(Originally published on Dealer magazine)
UPDATE: 5/12/2011: The $500 million set aside was for a Department of Justice investigation surrounding whether Google allowed online pharmacies to use Google’s advertising platforms to illegally sell prescription drugs. LINK
It’s all over the news today. Google reported in its SEC filing that they have set aside $500 million for an anticipated settlement into a Department of Justice investigation of the use of Google Adwords by “certain advertisers.” The comment is intentionally vague and details of the investigation itself have not been released. The statement in question is this:
“In May 2011, in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers, we accrued $500 million for the three month period ended March 31, 2011. Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.” (Note 16 in filing)
Many car dealerships use Google Adwords as part of their online marketing strategy. The phrasing of the comment is interesting. “Certain advertisers” can mean many things ranging from a few to a large amount. “Certain” doesn’t mean small, it only means “not all” in this context. Then we have the interesting part that states this investigation stems from the use of the advertising by its users (implying that it’s not by Google itself). If that’s the case, it’s curious that Google is under investigation. If its advertisers were misusing the Google Adwords program, you’d think it would be an internal violation of their Terms of Service issue, not something that Google itself would be under investigation for much less anticipating a $500 million settlement.
It would seem logical that Google played some part in allowing (or assisting) in this misuse. What other scenario would explain why the Department of Justice is investigating, and holding liable, Google itself? Speculation includes favoring some advertisers over others, fixing its bidding system to maximize bidding amounts, skewing search results to favor its own products and penalizing advertisers that also advertise with other search engines. It is also unclear whether Google would be paying this potential settlement to the DOJ or to its advertisers. The Department of Justice has yet to comment.
This investigation has a potential impact on just about every aspect of the automotive business: from manufacturers to dealerships to 3rd party lead providers. It will be interesting to see how this plays out and exactly what Google is under investigation for.
$500 million is a pretty hefty figure for it to be on the line for so the assumption would be that this is not a small violation (or potential) of something. Considering Google’s income comes primarily from its advertising, it’s hard to believe the investigation is somehow unrelated.
The conspiracy theorist in me is very interested in hearing more about this.
