Google and paid links - why Google is wrong

I wrote recently that, at least in my informed opinion, Google has become a monopoly. I base a lot of my editorial opinions in this post on the information I provided in that article. You can read it here:

Google has become a monopoly

Google's Stance
From Google's point of view, paying for links to gain Pagerank skews their ranking system, which as we all know is based in part on backlinks. The greater the rank of the page with the backlink, the more rank "juice" is passed on. Google has stated often that they want to return the most relevant results to their users, and I believe them, at least partially. If Google truly believed in that philosophy 100%, then they would return results without any advertising (ie - Google Adwords). Then, Google's stated goals of returning the most natural results would truly be achieved.

A Challenge To Google
I'm challenging Google to give users the options of turning off all advertising through their networks. This would mean that Google would have to put its money where its mouth is and truly give users the ability to have a completely 100% organic search experience. Not only that, but it would require users wanting to turn off advertising to sign up for a Google account. Those users that chose to do so could also give permission to Google to track their browsing behaviors.

This would give Google one more important variable to use in its ranking algorithm. That variable probably wouldn't play much of a part in the whole process, at least in the short term. In the long term, however, this could become an important metric in choosing which sites have the most authority simply by the traffic they have, how long visitors stay on a site, and what sites are clicked on the most when certain keywords are entered by the user.

For the privacy folks: this would be an entirely opt-in system, but I believe Google has the smarts to give users enough incentive to opt-in to the program.

As a positive for Google, they could use the new variable to decrease the value of all links, and implement user behavior as part of the Pagerank algorithm. For example if a website is visited a lot, but the bounce rate is 95%, then Google knows that the users are not finding what they're looking for. They can then track that back to the keyword and lower that sites' SERP for the keyword.

While this wouldn't entirely remove the paid link black market, it would devalue links enough that it would become far less cost effective to simply buy your way to a high Pagerank because part of the PR algorithm would be the actual effectiveness of the website. If users have a good experience and browse a certain website for 20 minutes, return to it often, and visit many of its pages, then the Pagerank would no longer be entirely based on the "backrub" system.

I know that there are a lot of holes in my proposition, but Google is staffed by hundreds of the smartest people in the world. I'm sure they could figure out a way to make it work.

Leveling the Playing Field
I've read many times that Google aims to "level the playing field" for websites, meaning that even the little mom and pop shop's website could compete with the "big boys" (large corporations) for business on the web. The idea is grand and noble and just, but it's a utopia that will never be reached, for several reasons:

• Large companies can spend hundreds of thousands or millions of dollars on a website that has a pile of pages (whether useful or not), includes cool gimmicks such as mini Flash games, and has tens of thousands of their own dealers' websites linking back to them.
• The big boys can drop a six figure budget into a Google Adwords campaign and get instant top page placement. This point by itself shows that the Google mantra of "leveling the playing field" is one that died about the same time as the Y2K scare.
• Smaller companies, for the most part, don't have the technical savvy or budget to create, manage, grow, and optimize their websites. I'm not saying that those websites aren't valuable to the companies that own them, just that there are very few ways to compete on the web.
• Smaller companies get suffocated out by the big boys when running Adwords campaigns. It's not hard for a larger company to push up their bids when a smaller player comes on the scene. It's not hard for the big boys to simply wait out the smaller company's budget and time frame. Speaking from experience, there are some nasty things happening in the background of the entire Adwords system. I've run Adwords campaigns with varying degrees of success, but I stopped recommending them to my clients 6 months ago. I can't prove it but some of the larger advertisers have systems in place to click through the smaller guys' entire budget every day. For example, I was running ads in a competitive market with a budget of $200 per day. I went an entire month with about 2,500 clicks without a single conversion. The exact same group of landing pages, when users found them organically, had a 1-2% conversion rate. Cheating is rampant in the system - I can't prove it, but I know it's happening.
• Since Google uses domain age as part of the algorithm, established small businesses that may have a 50 year real-world track record of great service and stable operations start their website with an almost certain chance of short term failure.

Why Paid Links Help Actually Help Level the Playing Field
Faced with the notion of spending scarce advertising dollars on a website that will take years to show a return, a small business owner can take 2 or 3 hundred dollars and instantly level the playing field. With even a small link-buying budget, a business owner can purchase links that get their website ranked for local keywords. For most businesses, this is where they want to be - ranked on the first page for keywords using their local area name is part of the keyword.

For example, a piano tuner in Anchorage, Alaska might want to be ranked in the top ten for the keyword "Anchorage piano tuning". Even with a great on-page optimization plan, without the backlinks the website will probably take a long time to become ranked in the top ten. A couple hundred of dollars in link sales, and the website is ranked.

Google should recognize that their system is often what holds the little guy back when trying to develop a successful online presence. Purchasing links helps the little guy fight the inherent problems with the system. In addition, it actually provides MORE useful results for users. Using the example from above, if 6 or 7 of the top positions for "Anchorage piano tuning" are for national distributors, yellowpage/directory junk sites, or Wikipedia entries about pianos, then the user is not getting relevant results returned to them. Were the small business owner to purchase a sufficient amount of link "juice" to get into the first page of results, it provides one more relevant result. And that brings me to my last point:

Paid Links Actually Make the Index MORE Relevant
Let's say I start a website selling kitty litter at discount prices, and want to optimize for the keyword "cheap kitty litter". Purchasing links that increased the site's Pagerank and SERP values would provide the user with an excellent result that is nearly 100% relevant to the phrase they were searching on. Very few sites that purchase links for Pagerank and to increase their SERPs are optimizing on keywords that aren't relevant to their sites. And why should they? It becomes a huge waste of time, money, and energy to buy links that drive non-targeted traffic to their site. If the site is relevant to the keywords being optimized, then Google is getting half of their job done for them.

Google Is Shooting Itself In the Foot
The simple fact is that Google has created a system that encourages buying links for Pagerank, and now they want to stop those small businesses that buy or sell links.

Again, I'll make the challenge to Google - if they truly believe that purchasing links to get ranked above other sites is against the rules, then they should put their money where their mouth is and allow users to opt out of viewing all the advertising Google throws at them. After all, an Adwords ad is simply a paid link that the website owner spent money on to get pushed above other websites on the results page. The lines between the two methods are pretty blurry, and a judge in an anti-trust battle may see it for what it is: Google using brutal monopolistic powers to break up competitors' ability to make money.

Should the political environment change in the U.S. over the next 24 months, Google could be in real trouble, and putting a stop to link buying/selling could be the oven that cooks Google's goose in an anti-trust action. It's a blatant use of a monopoly to remove smaller businesses from the online advertising equation.

Google is the largest seller of links on the internet, and now is discouraging other websites from doing the same thing. Ain't it ironic?

I think Google can officially be termed a monopoly

Wikipedia describes a monopoly as:

"a persistent situation where there is only one provider of a product or service in a particular market. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods."

I've bolded the part to highlight where Google has reached monopolistic conditions. While there are minor sideline players in the Search Engine game, Google has more search volume than all of it's competitors combined. According to HitWise.com, in March 2007, Google accounted for 64% of all U.S. searches, and I've read more recent (yet hazier) reports of Google nearing 70% of all searches.

Before the Google-worshipers start falling all over themselves with excuses like

• "but, but, Google has the best results!" and
  
• "Google can't help it that they're better than the others"
• and my favorite from the pro-corporatists: "Google has won the search engine battle because we let true market forces play out!!!" (usually with a stamp of their little jack boot on the ground)
  

Let's delve into the economics of online advertising. According to the blog SearchEngineWatch, online ad revenues reached a high of $4.8 billion in the final quarter of 2006. Google's own revenues in quarter 4 of 2006? $3.2 billion dollars. Read their own investor relations page to see the details. Their own information shows that "Google owned sites generated revenues of $1.98 billion dollars". In addition, the data shows that Google made $1.2 billion in AdSense revenue in quarter 4 of 2006. That's a total of $3.18 billion dollars on online advertising revenues

Calculating from the data from Google's own investor relations page, we can see that Google's share of the internet pie in quarter 4 of 2006 was about 66% ($3.18 billion / $4.8 billion). Even if we are to assume the $4.8 billion dollar figure is low, and that Google didn't make a full $3.18 billion in actual advertising revenue (financial reports are notoriously difficult to read for the layman - me), it's not hard to see that Google made more than half of all online advertising revenues in the fourth quarter of 2006. It's almost certain that that number has grown since Q4 of 2006.

So what does this all mean? Given the current political climate with a pro-business Presidential administration and the giddiness of Wall Street over Google's performance, maybe not much. But there are several factors that could change the outlook over the next 12-24 months:

1. Google's crackdown on paid links. Sure, its Google's search engine, and they can pick and choose which criteria they use for rankings. But, when a company in a monopolistic position begins to perform actions that reduce revenues for smaller companies and increase their own, then a problem exists that only tighter regulation can fix. Will Google's monopoly be busted simply because of the paid link crackdown? No. Does it shine a spotlight on some of Google's vulture-like business practices? Yes.
2. A possible change in national U.S. politics. It's appears likely that a Democrat will take the Presidency in 2008. That in and of itself won't provide a challenge to Google's monopoly, especially if a corporate-friendly Democratic candidate like Hillary Clinton or Barack Obama wins. But, if the anticipated increases in Congressional majorities for the Democrats continues its trend in 2008, there could be a similar increase in backers of Justice Department investigations into companies like Google and Microsoft that operate under obvious monopolistic conditions.
3. A sharp increase in percentage of online ad revenues. Yahoo's "Publisher" program according to even the most ardent Yahoo supporters, has not exactly lit the world on fire. It suffers from a multitude of problems; unrelated ads appearing on pages; a selection process for testing that left a LOT to be desired; a lack of strong advertisers to push the program out of beta and into a real-world advertising environment. The trends show that both Yahoo and MSN are losing ground to Google. And while that may not be Google's fault (both Yahoo and MSN have been absolutely awful at playing the online advertising game), what it does mean is that Google has an even larger stranglehold on the market and gains even more monopolistic power with every passing month.
4. A strong backlash from webmasters. Google's original creed was that every website, whether owned by General Electric or John Q. Public would be on an equal footing on the web. That's no longer the case - large companies can afford to pay large sums in the AdWords program to grow their online businesses. This has been an issue for quite a while, but it has come to a head with the crackdown on paid links. Webmasters, desperate to monetize their sites, started selling links based on their own Pagerank. With all of Google's progressive thinking, how did they not foresee this happening? What happens if there IS a large scale revolt? It might not hurt Google's bottom line, but bad press can hurt just as much as revenue drops, especially if investors get jittery about an online revolt against Google. A 25% drop in the price of Google stock would force a lot of folks outside the online community to take a look at what Google does.

My next post will be focused on Google's paid-link crackdown, and why it's wrong for the internet, wrong for Google, and bad for business in the long run. It will refer to this post a lot because the two issues may end up being intertwined. I decided to focus on Google's monopolistic position first, then use that as a catapult for my post on the whole paid-link semi-scandal.

Just to note: I have no inside information. I'm not talking to Justice Department officially or unofficially. I don't have some deep-throat feeding me information about what may or may not occur with a possible Google investigation. I do, though, have a brain, and the ability to Google all the information I need to at least make a semi-informed decision (ironic, ain't it?)

PS: no Googlebirds were hurt in the writing of this post, but at least one birdie has been fluttering around with questions.

Signed,
The Google Watchdog