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An Advertising Slot Machine?


Source: SVM Mac Magazine, France, December 2006, Page 38


The good thing about being an author is that it gives you the opportunity of meeting all kinds of people who have many interesting things to tell. Whenever you cover a subject the interviewees may come up with a totally unexpected story, more than once even more interesting than the central subject.

I had this experience recently and what it follows looked really suitable for this chronicle. Mario Fantoni, a marketing man, offers an apparently revolutionary system that allows optimizing advertising - the Taguchi Method. This Italo-American businessman had a really curious experience with AdWords, that consists of, as you probably know, the commercial ad strips placed on the right of the search results page of Google.

Fantoni was paying for the keywords related to his industry and started to see that he was requested more and more money month after month. "I paid one dollar to be on the first position, however, on the following week, I was on the second position."

Soon after he discovered he had to pay even more to be on the top, almost five times more than at the beginning. Surprised, he started to test the system deeply. Then he realized that no matter what he did his position would be changing all the time. "I had never seen this before…"

By curiosity, Fantoni gathered a lot of information and gave it to Dr. Taguchi, creator of the mathematical method named after him. After some days this engineer reached an astonishing verdict: according to him, Google was using the famous theory of games of John Forbes Nash Jr., Noble Prize in Economics in1994. This theory refers to the search of an equilibrium point. If a gambling house gives a lot of money to its players, it will end up losing lots of it. If, on the other hand, does not give away enough, people will stop betting money. Nash equation would help meeting the famous equilibrium point.

In order to know more, Fantoni decided to visit another specialist in games theory in Florida and presented the same numbers to him, not explaining what the thing was about. After three days, the specialist gave Fantoni an answer: "This is a casino!"

Chance or coincidence? In any case, at Google we can justify such order fluctuation in a more pragmatic way that invokes two criteria:

1) The price one is willing to pay at an exact moment. As it deals with bids, the best bid may vary at any minute.

2) The "pertinence." As a Google representative explained to Fantoni: "Because your competitors have more clicks than you do, we have lowered your position." How does this explains the second position? Due to the fact that the algorithm used by Google for both the results of its search mechanism and for the AdWords positioning is based in popularity. It rewards with the first position those who have more links, more notoriety.

Fantoni came to the conclusion that the system works out according to a basic rule: It maximizes Google profits according to a method that would not be different than the one used by the lotteries and gambling places.

I reminded Fantoni that Google had a motto: "Don't do evil", and he answered, in an Italian way: "C'mon….what kind of evil would you do to people with a search engine?"

Daniel Ichbiah

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