Yahoo Happily Admits It Manipulates Ad Auctions To Get Advertisers To Bid More

from the that-doesn't-sound-legal dept

Sometimes you wonder if executives realize what they're saying before opening their mouths at times. In an interview with TheRegister, Yahoo's chief economist appears to happily admit to manipulating ad auction results in order to force advertisers to bid more:
"When someone has a really high ad click probability, they're very hard to beat, so it's not a really competitive auction," McAfee told The Reg. "So that they don't just win [every auction], we do squashing. This makes the auction more competitive.

"It's like handicapping. We handicap the people with the high click probability."

This, McAfee said, can increase Yahoo!'s revenues. "The bidders respond by bidding higher. The one who was destined to lose is now back in the race, so they bid higher trying to displace the number one, and the number one is trying to fend them off so they bid higher too.

"We can make the competition a bit more fierce using squashing, even on keywords where there's not much bidding."
While that may seem like a neat trick from an economics standpoint, it certainly seems like a pretty questionable business practice from an advertisers' standpoint. Having a company secretly manipulate the results of an auction to make participants pay more? That sounds like fraud. As Eric Goldman notes, this appears to be a lawsuit waiting to happen.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Sep 17th, 2010 @ 7:05pm

    I said, yeah, it seems like a clever way to boost their revenue.

    But dear lord, they better make it abundantly clear in their auction rules, because otherwise, isn't that deceptive advertising, to tell you you're bidding on something (placement order) but then not DELIVER that service?

    I expect bidders, especially ones with low "quality", will be quite pissed. Lawsuit-level pissed.

     

    reply to this | link to this | view in thread ]

  2.  
    icon
    SUNWARD (profile), Sep 17th, 2010 @ 7:12pm

    class auction lawsuit time.

    Shill bidding is also illegal in many places.

     

    reply to this | link to this | view in thread ]

  3.  
    icon
    Bubba Gump (profile), Sep 17th, 2010 @ 7:25pm

    Talk about a blunder... major lawsuit coming!

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Joel Coehoorn, Sep 17th, 2010 @ 7:34pm

    I like it

    As a user, I like it. If a site was gonna show up in the results with a high-click probability anyway, I don't need to also see an add for it. This makes it much more likely to see ads that are actually useful.

     

    reply to this | link to this | view in thread ]

  5.  
    icon
    Jon Renaut (profile), Sep 17th, 2010 @ 7:48pm

    Yahoo?

    People buy ads on Yahoo? This is news to me.

     

    reply to this | link to this | view in thread ]

  6.  
    identicon
    Richard, Sep 17th, 2010 @ 8:56pm

    Margin Call

    if you still have Y! in your portfolio, now might be a good time to short :)

     

    reply to this | link to this | view in thread ]

  7.  
    identicon
    Anonymous Coward, Sep 17th, 2010 @ 9:15pm

    "Yahoo Happily Admits It Manipulates Ad Auctions To Get Advertisers To Bid More"

    If Google did something like that they would be busted for Anti Trust violations. Heck, Google gets busted for doing nothing wrong. But it's OK for Yahoo to do it.

     

    reply to this | link to this | view in thread ]

  8.  
    identicon
    Consumer advocate, Sep 18th, 2010 @ 10:04am

    I agree. Messing with anything with the sole purpose of making people pay more like this is fraud clear and simple.

     

    reply to this | link to this | view in thread ]

  9.  
    identicon
    Anonymous Coward, Sep 18th, 2010 @ 4:59pm

    It's not exactly a surprise. All companies do it, you just don't hear them admitting to it.

     

    reply to this | link to this | view in thread ]

  10.  
    icon
    Derek Bredensteiner (profile), Sep 18th, 2010 @ 5:35pm

    Haha, subtle

    "As Eric Goldman notes", somehow I feel you haven't conveyed the energy level of his tweet there.

     

    reply to this | link to this | view in thread ]

  11.  
    icon
    Sarah Desmet (profile), Sep 19th, 2010 @ 12:04pm

    Trade Secrets Revealed!

    Kudos to Y!Exec for revealing web-ad-revenue trade secrets--ever more valuable than any patent! "It's common practice." As for lawsuits, I would anticipate instead Marketing Execs to vote with their budgets and (attempt to) select more level playing fields. Q:What's your ad squash policy? A:Zucchini? Coda:Short Yahoo!? Why bother? As Y! charges me to Thunderbird or gmail my email, me and my wallet (M&MW(tm);) visit Y!sites no more than (4) times per year. Que lastima!

     

    reply to this | link to this | view in thread ]

  12.  
    icon
    Tek'a R (profile), Sep 19th, 2010 @ 5:54pm

    Its interesting.

    Where are the vitriol-spewing bloggers to call yahoo the spawn of satan?

    Where are the DAs (at least the ones who couldnt get in on that Craig's List thing) to Champion The Protection of The People in demanding special internet-fairness hearings?

    News releases by officials broadcast from the google headquarters to assure us all that "every step is being taken"

    its almost like the people who are being encouraged and funded to attack the Big G don't dare say a cross word about anyone else.

    you know. its just interesting.

     

    reply to this | link to this | view in thread ]

  13.  
    icon
    Tek'a R (profile), Sep 19th, 2010 @ 5:54pm

    Its interesting.

    Where are the vitriol-spewing bloggers to call yahoo the spawn of satan?

    Where are the DAs (at least the ones who couldnt get in on that Craig's List thing) to Champion The Protection of The People in demanding special internet-fairness hearings?

    News releases by officials broadcast from the google headquarters to assure us all that "every step is being taken"

    its almost like the people who are being encouraged and funded to attack the Big G don't dare say a cross word about anyone else.

    you know. its just interesting.

     

    reply to this | link to this | view in thread ]

  14.  
    icon
    Tek'a R (profile), Sep 19th, 2010 @ 5:55pm

    Its interesting.

    Where are the vitriol-spewing bloggers to call yahoo the spawn of satan?

    Where are the DAs (at least the ones who couldnt get in on that Craig's List thing) to Champion The Protection of The People in demanding special internet-fairness hearings?

    News releases by officials broadcast from the google headquarters to assure us all that "every step is being taken"

    its almost like the people who are being encouraged and funded to attack the Big G don't dare say a cross word about anyone else.

    you know. its just interesting.

     

    reply to this | link to this | view in thread ]

  15.  
    icon
    Tek'a R (profile), Sep 19th, 2010 @ 5:56pm

    Its interesting.

    Where are the vitriol-spewing bloggers to call yahoo the spawn of satan?

    Where are the DAs (at least the ones who couldnt get in on that Craig's List thing) to Champion The Protection of The People in demanding special internet-fairness hearings?

    News releases by officials broadcast from the google headquarters to assure us all that "every step is being taken"

    its almost like the people who are being encouraged and funded to attack the Big G don't dare say a cross word about anyone else.

    you know. its just interesting.

     

    reply to this | link to this | view in thread ]

  16.  
    icon
    Tek'a R (profile), Sep 19th, 2010 @ 5:57pm

    Its interesting.

    Where are the vitriol-spewing bloggers to call yahoo the spawn of satan?

    Where are the DAs (at least the ones who couldnt get in on that Craig's List thing) to Champion The Protection of The People in demanding special internet-fairness hearings?

    News releases by officials broadcast from the google headquarters to assure us all that "every step is being taken"

    its almost like the people who are being encouraged and funded to attack the Big G don't dare say a cross word about anyone else.

    you know. its just interesting.

     

    reply to this | link to this | view in thread ]

  17.  
    identicon
    Anonymous Coward, Sep 19th, 2010 @ 8:37pm

    Re:

    I think a better question is where are the honest folks?

     

    reply to this | link to this | view in thread ]

  18.  
    identicon
    BBT, Sep 20th, 2010 @ 6:36am

    Some sort of an explanation of wtf "squashing" is would be nice. It's the whole point of the article and there is absolutely no information on what it actually is :/

     

    reply to this | link to this | view in thread ]

  19.  
    identicon
    FreemonSandlewould, Sep 20th, 2010 @ 11:36pm

    suspect Google does a similar thing

    I got the sensation when I tried adsense that something funny was going on.

     

    reply to this | link to this | view in thread ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This