Could Google be using its own AdWords system against its own customers?

Google, the company who's internal motto is, infamously "Do No Evil," is getting some grief from some popular bloggers as well as customers of its automated keyword-based advertising system known as Adwords. If you have a product or service that you think would be helpful to users of Google's search engine and you want to intercept their keyword searches, you can participate in one of Google's keyword auctions. This is where you promise to pay Google a certain amount of money everytime your advertisement is clicked on if and when it appears after a Google user searches on those keywords. For example, the keyword "spreadsheet."

Under a post titled When the auctioneer bids, Nicholas "IT Doesn't Matter" Carr wrote:

Google doesn't act simply as an honest broker, with no interest in either the seller's or the buyer's fortunes. It's the auctioneer, but it's also the seller. And sometimes, as noted above, it's a buyer, too. The way the auction works is a bit funky as well. Even if you bid the most for a keyword, you don't necessarily "win." Google adds some special secret algorithm sauce to the auction results to determine the actual order in which the ads appear.

Carr's post was inspired by a conversation in the blogosphere that was kicked off by wiki-solution provider CentralDesktop.com founder and CEO Isaac Garcia who himself wrote a blog suggesting that Google's system is rigged to favor Google whenever the search giant is itself participating in its auctions. Said Garcia:

What if the company started placing ads for its *own* competitive products next to yours? And, what if those ads are placed higher and in more premium positions than yours? I'm not afraid of competing with Google - but I *AM* afraid of AdWords. Here is why..........Google Cheats: Google holds the top advertisement (Adword) slot for the following key words: Intranet, spreadsheet, documents, calendar, word processor, email, video, instant messenger, blog, photo sharing, online groups, maps, start page, restaurants, dining, and books (somehow Amazon has managed to appear in the #1 ad slot for 'books').

Garcia's observations may have been true when he wrote the blog. But, in testing some of the links, I found that they're not necessarily true now. Futhermore, in some cases, the only sponsored link is Google's which leads me to believe Google is the only one bidding on that keyword (in which case, does the whole rigging question really matter?). 

Garcia, who advertises his services through the Adwords system, became sensitized to the issue when he suddenly found his company competing against Google after the search giant acquired one of his main rivals: another wiki-solution provider, JotSpot.com. in Google's AdWord's blog, someone from Google known only as Walter H. issued a response explaining that Google plays by the same rules as everyone else. But Carr characterized Google's explanation as "disingenuous."

I decided to get more details from both Garcia and Google in a podcast interview. Garcia gladly accepted my invitation. Google declined on the invitation but offered some more context that I read word for word in the podcast interview. 

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Here's a taste of the Q&A: 

ZDNet: You say you buy keywords...Describe how it is that you buy keywords; what that means and how it works for those people who are listening and don't understand how the AdWords system at Google works.

Garcia: Sure, well at least with Google, you have the opportunity so that when people type in certain words, for example "Internet" or "blog" or something like that, that you are able to bid on small little advertisements that appear in the upper right hand corner, or as a sponsored link at the top of the search engine results. [You] are able to bid on those words and based on your bid price and the quality of your add, being how relevant it is to the search, [that] determines your position and you bid anywhere from a few pennies to several dollars for the position of where your add will appear when someone types in a corresponding word.

ZDNet: OK, so you were saying that you spend some money with Google to make sure you show up, explain how...what you've been doing for the past six months [to a] year.

Garcia: Sure, since the inception of our business being that we are an online business, the majority of our traffic comes from blogs and organic traffic leads that come from other Web sites, but also we spend a significant amount of our budget on buying keywords on Google and Yahoo! and MSN and other search engines as well, so that we can derive leads on different keywords. Generally since we are a collaboration platform, we are buying keywords such as "wiki" or "team collaboration" or "online project management" or things like that. The only reason that Jotspot got my attention or this whole Google affair got my attention, was because potentially, Google could be buying key words against me to promote its own products. And I sort of thought about it just on the top of my head and then I went and did some searches on other keywords such as "spreadsheet," "word processor," "documents," [and] things like this and I noticed that Google's ads were coming up at the top...virtually every time. 

ZDNet: When you say Google's ads, you mean ads for what?

Garcia: For their own sponsored products. If you type in the word "spreadsheet," at the top you're going to get a sponsored link most likely for docs.google.com, advertising their own online spreadsheet tools. And the same with "documents," you'll also get their online documents for typing in "word processor" and such. And I just started experimenting with other words such as "earth" or "print"..."classifieds" and it just seemed that every word Google had a pretty strong vested interest in promoting its own products, that its own ads were appearing at the top or very near the top every time. Now in my blog post, I said "every time" and that's since been proven otherwise and it's not every time OK. [But] a lot of times I should say and it still gets my attention I guess.

In the interview, I challenge some of Garcia's findings and by the time we reach the end, I ask him for a solution at which point, he spells out what he thinks Google should do to make the system fair.  Or fairer. Think transparency. 

Disclosure: In the spirit of media transparency, I want to disclose that in addition to my day job at ZDNet, I’m also a co-organizer of Mashup Camp, Mashup University, and Startup Camp. Google, which is mentioned in this story, was a sponsor of the first Mashup Camp. For more information on my involvement with these and other events, see the special disclosure page that I’ve prepared and published here on ZDNet.