Auctioneers generally aren't allowed to bid in their own auctions; why should Google be any different?
That's what Santa Clara University professor of law Eric Goldman is wondering, publishing an essay Wednesday on his personal blog and Search Engine Land calling on Google to stop bidding in AdWords auctions to run "house ads" that promote Google products. Google's involvement in the process distorts the value of search ads for other advertisers trying to bid on the same keywords and makes it impossible to know whether Google is playing fair, Goldman wrote.
"Thus, when Google runs house ads, it simultaneously conducts the auction that it is bidding in--an impermissible conflict of interest," Goldman wrote.
Google will occasionally run AdWords ads promoting its own products or services--house ads--alongside search results. It will also buy ads to promote charities or public service announcements, or to explain weird or offensive search results, such as it did last year with.
The placement of search ads is determined by a combination of two factors: the price the advertiser is willing to pay per click and the quality of its ad. Goldman argues that Google has too much knowledge about quality scores and prices that advertisers are willing to pay to fairly participate in the same process as advertisers who naturally lack similar access.
Google told Goldman that individual departments that want to run house ads have to bid just like anybody else without special knowledge, and that they have to use their marketing budgets to pay for those ads. While that may be true, their mere presence in the auction is a conflict of interest that can't be ignored, he argued.
Goldman wants Google to use unique ad units to promote its own wares, such as it has done in the past with Chrome and Nexus One ads on its home page, or at least prevent other advertisers from bidding on terms that it wants to use for house ads. It's an interesting read, and is recommended in its entirety.