Imagine walking into a store, ready to purchase advertising space to showcase your products. You’ve done your homework, budgeted carefully, and know exactly what you want to achieve with your advertising spend. Just as you’re about to close the deal, the price of the ad skyrockets by 30% because someone next to you showed interest in the same ad. Frustrating, right? This scenario mirrors what many merchants face when advertising with Google. You’re told that’s just how ad auctions work, right? Right?... Wrong, in this article, we’re going to tell you the dark secret that Google doesn’t want you to know. Buckle in and grab a brew, we’re going to be in for a wild ride.
Google Is Not Working in Your Best Interests as a Merchant
The Knowledgeable Store Owner
Imagine Google as a store owner in a bustling marketplace. This store owner knows everything about you:
- Your Budget: You’ve shared how much you’re willing to spend.
- Your Revenue: You’ve disclosed how much you make from the ads.
- Your Targets: You’ve even revealed your target Return on Ad Spend (ROAS).
In some ways, it makes sense to share all this data with Google. By providing them with detailed information, they can offer you insightful analytics on how well your campaigns are performing. This data-driven approach can help you fine-tune your strategies and achieve better results. However, it's a double-edged sword.
Armed with this information, the store owner is supposed to offer you the best possible price. But do they? Not necessarily.
Adding to the complexity, the store owner doesn’t even tell you what you’re actually buying. You remain unaware if you’re receiving high-quality inventory or if low-quality traffic is being mixed in, making it difficult to gauge the true value of your ad spend. This lack of transparency benefits Google, as they can maximize their revenue by dumping subpar inventory on unsuspecting advertisers.
I’ll cover more about this court case shortly…
The Reality of Google Advertising
Google is not incentivized to give you the best deal. Instead, they’re motivated to maximize their revenue. Given your disclosed targets and budget, Google’s algorithms will spend the maximum they can to meet your ROAS target, but not necessarily in the most cost-effective way for you. They benefit from higher ad prices and increased spending, not from helping you find the cheapest and most efficiently converting traffic.
Ads are Googles cash cow, and you’re just another revenue line item, source: Google’s 2023 financial report.
The Google CSS Program: A Response to EU Antitrust Rulings
The Google Comparison Shopping Service (CSS) program emerged following a landmark antitrust case in the European Union. In 2017, the European Commission fined Google €2.42 billion for favoring its own comparison shopping service in search results, disadvantaging competitors. To comply with the ruling and promote fair competition, Google introduced the CSS program. This initiative allows third-party comparison shopping services to compete on equal footing, offering merchants better terms and more transparency in their advertising efforts. Through this program, merchants can achieve improved visibility and cost efficiency compared to traditional Google Shopping campaigns. Did you know that CSS providers get a discount on the bid price they pay vs if you go directly to Google Ads? This is just another well kept secret… We’ll dive into how you can benefit from the CSS program and how it works in more detail later in this article.
The Impact on Customer Acquisition Costs
Across the board, customer acquisition costs are increasing, making it more crucial than ever to find cost-effective advertising solutions. By partnering with Order Legend, you can counteract this trend and ensure that your advertising spend is used efficiently, focusing on your interests rather than Google’s bottom line. Cost Per Click prices more than doubled in less than 10 years. You might chalk this up to increased competition, but that’s not the only factor at play.
The Dark Secret, How Google Manipulates Ad Auctions to Inflate Prices: DOJ Unveils Alarming Abusive Practices
The U.S. Department of Justice (DOJ) presented evidence in the antitrust trial against Google, showing how the company manipulated ad auctions to increase its revenue, harming advertisers. Key tactics included inflating the bid of the second-highest bidder (Project Momiji), squashing bids to create broader price increases, and using the Randomized Generalized Second-Price (RGSP) auction to raise ad prices gradually. These practices resulted in advertisers paying more, benefiting Google's bottom line while not necessarily improving ad quality or user experience.
Not only is Google selling the ad space, but they are also running the auctions, which means they can engineer the auctions to get the results they want. This inherent conflict of interest allows Google to maximize their profits at the expense of advertisers, misaligning their objectives with yours. Instead of prioritizing cost-effective advertising solutions for you, Google's control over the auction process ensures they extract the highest possible revenue.
For more detailed information on specific implementations Google has built to inflate the bid prices you pay we highly recommend you read the full article on Search Engine Land. You’ll also see more quotes directly from Google employees answering questions in court, straight from the horses mouth.
Fighting Back with the CSS Program: Leveling the Playing Field for EU Merchants
When dealing with a giant like Google, it can feel like you’re stuck playing their game, often at a disadvantage. However, thanks to EU regulations and the advent of the Comparison Shopping Service (CSS) program, there’s a way to fight back. For EU merchants, the CSS program provides a crucial opportunity to avoid being overcharged and overlooked. By partnering with a CSS like Order Legend, merchants can gain better visibility, benefit from lower costs, and ensure their interests are prioritized over Google's profit-driven algorithms. This program empowers you to take back control and achieve more cost-effective advertising and a better, fixed ROAS.
The Order Legend Advantage
Enter Order Legend, a Google Comparison Shopping Service (CSS) partner, which flips the traditional ads model on its head:
- Exclusive Ad Spend Discount: As a Google CSS partner, we receive a 20% discount on your ads. Another way to say this is that Google Shopping ads a 20% markup on the true bid prices that you pay. Google obviously does not actively promote or talk about this or highlight this anywhere online. They’d prefer you to spend directly with them to line their pockets instead. With this discount, we basically have more purchasing power and can make our budget go further than you can alone when you go direct to Google.
- Privacy on Budget, Revenue and Targets: We don’t disclose your budget, revenue or target ROAS to Google.
- Bidding Strategies: Instead of bidding high to secure ad space, we start with the lowest possible bids (1p, 5p, 10p) and see what’s accepted, raising over time within our model to generate you as many orders as possible, within the confines of our commission rate. This isn’t our only strategy, but one of many.
- Our budget is infinite: We are prepared to invest as much of our money as possible whilst running at break-even or at a slight profit margin on our side (between our ad spend and commission earnings), whilst still getting you a cheaper rate.
- Total Alignment: Our pay-only-on-results model means we only get paid when we get you results.
- Fixed ROAS: Order Legend operates on a Cost Per Acquisition (CPA) model, funding the ads with our capital and running them end to end with our unique bidding strategies to secure the best possible price. We agree on a fixed commission with you upfront, locking in a reliable ROAS that does not fluctuate. You only pay for the orders our app generates, ensuring you always know your costs and returns in advance.
Order Legend employs a strategy of “sniping” to find the traffic Google won’t show you. By starting with the lowest bids and optimal strategies, paired with our discounted CPC rate, we ensure that you get the cheapest traffic available, rather than the most profitable for Google. We do this whilst achieving your desired ROAS thanks to our fixed commission pay-on-results model.
No Cannibalization
With Order Legend, there's no risk of cannibalizing your ad spend. Due to imposed EU regulations, Google is forced to select the cheapest winning bid. This means no bidding wars between us, as we operate for you, the same merchant, ensuring efficient use of your advertising budget. For more details on how we avoid cannibalization and prevent increased ad spend, visit Google's support page where Google provide detailed examples.
Guarantees of success?
Order Legend operates like an investor, we run shopping ad campaigns on your behalf and fund the campaigns with our capital upfront. We are data driven and will try all stores and products to see what works. We are not an agency. We take on all ad spend risk and there is zero downside for merchants if it doesn’t work out. Every store is constantly evaluated for risk and assigned capital to spend on ads accordingly. All stores get atleast a minimum of $50 initial ad spend, larger stores get more, depending on the size of their business.
When we find stores that work with our model, we double down and invest more to generate as much revenue for you as possible whilst taking a small cut between our ad spend and commission earnings. If we find a store that could work with some optimisations or a tweak in the commission rate, we’ll let you know, discuss and share predictions.
For stores where we lose money, we pull back our ad spend and become more conservative to prevent us from incurring significant losses. In these scenarios, we may decide to experiment and invest again in the future if you keep our app installed. There are many variables that are outside of our control, like the products you sell, search volume and demand, competition, pricing and your website conversion rate that could improve or change over time.
We can guarantee that we will only ever charge for orders our ad campaigns generate. If we generate zero orders, we will charge you $0. This aligns Order Legend much more closely with you than an agency or with Google themselves. We only get paid if we get you results.
We suggest that stores run Order Legend in parrallel to your own if you have allocated capital towards ad spend. These stores should view our app as incremental to your own efforts, either through increasing orders you wouldn’t otherwise see or by reducing the amount you pay to Google. You can use an analytics service like Triple Whale to check incrementality and overlap across different attribution models between Order Legend and your own marketing campaigns.
Robin Hood vs. Sheriff of Nottingham
Think of Google as the Sheriff of Nottingham, collecting taxes and not necessarily caring about the plight of the merchants. In contrast, Order Legend acts as Robin Hood, redistributing opportunities to those who need them most (you, the merchant).
Google will take your bag of money and spend as much as they can to hit your ROAS target, but this approach doesn’t prioritize your cost efficiency. Order Legend, on the other hand, constantly seeks the lowest bids accepted, ensuring that you get the cheapest traffic to maximize your profitability.
You have to play the Google game, but you need to tilt the odds in your favour. We highly recommend that you run both acquisition strategies in parallel. Think of Order Legend as sniping you traffic you wouldn’t otherwise get and you’ll only ever pay a fixed rate on the orders generated, so there is no risk.
You can learn more about how the Google CSS program works to incrementally deliver you more orders through the Google CSS help centre article here. Basically Google is forced to accept the cheapest winning bid on behalf of a merchants (so we don’t create a bidding war). This is definitely one time where we can all thank regulation!
Questions every merchant should be asking
The Hidden Costs of Google Ads: Am I Paying for Low-Quality Inventory?
One of the biggest challenges with Google Ads is the lack of transparency regarding what you’re actually paying for. Google provides minimal insights, leaving you in the dark about the quality of the traffic you’re purchasing. This opacity raises the question: are you being served low-quality inventory mixed with good traffic to inflate costs? Google benefits by blending undesirable inventory with premium placements, maximizing their revenue while you bear the expense. Without clearer data, merchants risk overpaying for subpar results.
The Push for Automation in Google Ads: Convenience or Control?
Google is aggressively pushing automation across its advertising platform, encouraging merchants to let it handle everything from bidding to budget increases. Features like automated bidding promise to optimize your ad spend by determining the best bid for each auction. Additionally, automatic budget adjustments are touted as a way to maximize your campaign's effectiveness. However, this shift towards automation often means relinquishing control and transparency over your ad spend. While these tools can simplify management, they are designed to prioritize Google's profits over your cost-efficiency.
Don’t even get me started on the paid ad reps where they just refer you to implement the automatic recommendations…
Consider this in the context of our store owner analogy. Not only does the store owner (Google) know how much money is in your wallet, what your revenue and ROAS goals are, but you are also handing them the ability to spend your money for you! This lack of control means the store owner, Google, can freely spend your money without your constant approval, potentially prioritizing their own profits over finding you the best deals. This automated convenience might come at the cost of transparency and financial efficiency.
They even have a helpful article explaining their ad recommendation system. Don’t forget to check back regularly as they recommend you more ways to empty your pockets and make more revenue from you!
If you were Google, a publicly listed company, what would you prioritize?
Are You Suffering from Stockholm Syndrome with Google Ads?
As merchants, we often find ourselves relying heavily on Google Ads, despite increasing costs and questionable practices. Have you considered that you might be experiencing a form of Stockholm Syndrome? Google offers convenience and automation, making it seem indispensable, but at what cost? You might feel dependent on its services, even as it manipulates auction prices and pushes automated solutions that benefit its profits more than your ROI. It's time to rethink your relationship and seek alternatives that truly prioritize your interests.
Ad Wars, A New Hope for Fair Competition in the U.S.
While EU merchants currently benefit from the Comparison Shopping Service (CSS) program, U.S. merchants might soon have similar opportunities. With the Department of Justice's ongoing antitrust investigations into Google's monopolistic practices, there is hope that significant changes are on the way. Pending rulings and fines could lead to the introduction of a CSS-like program in the U.S., breaking up Google's market dominance and offering more competitive and transparent advertising options. This potential shift promises a fairer landscape for North American merchants, ensuring better value and control over their ad spend. Stay tuned, and may the force of fair competition be with you!
Where do we go from here?
In a landscape where giants like Google dominate, it’s essential to align yourself with partners who prioritize your success. Order Legend offers a smarter, more cost-effective way to advertise, ensuring that you’re not just another merchant in Google’s revenue-maximizing machine. If you’re a Shopify merchant operating in Europe, all you need to do is install our app and agree to usage based billing to get a better, fixed ROAS. We’ll get started investing our capital upfront to find you the best possible prices. You’ll only ever pay a fixed % on the orders we generate for you. Don’t work for Google, let us put Google to work for you.
As of the time of publishing this artice, Order Legend has generated over $9 million of revenue for Shopify merchants on a fixed ROAS. You can keep track of the top 100 merchants that have benefitted the most with our model via the Legends Chart over on our website.
If you’re not on Shopify, you should check out Redbrain, they pioneered the pay-on-results model and work with merchants through affiliate networks like AWIN and CJ. Redbrain generated $1.25billion in revenue for merchants last year, including $400m for eBay. These results demonstrate that our CPA model works for small and large businesses alike. Order Legend is arming Shopify merchants with the same tools that the big players have access too.
Choose wisely, and make sure your advertising budget work for you, not just for Google.
Special Thanks (You should totally connect with these people!)
Xavier Mantica and John Moran for their social posts, youtube video and podcast to raise awareness.
Karina Bautista for speaking to me at Shopify Editions.dev 2024 in Toronto, your analogy to us being like Robin Hood really resonated with me (as I am sure you can tell from the images throughout this article!).
James Henderson for inviting me to Shopify Editions, otherwise this article may never have existed in the first place. We can generally be quite secretive about winning strategies in the ad space! Granted I haven’t really gone into too much detail in the post above about all of our secrets!
Search Engine Land for their coverage on the DOJ & Google court case.
The BBC for their coverage of the DOJ & Google court case ruling in August 2024.
