Google’s War on Affiliates

Google’s War on Affiliates

http://www.zdnet.com/blog/foremski/googles-highly-profitable-secret-war-against-small-businesses-and-jobs/2025

Google’s highly profitable secret war against small businesses and jobs

Summary: Google distracts analysts and media with non-revenue projects such as G+ or driverless cars, cloaking its attack on thousands of smaller companies, and their jobs.By Tom Foremski for Tom Foremski: IMHO | November 30, 2011 — 15:06 GMT (20:36 IST)

Google has managed to boost its revenues by billions of dollars this year by attacking thousands of smaller businesses who make money from affiliate programs. It does this by deliberately favoring large brands in its search results.

This war is largely secret because very few people understand this shift. Google manages to deflect attention through publicity about projects such as Google+, or its self-driven cars — none of which are revenue generating businesses.

Yet in its core business, under the renewed leadership of CEO Larry Page, Google has launched an incredibly aggressive strategy targeting mostly small firms. You can see how effective this has been in the following numbers culled from its financial reports.

For example, for the whole of last year, 2010 Google’s revenues from its own sites could barely keep pace with growth in revenues from its AdSense partner network — mostly small firms.

2010:

- In Q1 Google sites grew 20% and partner sites grew 24%

- In Q2 Google sites grew 23% and partner sites grew 23%

- In Q3 Google sites grew 22% and partner sites grew 22%

- In Q4 Google sites grew 22% and partner sites grew 24%

Yet in 2011 this trend miraculously reversed itself within just 1 quarter and Google sites’ growth jumped suddenly and for no outward reason.

2011:

- In Q1 Google sites grew 32% and partner sites grew 19%

- In Q2 Google sites grew 39% and partner sites grew 20%

- In Q3 Google sites grew 39% and partner sites grew 18%

What did Google do that suddenly, its sites nearly doubled their growth rate while partner sites suffered a massive drop?

The answer is that it controls the traffic and that controls revenues. Google managed to shift traffic and revenues from its partner network to its own. That means it keeps all the revenues — it doesn’t have to give away 80% of AdSense revenues to partners.

There’s other things that Google has done that hurt small businesses trying to make money online such as banning tens of thousands of affiliates from its Adwords network.

It has gotten away with this strategy by shifting the attention of analysts and media to projects such as G+ and self-driving cars. These aren’t businesses and have no effect on its revenues but that’s the subject of the questions asked by Wall Street analysts on its earnings calls.

I haven’t come across any analysts or journalists looking into this major shift in Google’s business strategy. I haven’t seen any financial analysts explaining how Google has been able to grow revenues so quickly — yet some of the answers are hiding in plain sight — in Google’s financial reports (as above).

Google’s strategy is to set itself up as the largest affiliate and displace the hundreds of thousands of small businesses that make money from affiliate marketing. It wants to be the main affiliate for online sales of branded products and that’s why its organic search results heavily favor large companies — the brand owners.

But this strategy comes at a significant cost — lost jobs as it displaces the smaller firms. It’s not a cost to Google but it is to society.

That’s not a good scenario in today’s hard economic times, it’s a PR nightmare for Google to be seen as anti-small business and causing job losses.

Small companies don’t have a much of a voice in Washington DC and Google knows this. It has been careful not to antagonize the large brand owners, reports one of my contacts, the CEO of a large company that relies on AdSense revenues, because they have lobbyists and they could add their voices to complaints about Google’s business practices.

Google, however, is working hard to keep the US government out of its business. This year it dramatically stepped up its lobbying efforts, hiring more firms and spending a record amount on political influence.

Jessica Guyen reported in the The Los Angeles Times:

Google spent $5.9 million from Jan. 1 through Sept. 30, a 51% jump from a year ago. To put that in perspective, Google spent $5.2 million total on lobbying last year.

Google has doubled its spending on lobbying in the last two years. It has also formed a political action committee to give donations to candidates and it has hired influential lobbyists such as Richard Gephardt, a former House Democratic leader.

So who will come to the aid of small businesses? By the time the government figures out what’s going on, and politicians extract themselves out of the pocket of lobbyists, it’ll be too late.

Maybe Facebook will be a savior of sorts, it has been far more small business friendly than Google lately. But, this might be just a short term strategy because Facebook will face pressure to grab an ever larger share of the revenues flowing through its network, as Google is doing today. That pressure will mount when it becomes a public company next year.

What’s happening to small businesses in the Google ecosystem is precisely why Facebook, Apple, etc, prefer to build a walled garden online and control as much of their ecosystem as they can so they aren’t vulnerable to a change in business strategy by a large partner providing traffic and web services. Google’s decision to start charging third-parties for using its formerly free maps service is a good example.

One of the very few people I’ve found that understand Google’s anti-small business strategy is Aaron Wall over at SEOBook. Here’s an excellent post by Mr Wall on Google trying to stamp out affiliates.

Google Hates Affiliates

At Affiliate Summit last year Google’s Frederick Vallaeys basically stated that they appreciated the work of affiliates, but as the brands have moved in the independent affiliates have largely become unneeded duplication in the AdWords ad system. To quote him verbatim, “just an unnecessary step in the sales funnel.”

It is worth noting that Google doesn’t consider itself “just an unnecessary step in the sales funnel” when they insert themselves as an affiliate.

He recently produced an excellent infographic to explain Google’s focus on large brands.

http://www.seobook.com/brand-vs-affiliate-vs-spam

Google Hates Affiliates

Years before Google broadly torched affiliates operating inside the AdWords channel I highlighted how much Google hated affiliates in their ecosystem.

How was I aware of that?

2 ways:

  • If you read any of Google’s older guidelines that leaked over the years you would see a consistent disdain toward affiliate sites. This was also reflected in official advice at search engine conferences & whatnot.
  • A friend of mine went to Google’s campus & Google offered to “optimize” their AdWords account. As soon as the word affiliate came up it was like spoiled meat. Replacing the word “affiliate” with some other idiotic made up phrase (I think it was “regional online distributor”) suddenly made everything O.K. again. Other friends had similar stories.

Note that the difference between “affiliate” and “regional online distributor” is for all intents and purposes linguistic crap, however it can be the difference between life and death for an online business.

To be fair, the ready availability of feeds to quickly generate sites means that most affiliate sites will be garbage. At some point Google gets sick of fighting the same battles over and over again. Then again, most websites are garbage & only the top x% of anything is going to be great.

At Affiliate Summit last year Google’s Frederick Vallaeys basically stated that they appreciated the work of affiliates, but as the brands have moved in theindependent affiliates have largely become unneeded duplication in the AdWords ad system. To quote him verbatim, “just an unnecessary step in the sales funnel.”

It is worth noting that Google doesn’t consider itself “just an unnecessary step in the sales funnel” when they insert themselves as an affiliate.

Should information empires be allowed to discriminate based on nothing more than the business model of competitors?

Spam vs Not Spam

The most recently leaked Google rater document stated

Spammers create spam pages to make money. Sometimes, they make money directly, by placing moneymaking links on the spam page. Here are two types of moneymaking links:

  • Pay-Per-Click (PPC) ads: Spammers get paid each time ads are clicked on their webpages. Another term for PPC ads is “sponsored links”.
  • Thin Affiliates: Spammers make money when a transaction is completed after the user has clicked through to the merchant’s site from their webpages

PPC ads appear on many, many webpages. Some pages with PPC ads are spam, but many pages with PPC ads are not. Pages should not be assigned a Spam flag if they are created to provide information or help to users. Pages are spam if they exist only to make money and not to help users.

Sometimes, spam pages do not have moneymaking links. These spam pages are created to change search engine rankings or even to do harm to users’ computers with sneaky downloads.

So in essence, the difference between spam & not spam is if the page is helpful to users.

The rating document takes 130 pages to clearly articulate the difference between what is spam and what is not spam.

But the core ethos in categorization is if it is original & helpful it is not spam unless it is doing something deceptive.

A Minor Exception*

Google’s rater guides also arbitrarily sneaked in the “what the hell, if it is affiliate, it is spam” card:

Note: Major cosmopolitan cities are preferred targets for spammers, especially hotel affiliatesSuch results should be flagged as Spameven if they are related to the query and helpful to users. For example, a hotel affiliate page with a list of Chicago hotels may be assigned a rating Relevant, but also receive a Spam flag.

Google is directly going out of its way to attack competing business models.

Even if the site is quality – any way you slice it – they still tell raters to label it as spam if it is a hotel affiliate.

Once again it is worth pointing out that the label “affiliate” is just an arbitrary label. It could just as well be a “commissioned salesperson.”

An Example Market: Books

In our forums one of our members quoted a brilliant book by Karl Polanyi from 1944 which was full of gems like “A so-called self-regulating market economy may evolve into Mafia capitalism — and a Mafia political system”

I searched for that quote & guess what ranked #1?

Google Books of course.

Google’s owned & operated affiliate offering in the niche.

The stolen version hosted on Google.com ranks #1…everything else is either spam, unneeded duplication in the marketplace, and/or conjecture that can float up and down as they tweak the algorithms.

To say that the book publishing industry is undergoing pains would be an understatement. But maybe in some weird way Google promoting Google helps the book industry by giving it more avenues to be seen? Maybe they are trying to help out book authors?

The structure of the book industry prevents the book author from getting anything but a small slice of the book’s revenues (unless the author is well known and/or they self publish). Markets being what they are, most authors live in obscurity on the long tail. To help supplement their low cut of the revenue pie, some book authors use affiliate links to link to Amazon.com as a purchasing option on their official book websites.

Recently in our forums a member created a thread about a client site being blocked from AdWords because there was an affiliate link on the page for their own book!

Google is The Biggest Online Affiliate

So the author is not allowed to advertise his own work to give you multiple buying options & highlight options which offer her additional compensation, however…

  • Google is free to steal the copyright work & promote their looted version first
  • Google can run an affiliate network
  • Google can double dip in the AdWords auction
  • Google can give itself affiliate ad units in the SERPs (all their lead generation offers & the CPA-based product ads)
  • Google can invest in start up affiliate networks (like VigLink) that automatically inserts affiliate links without any editorial discretion from the publisher
  • Google can invest in networks of similar sites (like Whaleshark Media) that are primarily driven by affiliate links
  • Google can create paid placement affiliate-driven sites like Boutiques.com & then fold them into Google Product Search without disclosing what is happening to those affiliate placements
  • Google can become the ultimate online affiliate

And yet the word “affiliate” is a bad word.

The word affiliate is arbitrarily tarnished in the same way that SEO is.

Use another label & if you do the exact same thing it is clean. Craigslist or eBay are not affiliates as they are marketplaces. Wal-Mart & Amazon.com might do drop shipping & have some affiliate promotions on their sites, but they are retailers.

These arbitrary label differences make a big difference to the stability of an online business.

Machine Learning vs a Small Business Killing Machine

Google can claim that they use artificial intelligence and machine learning and are unbiased, but their ranking systems need training sets. And if upon this alleged independent rating affiliates come up as “spam” then how can an affiliate build a sustainable business model?

I know what you are thinking: “Well, Aaron, they can stop being affiliates and move up the value chain.”

The problem with that is that as an affiliate I can compare a lot of products in a condensed space, but if I accept payments for products then I likely need to have a page for each product. The issue there is that if you do not have a strong brand and you have lots of pages on your site there is a great chance that the Panda algorithm will torch your website.

At the same time, if you try to go big & thick you have to worry about competing against Google as they buy out vital pieces of the supply chaincreate their own affiliate partnershipssteal your content & outrank you with their copy of it, and launch their own affiliate channels & affiliate stores on their websites.

Brand Sites Become Affiliates

One of the things Google mentioned to identify thin affiliates from other merchants is this:

Check to see if the address of the image is the same as the address of the page or if it is the address of a “real” merchant?

Small businesses are getting squeezed out of the search results by Panda. Affiliates are getting torched for not being a “real” merchant.

What is “real”?

At the same time, some of the biggest branded websites that Google promotes are now BECOMING AFFILIATES:

The new items on the website will mostly get to consumers through third-party sellers, which means B&N won’t have to carry the expense of inventory. The bookseller will just take a sales commission of 8% to 15% on each item.

What’s worse, when brands come under review for spamming, Google says that they already ranked #1 so there is no reason to penalize them. Which is precisely why you can now buy rugs on Barnes & Noble. And it is precisely why you can find dating offers, education offers, jobs, and automotive sections on Excite.com. There is no SEO risk in brand extension for large brands that can do no wrong.

Google puts weight on domain names then suggests that domains can be a spam tool. So in a sense, if you invest in whatever Google trusts and are small you are a spammer. Whereas if you invest in whatever Google trusts and are large you deserve the benefit of the doubt & further promotion.

Sometimes the only difference between the brand and spammer labels is that the brands spam harder.

Brand + Money = Not Spam

For those with money, brand is another SEO tool to buy, and Google will proudly run the affiliate program for your duplicated site if you buy a bankrupt brand & slap a product feed on it.

Google literally ties their relevancy signals to their ad units. Recall that:

  • Google counts YouTube ad views as organic views
  • Google suggests that buying their display ads lifts branded search volume (which helps create a branded search signal)
  • Google put the +1 button in display ads & claims that if you click on it you are recommending the site in the search results (in spite of having only seen an ad & not actually having seen the landing page yet! how hard is it to advertise “free money” and then offer up a landing page which says “oh, but there’s a catch”?)

So if you have brand & money you can just flat out buy the “relevancy” signals. Yet if you try to create similar signals without paying Google & without owning a billion Dollar brand you are shunned & labeled as a spammer.

This subjective circular nonsense is getting a bit out of hand.

In summary, we are not SEOs and we are not affiliates.

We are a brand & we will buy retargeting AdWords ads + up our AdWords budget appropriately.

If we rebrand to remove “SEO” from the domain name can we please be added to Google’s whitelist? ;)

Published: October 27, 2011