out of the situation than try and screw a few more pence out of it." http://www.ga-experts.co.uk/blog

    Jim

  7. 7
    Peter Cohen says:

    I would fall in the “Avinash is being naive” camp, just a little bit. Your post is very thoughtful and presents a great perspective with a personal story. But time and again companies with positions like Google have “abused” their market power and there is no reason to give Google a blank chq. So while I think you have added some good points to the conversation let’s wait and watch.

  8. 8
    EricB says:

    Hi Avinash, thanks for following up on (and extending!) this thread. I can definitely appreciate that the difficulties of solving this very complex problem means it's not happening anytime soon.

    But I do believe we need to be both cautious and deliberate when it comes to any powerful entity (Google in this case).

    A cautious approach will allow us to keep our eyes open to shifts in business practice that might cross over some proverbial "line" that no longer feels appropriate.

    And a deliberate approach will force us to help define the standards we use to help our colleagues / customers succeed in this industry, as you (and Eric P and others) have done so well with your thoughtful discussions.

    Again, thanks for the great post(s)!

  9. 9

    I hadn't even thought that Google might try and get a bigger piece of each advertisers' pie with this information by trying to figure out how much people make with adwords. If they were, you are right in many respects:

    a) They'd have to be trying to be evil.
    b) They'd have to be clairvoyant. It's more than just a non-trivial task. Without knowing production and supply costs, etc., G analytics inforation does not provide the all important net profit numbers.

    I think what is more important is how Google can fairly easily put togther how much traffic every site is getting from every other site in the world. There is a lkot more information they can figure out that may help them with trending Internet usage etc.

    Anything else, imho, is just paranoid.

  10. 10

    Hi Avinash,

    Interesting post, happy to see it was initiated by Eric Butler ;-)

    I wanted to comment on point 2: Single acquisition channel vs a world of many. I don't believe that Adwords will ever be a single acquisition channel actually as this statement reminded me of a case study done on Yahoo in 2005 about using banners to leverage SEM results for a financial company. Best results are found within a marketing mix.

    The guy who wrote that has a blog called "PardonmyFrench" (probably the main reason why I remembered ;-)) and as I was surfing to find the document in question, I stumbled upon his – Eric Frenchman's – latest post regarding the fact that Disney is fingerprinting it's visitors. We're not only talking about online issues, there are other actors out there holding quite some information about us customers.

    The issue for me does not lie in the fact that Google can or can not match the data. Theoretically, we all know it's possible and technologically, it's just a matter of having enough horse power. IMHO, the issue lies within what is actually allowed on a legal basis and thus the privacy policies and to which extent these are actually acceptable and respected.

    As you say, the IPO brings in money but also comes with responsibility, to make more money in order to keep the investors happy. Ah, Wall Street! Can't live with them, can't shoot them.

    If Google runs out of good ideas to keep up the pace of innovation, isn't there a time when they'll turn to more "creative ideas"? and apparently, it doesn't seem like the privacy policy might stop them.

    On the other hand, I'm no lawyer so I should trust the system, right? having somewhat of a problem with that lately, mainly in the US, where Google's based as well, right?

  11. 11
    Rob says:

    The one thing that nobody seems to be looking at is Page Rank. With log data in hand Google can determine exactly what pages are the most relevant.

    I think this is what is driving this strategy more than any other factor.

  12. 12

    I don't think your view is naive; it is simply an expression of what it would be wisest for Google to do. Realists know that many companies do not take the long-term, wise course; many do choose the short-term, greedy course even though the long-term consequences should be obvious. To know Google's intentions would require knowing if the Master Mind(s) behind the company are more wise or more greedy.

    I believe there is a third possibility: maximize profits at advertisers' expense periodically and pull back before you lose too many.

  13. 13

    Hello Avinash,

    I am joining this conversation a bit late! 2006, wow! : )

    Currently I am reading "Advanced Web Metrics with Google Analytics" by Brian Clifton and I am scanning all the sections that hit Google AdWords because I need to decide on 10 words.

    About your post, the fact that Google Analytics integrates tightly with Google Adwords sounds fine to me. It is a suite of free products that Google offers and it is up to the web analyzer to decide whether to use them or not. I believe in free markets too. However, I have to agree with Rob that "page rank" is critical and Google has the upper hand in that. This is definitely something to consider in the future.

    I have 2 questions regarding AdWords. I have to decide for 10 words in the next 10 days. I have found that most of the terms from our website are two-worded (e.g. photo sharing). Most single words have better relevance that double words (e.g. photo VS photo sharing).

    What is the main difference?

    Also, what about being redundant? Is it worth our while to select "photo sharing" and "photo" to cover both chances?

    Many thanks in advance for your help!

    Cheers,

    Damian

  14. 14

    Hello Avinash, thank you for the tips on finding the right Google Adwords keywords.

    Aloha and mahalo from sunny Honolulu!

    Cheers,

    Damian

Trackbacks

  1. Google AdWords plus Google Analytics: Market Manipulation and Possibility of Mischief ?…

    Avinash Kaushik has one of the best posts on Google Analytics and AdWords that I've read; he cleared up some concerns many are having with allowing Google to collect your Web Analtyics and PPC Advertising. Here's the main reason why……

    http://www.webmetricsguru.com/2006/08/google_adwords_plus_google_ana.html

  2. [...] Too bad for businesses who have limited or no budget to acquire sophisticated tools such as WebTrends, Visual Sciences or Omniture. Businesses who have to rely on Google's engineers while fearing data might be padded or misrepresented by Google to cater to its own interests.

    Unreliable. Misleading data can ruin someone’s confidence in trusting future numbers that are generated by a tool. This borders with consistency, such that if a report shows an average of 0.5 visits per visitor, one would think how could that happen if the minimum page visit of an online visitor is 1.

    Unsupported. I am using Google Analytics to track several websites. Yet once I have problems with the reports, or if I wanted to inquire about being a certified professional, I get a reply usually within two days. Unsupported could probably mean certain features are unavailable and definitely we’re at the mercy of these “free” products to implement them. But as for Google’s consistent upgrades, I can only cross my fingers.

    Inaccurate. It is not good to compare numbers between different web analytics tools. If we use WebTrends in the past and introduce a newbie like Google Analytics or another freebie (Webalizer), stick to WebTrends for traffic trends and Google Analytics for newer metrics. Different tools have different definitions of how they interpret data (Google Analytics, for example, uses a 30-minute span to define a session and changing its settings in the code can affect the numbers).[...]

  3. [...] Google AdWords plus Google Analytics: Market Manipulation and … … blogosphere and elsewhere around potential for misuse by Google of data they have from AdWords … I know three people who work at Google, I think they are nice (this could cloud my judgment) http://www.kaushik.net/avinash/2006/08/google-adwords-plus-google-analytics-market-manipulation-and-possibility-of-mischief.html [...]

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