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Wednesday, November 24, 2010

Google Pays Kickbacks -- Or So Say TechCrunch's Anonymous Hearsay Sources

Posted By on Wed, Nov 24, 2010 at 10:10 AM

click to enlarge If anonymous hearsay says it, it must be true.
  • If anonymous hearsay says it, it must be true.

Is Google today's incarnation of Alan Freed, the 1950s R&B disc jockey accused of taking payments to play certain songs? TechCrunch cites anonymous sources suggesting something like that.


A major agency "is pushing a ton of advertising dollars through Google in return for what two industry insiders independently refer to as "kickbacks" or "rebates," the technology website reports Wednesday morning.

In 1959, Congressional payola hearings offered hope to some of beating back the rock 'n roll and rockabilly devil's music revolution that had jolted traditional music publishing. Could it be that Google -- traditional publishers' version of the devil's ad platform -- is pushing growth by nurturing conflicts of interest?

The TechCrunch story, by Erick Schonfeld, focuses on agencies that place display ads through Google on behalf of clients. The agencies promote themselves as disinterested honest brokers who seek out whatever platform works best for a given client and campaign. However, Schonfeld cites an unnamed Google spokesman in a way that seemingly adds credence to the idea that Google obtains display ad market share through disguised kickbacks.

"There are incentives," admits a Google spokesperson. "I don't now that there is a wad of cash," he adds, "payments are predicated on a bunch of things." Those things are more along the lines of investing in the trading platform, co-marketing, and training if Publicis and Vivaki hit certain milestones. "There is no commission being paid," says the Google spokesperson. So there are payments, but they are framed as technology incentives to help Vivaki test and prove out its exchange.

We've sent an e-mail to Google's press office asking if the quote, and the impression it's used to convey in the TechCrunch article, are correct. A spokesman called to say the company wasn't commenting on the article. But it's worth mentioning that this wouldn't be the first time Google has provided services of value to potential customers. The Atlantic not long ago ran an article about how Google was helping the New York Times figure out how to better draw readers via Google News. And it's not uncommon in the automobile industry, and others, for manufacturers to work closely with suppliers to develop components.

An official with Vivaki, an online ad-sales division of the agency Publicis, is quoted denying a kickback scheme, saying "there isn't a rebate in play. We have a strategic partnership."

Any suggestion that Publicis is accepting payments from Google in return for driving online ad spending through Google is "an utter crock of shit," he says. He adds, "That is illegal in the U.S."

It should also be noted that the TechCrunch story is weighted with a big, fat weasel paragraph acknowledging the reporter has no direct evidence anything untoward is going on at Google.

Direct rebates would be a big no-no and could raise antitrust concerns. It would mean that Google is essentially buying market share in display advertising. If its rising share in display is based on better performance then that is fine. But if there were some sort of financial incentive for Publicis (or any other ad agency) to throw display ad spending its way, that would raises all sorts of concerns. The question would be whether Google could pay such rebates because it is making a higher profit from its display ads than competitors, or whether it is using its profits from search advertising to fund the growth in display in this manner. If it were the latter (and, again, to be clear, there is no evidence other than anonymous hearsay that this is happening), that could have antitrust implications, especially if this rebate practice extended to other ad agency DSPs.

Despite 1959 congressional payola hearings, the downfall of Alan Freed, and laws designed to prevent hucksters from paying kickbacks in exchange for market share, devil's music prevailed, albeit in varnished form imported from England.

Does this mean we'll soon be doing our web searching on Baidu?

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