Ben Edelman and Deceptive PPC Ads

Ben Edelman does some more search engine research, taking on Google and their ppc advertising network, Google Adwords, and how they profit from deceptive ads. Examples include Charging for software that’s actually free, The “completely free” ringtones that aren’t, Claims an item is “free,” but requires that users complete “offers” to receive the item, and Ads impersonating famous and well-known sites, he also gives users the ability to submit their own and gives the entire list here.

A specific example helps clarify my result. Consider a user who pays $38 to Freedownloadhq.com for a “free” copy of Skype. But Freedownloadhq also received, say, 37 other clicks from 37 other users who left the site without making a purchase. Freedownloadhq therefore computes its valuation per click (its expected gross profit per incoming visitor) to be $1. The other 10 advertisers for “Skype” use a similar business model, yielding similar valuations. They bid against each other, rationally comparing the benefits off high traffic volume (if they bid high to get top placement at Google) against the resulting higher costs (hence lower profits). In equilibrium, simulations report, with 10 bidders and 20% standard deviation in valuations (relative to valuation levels), Google will get 71% of advertisers’ expected gross profit. So of the user’s $38, fully $27 flows to Google. Even if Freedownloadhq’s business includes some marginal costs (e.g. credit card processing fees), Google will still get the same proportion of gross profit. Source: False and Deceptive Pay-Per-Click Ads

Of course that may not be the case, but it is definitely a good example of how much money Google can make from deceptive ads and as he said, lots of advertisers push the limits ethically and legally. Interesting reading.

Here is the one I submitted for this search windows xp,

Ad Title: Free Windows XP Pro
Ad Body: Get the Latest Windows XP Pro Free. Guaranteed Free for a Limited Time!
Ad Display URL: www.EveryFreeGift.com/WindowsXP
Ad was observed in position 8 when searching at Google for keyword windows xp on 10/9/2006
Ad characteristics: Makes a claim that is objectively false; Claims an item is “free,” but requires that users complete “offers” to receive the item.

The ad does not always appear on the first page of that search, but it will appear on one of those pages.