By all indications, Google AdWords features far more advertisers than competing PPC platforms such as Yahoo Search Marketing and Microsoft adCenter. (Consider: Search for "thinkpad x60 power supply" at Google, and there are six relevant ads from vendors who actually sell that product. Search at Yahoo Search or Microsoft Live Search, and there are various ads from indexers and aggregators, but only one or two from vendors directly selling the product. Other searches for offbeat, unusual or region-specific keywords show similar patterns.)
Why do more advertisers choose Google? Because more users search at Google, Google can offer wider ad distribution than any single competitor. So if an advertiser had to choose just one ad platform, Google would be the natural choice.
But in principle advertisers can easily use multiple ad platforms. Ads are trivially small plaintext data, and In principle ads can be copied from platform to platform without restriction. So why don’t more Google advertisers use Yahoo, adCenter, and others too?
One possible answer comes from a little-noticed Google AdWords API Terms & Conditions restriction which substantially hinders advertisers’ efforts to use multiple providers — exactly prohibiting software vendors from helping advertisers copy AdWords campaigns to competing platforms. In this article, I identify the restriction at issue, analyze its effects on advertisers and competing ad platforms, critique response from Google, and compare this restriction with Google’s commitment to “data portability” in other contexts.
To use the Google AdWords API, a software developer must accept Google’s AdWords API Terms & Conditions. The T&C’s include the following requirement:
"Any information collected from an input field used to collect AdWords API Campaign Management Data may be used only to manage and report on AdWords accounts. Similarly, any information or data used as AdWords API Campaign Management Data must have been collected from an input field used only to collect AdWords API Campaign Management Data. For example, the AdWords API Client may not offer a functionality that copies data from a non-AdWords account into an AdWords account or from an AdWords account to a non-AdWords account." (emphasis added)
Sure enough, searching the web for commercial tools to synchronize PPC campaigns or to export data from Google to competing platforms, I found none.
The quoted restriction prevents advertisers from easily exporting ads from Google to a competing paid search provider. Consider: The essence of an export procedure is to copy data from an AdWords account to a non-AdWords account — exactly what the restriction prohibits.
Indeed, available export procedures are strikingly complex. For example, to import a Google AdWords campaign into Microsoft adCenter, Microsoft offers a 17-step procedure (with some steps made more complicated by the presence of multiple sub-steps).
Microsoft’s procedure is necessarily convoluted because Google’s "may not … cop[y]" restriction prevents Microsoft, or any other vendor, from writing a tool that connects to the Google API, downloads an advertiser’s ads, and uploads those ads directly to, e.g., Microsoft adCenter. Instead, advertisers must download data manually, reformat it to match adCenter’s requirements, and upload it to Microsoft — just as Microsoft’s lengthy procedure specifies.
For many advertisers, Google’s restrictions on data export impose an ongoing burden even beyond the advertiser’s initial signup with a competing PPC provider. Consider an advertiser that changes its ads or keywords often — perhaps selling seasonal merchandise, or experimenting with alternative advertising strategies. Such an advertiser would typically prefer to make changes in one place, and have the changes automatically propagate to all the advertiser’s PPC platforms. If Google remains the advertiser’s primary PPC provider, the advertiser would probably want to make changes in Google’s interface, then have other PPC platforms optionally automatically copy those changes. But Google’s "may not … cop[y]" restriction applies equally to ongoing resynchronizations. If an advertiser made daily changes to its Google campaigns, it would have to daily repeat the manual export/import process — a task that would be both time-consuming and prone to error.
In short, the net effect of the quoted restriction is to reinforce the tendency of small to medium-sized advertisers to "single-home" — to use only Google AdWords, to the exclusion of competing platforms.
At their peril do advertisers rely solely on Google: If advertisers get stuck using only Google, for lack of any easy and efficient way to buy some traffic elsewhere, Google can charge prices higher than competing platforms. Of course Google can’t raise prices infinitely; at some point, advertisers would overcome the lock-in, accept manual export, and copy ads to competitors. But Google’s "may not copy" restriction increases the costs of multi-homing — letting Google charge that much more than competitors, without advertisers facing compelling incentives to look elsewhere.
By encouraging small to medium-sized advertisers to advertise only with Google AdWords, Google’s API restriction reduces the number of advertisers using competing ad platforms. This harms competing platforms in two distinct ways. First, it reduces competitors’ coverage — preventing competitors from featuring relevant ads that pertain to obscure user searches. (Consider the power supply example from the first paragraph of this piece — better and more useful ads at Google.) With fewer relevant ads, the competing platform offers users an inferior service — inviting users to look elsewhere, and reducing the likelihood of a paid click that would earn the platform an advertising fee.
Second, by reducing the number of advertisers bidding for advertising positions at other platforms, the quoted provision dramatically reduces revenue at those platforms. My December 2006 Optimal Auction Design in a Multi-unit Environment estimates the revenue benefits of additional advertisers based on publicly-available data and estimates of market fundamentals. The intuition is straightforward: When many advertisers seek positions for a given search term, they must bid higher to avoid being outbid and receiving inferior listing position. Conversely, when only a few advertisers seek positions, prices can be strikingly low since even a low bid earns a prominent position.
Google’s API restriction also reduces the value of advertising inventory held by third-party publishers. Consider a publisher seeking to sell its sponsored search or other text ad inventory to a provider of sponsored search services. In general, Google can afford to pay more because Google’s revenue per search is higher than competitors’. But how much will Google offer? Google maximizes profits by narrowly outbidding competitors; anything higher is waste. So the weaker competitors become, the lower Google can bid — and the less revenue publishers receive for the traffic they sell. Google’s "may not copy" API restriction serves a role in weakening competing platforms — keeping advertisers using Google alone, and hence reducing competing ad platforms’ ability to pay for publishers’ inventory.
End users also suffer from Google’s restriction on copying ads. Were it not for Google’s restriction, more advertisers would sign up to use competing ad platforms — increasing the usefulness of Yahoo Search and Microsoft Live Search for the users who choose those services.
I forwarded these concerns to Google in March, and I managed to get in touch with Doug Raymond, product manager for AdWords API. Doug offered three rationales for the restriction. The list below summarizes his arguments (black) and my responses (blue).
- Google: The quoted provision only applies to third-party developers. Individual advertisers remain free to write software that exports their Google campaigns.
- Small to medium-sized advertisers don’t want to be developers. Rather, they want to use code that others write. That’s exactly why the AdWords API offers a concept of developers, rather than requiring that every advertiser write its own code.
- As a leading provider of centralized computing services, as distinguished from small programs individual users build themselves, Google well knows the benefits of rigorous design by competent professionals.
- Google: Advertisers can extract their data in other ways, e.g. a comma-separated-value (CSV) file.
- Manual export is convoluted, slow, and error-prone. API-based access would be faster, easier, and more reliable.
- The existence of an inferior alternative does not justify imposing restrictions that prohibit superior implementations.
- In other contexts (detailed below), Google has made strong requests for, and commitments to, data portability.
- In other contexts, Google emphasizes the benefits of streamlined, automated data transfer — never viewing convoluted manual procedures as an acceptable alternative.
- Google: Third-party developers ought not have free access to advertiser data.
- Google’s AdWords API already offers an appropriate security model to limit developers to serving those AdWords advertisers that have specifically granted such permission. In short, a developer needs a password to access an advertiser’s account.
Google’s prohibition on AdWords API data export stands in sharp contrast to Google’s position on data portability in other contexts. Indeed, Google has previously taken a firm position in favor of data portability. Some specific examples: In a November 2006 interview at the Web 2.0 Summit, Schmidt specifically promised that "We [Google] would never trap user data." Schmidt added that "If users can switch it keeps us honest." Just last month, Google CEO Eric Schmidt called for open access to (and indexing of) social network data — telling IBM’s Business Partner Leadership Conference "People should be able to move from place to place, and their data is available everywhere" and "open is best for the consumer." Well-known Google blogger Matt Cutts summarized Google’s commitment to data openness with the catchy title "Not trapping users’ data = GOOD" and a long list of Google products that support data export.
I credit that Schmidt’s statements refer to other kinds of data — search engines’ records of users’ search history, and a wide assortment of data held by social networks. But the same principles plainly apply to access to search ads: Just as consumers benefit from being able to move their data as they see fit, so too do advertisers benefit from flexibility.
Moreover, it strains credibility for Google to ask social networks to share their data with Google, while Google simultaneously imposes contractual roadblocks preventing others from accessing Google data.
Google already faces antitrust scrutiny for its striking growth and market share. In that context, it’s particularly hard to defend the restriction at issue — a barrier to competition, without any apparent pro-competitive purpose. Regulators might reasonably require that Google remove the quoted provision — letting third-party developers export and synchronize AdWords data if advertisers so desire. This would be a trivially straightforward requirement — just a sentence to be stricken from Google’s AdWords API T&C’s. Because Google’s existing APIs already provide the required data, Google would not need to add any new code or any new API functions.
Other AdWords API restrictions also deserve scrutiny. For example, Google insists that advertising tools collect AdWords instructions through separate fields not used for other ad platforms — blocking simplification via a single interface to streamline advertisers’ decisions. Google prohibits advertising tools from storing Google data in a single relational database along with data for other ad platforms — increasing the complexity of designing a system to manage campaigns on multiple platforms. And Google prohibits reports that compare Google ad performance data (e.g. costs and profits from advertising at Google) with data from other ad platforms — hindering advertisers’ efforts to evaluate competitors’ offerings. I gather Google defends these restrictions on the grounds that they purportedly prevent advertiser confusion. Perhaps — but their more obvious effect is to increase the costs and complexity of using competing ad platforms. Perhaps I’ll consider these restrictions in greater detail in a future article.
Meanwhile, I’m struck by Google’s calls for data portability in other contexts. With Google’s ongoing request that other companies provide data to Google, perhaps Google will return the favor by abandoning its "may not copy" restriction — ideally promptly and unilaterally, without requiring that regulators force Google’s hand.