We recently discussed with a very successful aggregator and the current risks of Google going down in verticals.

As we know Google advertising makes a chunk of revenue from e-commerce verticals. Travel, Financial Services, Shopping to name a few. A large number of portals operating in these domains have Google as a large part of their online marketing strategy both paid and unpaid. These verticals are developing destinations, and natural traffic for the top portals. That means if you wish to travel, you are less likely to search on Google than say expedia. That hurts Google and it would not like businesses to create vertical destinations. It would like to control traffic for longer by delving deeper into these verticals.

Clearly the auction nature of Google advertising should make it efficient to extract most money from the most efficient operators on the most obvious keywords. But Google could think it can do better in two separate ways:

1. If it believes it can actually set-up more efficient vertical portal services than those existing, improving on the operations
2. If Google still believes it has a lot of under-sold, unsold / un-monetized inventory, including its natural advertising.

The first reason is unlikely to be the one to justify Google going down the verticals, given that each vertical has its own complications and would lead to quite a different business altogether for Google. Logically, the second option is the direction in which a rational Google would make a move. This would lead not to a portal business but to a “lead generation” business.

However, this option implies two things. Either that the companies in these different verticals have been unable to use Google efficiently and hence have not used up the entire range of keywords to advertise on. Possible but probably not to a wide extent. Or, and it would mean something far more sinister and unethical from a Google standpoint, that Google will use the IP of its client which they’ve acquired by paying good money to Google.

To elaborate, let’s assume a portal has spent money to learn over the years what are the keywords with which it can drive cheap (aka cost efficient) traffic on. This data obviously is their intellectual property. Sadly, Google has access to it, and will bid on exactly those words. Google will identify where anyone has spotted an opportunity, and strike, since it has access to their data and bidding IP. I believe this would be a clear IP infringement case here. Google should clearly stop this or demonstrate that it does not use current bidding data, to which it has unfair access, built on other player’s individual and aggregate spend to align its own bidding. Fact of the matter is that if it did use this data, it would be a losing game all the way for itself so probably would not bother.

It will be interesting to see how things evolve and what (further) moves Google will make.