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The Ripple Effect: Did Google’s Bid Manipulation Impact Inflation?

I’ll begin by saying I’m no economist. I’m a pragmatist. One plus one has always equaled two in my mind. That’s why I’m left with many more questions than answers after Jerry Dischler’s damning statements this week admitting search bid manipulation in the federal antitrust suit against Google.

Dischler, VP of Google’s advertising products, gave testimony that acknowledged sworn statements he made in 2020 indicating auctions were frequently changed which led to 5% increases for a typical advertiser. In sum, this admission revealed that reserve pricing was manipulated in an effort they called “shaking the cushions” to ensure Google’s revenue targets were met. It was also noted that it was “possible” for those changes to result in a 10% increase. And to what end? To meet Wall Street’s expectations.

Never mind the antitrust allegations. Let’s look at this from the standpoint of a retail advertiser and their agency:

  • Google’s total revenue in 2022 was $279.8 billion.
  • 60% of Google’s revenue comes from search advertising. That’s roughly $167.9 billion.
  • Roughly 45% of their revenue share comes from the US. That’s roughly $75.55 billion.
  • 35% of Google’s US search revenue comes from retailers. That’s $26.44 billion.
  • Increasing bids by 5% means that of this $26.44 billion, $1.26 billion additional funds were likely spent by US retailers in 2022 alone in a non-transparent effort to prop up Google’s stock price (Alphabet).

Let that last point sink in a bit. The sad truth is that this simply reveals what a large contingency in the ad industry has often assumed. Google looks out for Google at all costs.   

Taking this a step further, this case doesn’t even begin to delve into practices surrounding other ad products such as DV360, AdX, or any of the other margin-capturing tools at their disposal.

If retailers are the point of sale for most manufacturers, consider these questions. If advertising costs increased between 5 and 10% for both retailers and manufacturers, how long has this been going on, and what’s the real cost of this manipulation? Not just to the advertisers, but more importantly to the end consumer who ultimately bears the burden of increased pricing.

Once more, this doesn’t consider every other industry! We’re just looking at retail and manufacturing.

Ask yourself this. Did Google’s bid manipulation impact the rampant inflation and higher cost of living we’ve seen over the past several years? I think it’s clear the answer is yes. An economist may say the impact is negligible, but the pragmatist in me believes that the ripple effect is likely a drop in the ocean that eventually led to a building swell.

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