<story><title>Google changed ad auctions, raising prices 15%, witness says</title><url>https://finance.yahoo.com/news/google-changed-ad-auctions-raising-191333390.html</url></story><parent_chain><item><author>junon</author><text>I&amp;#x27;m not understanding this, how can it be fraud? (Genuine question, I&amp;#x27;m not insinuating anything.)</text></item><item><author>karaterobot</author><text>Ahh okay, the missing piece is that the winner pays the second-highest bid, plus a penny. I can definitely see how this would be fraud, and how it could be justified internally by Google as &amp;quot;it&amp;#x27;s still less than they bid&amp;quot;.</text></item><item><author>iandanforth</author><text>Correct way: Winner bids $1.00, 2nd Place bids $0.80, Winner pays $0.81&lt;p&gt;New way: Winner bids $1.00, 2nd place bids $0.80, Google adds 15%* markup to 2nd bid, Winner pays $0.93.&lt;p&gt;*used as example, not a verified number</text></item><item><author>karaterobot</author><text>Maybe it&amp;#x27;s too early, but that article was not clear to me. Is it alleged that Google incorrectly stated the value of the second place bidder in order to make it look higher, in order to pressure the first place bidder to bid higher? Even that doesn&amp;#x27;t make much sense, so I&amp;#x27;m missing something.&lt;p&gt;&amp;gt; The shift sought “to raise the prices against the highest bidder,” Whinston told Judge Amit Mehta in federal court in Washington... To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said... Whinston’s comments Friday described Google’s technique, called “squashing,” that seeks to make the runner-up’s bid more competitive.&lt;p&gt;If they&amp;#x27;re inflating the second-place bid to be higher than the first-place bid, I&amp;#x27;d wonder why that wouldn&amp;#x27;t backfire for them and result in the second highest bid winning a lot of the time. And if they didn&amp;#x27;t inflate it above the first-place bid, why would the winning bidder feel any pressure to increase their bid?&lt;p&gt;I&amp;#x27;m sure it all makes sense, it&amp;#x27;s just not clear to me from this explanation.</text></item></parent_chain><comment><author>strongpigeon</author><text>I don’t think the point is that it’s fraudulent, remember that this is in the context of the antitrust trial. I think the point here is that they could only do that since they have a monopoly.&lt;p&gt;Though I’m not sure I even agree with that. It burns advertiser’s goodwill for sure, but they advertise on Google because it provides them with a ROI, not because there is no where else. This just forces them to tweak their bids more.&lt;p&gt;That’s without weighing in on whether Google has an illegal monopoly on search</text></comment>
<story><title>Google changed ad auctions, raising prices 15%, witness says</title><url>https://finance.yahoo.com/news/google-changed-ad-auctions-raising-191333390.html</url></story><parent_chain><item><author>junon</author><text>I&amp;#x27;m not understanding this, how can it be fraud? (Genuine question, I&amp;#x27;m not insinuating anything.)</text></item><item><author>karaterobot</author><text>Ahh okay, the missing piece is that the winner pays the second-highest bid, plus a penny. I can definitely see how this would be fraud, and how it could be justified internally by Google as &amp;quot;it&amp;#x27;s still less than they bid&amp;quot;.</text></item><item><author>iandanforth</author><text>Correct way: Winner bids $1.00, 2nd Place bids $0.80, Winner pays $0.81&lt;p&gt;New way: Winner bids $1.00, 2nd place bids $0.80, Google adds 15%* markup to 2nd bid, Winner pays $0.93.&lt;p&gt;*used as example, not a verified number</text></item><item><author>karaterobot</author><text>Maybe it&amp;#x27;s too early, but that article was not clear to me. Is it alleged that Google incorrectly stated the value of the second place bidder in order to make it look higher, in order to pressure the first place bidder to bid higher? Even that doesn&amp;#x27;t make much sense, so I&amp;#x27;m missing something.&lt;p&gt;&amp;gt; The shift sought “to raise the prices against the highest bidder,” Whinston told Judge Amit Mehta in federal court in Washington... To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said... Whinston’s comments Friday described Google’s technique, called “squashing,” that seeks to make the runner-up’s bid more competitive.&lt;p&gt;If they&amp;#x27;re inflating the second-place bid to be higher than the first-place bid, I&amp;#x27;d wonder why that wouldn&amp;#x27;t backfire for them and result in the second highest bid winning a lot of the time. And if they didn&amp;#x27;t inflate it above the first-place bid, why would the winning bidder feel any pressure to increase their bid?&lt;p&gt;I&amp;#x27;m sure it all makes sense, it&amp;#x27;s just not clear to me from this explanation.</text></item></parent_chain><comment><author>pyrale</author><text>Winner expects to pay runner-up bid (this is a very important piece, because this changes the behaviour of bidders). Google quotes them an incorrect bid in order to collect more.</text></comment>