Did Google & Facebook Collude & Monopolize Online Business Advertising?

Looking Back at Panda & Penguin

Did Google & Facebook Collude to Monopolize Online Business Advertising?

Photo by Duncan Meyer on Unsplash

Those working in eCommerce for a long time remember Google implementing the Panda Update in 2011 and Penguin in 2012, changing the way internet search worked. One of the primary features of these changes was the ranking of high-quality versus low-quality websites. Google claimed they intended these algorithms to decrease search results of websites or content farms with large amounts of spam. The implementation of these algorithms negatively impacted many businesses and anyone trying to rank, including artists, writers, and musicians. In the aftermath of these algorithm changes, Google and Facebook advertising became almost the default advertising to achieve traffic, and both companies’ stocks soared in value, raising the question of collusion.

In February 2011, Google implemented Panda, and in 2012 implemented Penguin giving more authority to popular sites, social media, and news agencies. Many businesses fell behind in search engines and could no longer compete with their product content or what Google deemed “low-quality content,” forcing companies and individuals to turn to social media advertising or Google PPC. Google and Facebook soon began dominating the online advertising market.

Facebook offered their IPO after 2011, and nearly quintupled in value by 2019.

 

Did Google & Facebook Collude to Monopolize Online Business Advertising?2

 

Facebook Stock From Scottrade now TD Ameritrade

Now look at Google’s massive growth from 2012.

Did Google & Facebook Collude to Monopolize Online Business Advertising?3
Google Stock From Yahoo Finance

Google deeming business and marketing content less important than other content compounds in absurdity by an insane ranking system based on search popularity. Under this system, you can post thousands of pages of content on your website and still not rank in search engines because you didn’t have rank or popularity, begging the question of how do you get traffic since you need traffic to rank to get traffic? Consider how ridiculous this situation is for a company. You can’t get traffic unless you already have traffic, forcing the need to use social media or Google advertising to obtain traffic.

When Google reduced businesses’ ability to rank online, this grew Facebook’s advertising business which happened to be a pay-per-click model (PPC) similar to Google. Businesses unable to obtain traffic from search results turned to social media, the ones that could afford it. Certainly, Panda and Penguin were in Google’s interest to implement since the company had the most to gain by forcing people to pay to advertise, but did Google collude with Facebook, and why?

Why would Google implement a system that gave Facebook an advantage in advertising?

On May 18, 2012, Facebook held an initial public stock offering, less than a year after Panda and just over a month before Penguin’s announcement, on April 24, 2012. Interestingly enough, GM also pulled $10 million worth of advertising just days before Facebook’s IPO.

Just days before Facebook’s historic stock offering, General Motors said it plans to stop advertising on the social media site, concluding that its paid ads don’t have a big impact on consumers (Muller, 2012).

Facebook likely dodged a bullet in 2012 by getting a boost in business from Google’s changes to internet search. Had Google not implemented Panda and Penguin, Facebook might have started a downward spiral as more companies like GM realized ads weren’t working. This threat may be an underlying reason for Google inadvertently or deliberately assisting Facebook, fearing the pay-per-click advertising model exposed as limited or ineffectual. If pay-per-click advertising doesn’t work, this undermines both Google and Facebook’s core business models.

Determining the efficacy of this advertising is tremendously difficult because of the cottage industry of armchair marketers selling Facebook and Google advertising: few of which are honest about results. Google, Facebook, and anyone else selling this advertising claim pay-per-click works because PPC delivers exactly what it says it will: clicks. You’re not paying for sales conversion, which is what many businesses and individuals are looking for; you’re paying for clicks. None of the companies selling PPC are talking about sales conversion. They talk about clicks, click-through-rates, and traffic with the idea that more traffic means more brand awareness, and more awareness means more sales conversion. Average business owners mistakenly believe they are paying for marketing that results in a more direct sales conversion.

The cottage industry of PPC shifted strategies over the years with no one discussing sales conversion anymore because that rate is so low that it makes PPC unsalable. Just look at the search results for social media sales conversion or email any company selling PPC, and they will discuss traffic, likes, and clicks but with no guarantee of results much less sales conversion.

Even if PPC is effective, most companies will readily tell you, as part of their no-guarantee, that it may not work for every product or it takes time to hit the right ad to make it work. The limited effectiveness leaves one to question the return on investment: is there an ROI, or is PPC restricted to likes, traffics, brand awareness, and indirect marketing schemes not easily measured? If this is the case, PPC is a terrible form of advertising because there is no way to measure outcomes accurately or effectively. It is entirely possible social media advertising works by creating awareness that causes a person to return later and purchase, but this is unlike ads on television or radio, where ROI can be measured over time by sales conversion. While no advertising comes with a guarantee, at least with TV or radio, you can run the ads for six months, and if there is no increase in sales, you kill the ads. PPC advertising is constantly shifting and changing ad campaigns, often ending with businesses and individuals wasting money and time for weeks or months with nothing to show. This situation occurs because artists, videographers, advertisers, and other professionals design television and radio ads. Facebook and Google ads for small businesses are usually designed by owners or individuals lured by seemingly low-cost ads but lacking experience, digital advertising makes them prone to wasting enormous amounts of money. Even GM, with all its resources and outlay of $10 million in annual marketing on Facebook, couldn’t make the ads work, so how is a small business or individual going to do it on a few hundred or few thousand dollars a month? The chances are dismal. If PPC advertising has limited effectiveness, possibly no effectiveness depending on the product, Google had every reason to implement Panda and Penguin. Facebook benefiting from these algorithms provided support for the PPC model and eliminated the bulk of competition, leaving just the two companies to dominate online advertising, which they do today.

The question of Google and Facebook’s collusion may rest in proving the efficacy of the PPC advertising model and connecting more dots, but collusion is not farfetched since Google and Facebook now face a similar charge of collusion with Facebook accused of receiving the money to not compete with Google advertising efforts.

In 2017, Facebook said it was testing a new way of selling online advertising that would threaten Google’s control of the digital ad market. But less than two years later, Facebook did an about-face and said it was joining an alliance of companies backing a similar effort by Google.

Facebook never said why it pulled back from its project, but evidence presented in an antitrust lawsuit filed by 10 state attorneys general last month indicates that Google had extended to Facebook, its closest rival for digital advertising dollars, a sweetheart deal to be a partner (Wakabayashi & Hsu, 2021).

There are many disturbing aspects to the possibility of Facebook and Google colluding, and viewing the history and impact of Google’s implementation of Panda and Penguin reveals, undeniably, Facebook and Google profited from these algorithms. If collusion occurred, this allowed for the near-complete monopolization of online advertising, with Google and Facebook maintaining half of the online advertising market share (Wakabayashi & Hsu, 2021). Perhaps more disturbing than the collusion is the forcing of costly PPC on individuals, writers, artists, and musicians along with businesses. Most new artists don’t have the money to spend on large-scale social media advertising or to waste trying to stumble upon the right ad if there is one. Who knows what this means in terms of global business loss? If collusion occurred, it cost individuals, small businesses, and corporations billions.

References

Daisuke Wakabayashi and Tiffany Hsu (2021, Jan 17). Behind a Secret Deal Between Google and Facebook The New York Times

Declan McCullagh (April 18, 2011) Testing Google’s Panda algorithm: CNET analysis. CNET

Muller, J. (2012, May 5). GM Says Facebook Ads Don’t Work, Pulls $10 Million Account. Retrieved from Forbes

~Citation~

Vincent Triola. Wed, Mar 17, 2021. Did Google & Facebook Collude & Monopolize Online Business Advertising? Retrieved from https://vincenttriola.com/blogs/ten-years-of-academic-writing/did-google-facebook-collude-monopolize-online-business-advertising

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