Algorithms Can’t Cure All – Google Gives up Arbitrage Fight

Analysis,Search,SEM by on May 21, 2007 at 7:59 pm

I’m sure you’ve heard by now that Google has been kicking Made-For-AdSense (MFA) publishers out of AdSense. This follows multiple unsuccessful attempts to use algorithms to make the business of AdSense Arbitrage unprofitable.

First was AdSense Smart Pricing. Google intended to more closely align advertiser benefit with publisher payout (eg drop payouts to crappy, poorly converting websites). It certainly reduced payouts to MFA sites, but they continued to flourish.

Later was the AdWords Quality Score. Google introduced the AdWords Quality Score to reduce long-tail arbitrage (Arbitrageurs using millions of low cost keywords driving traffic to MFA landing pages). Quality Score is a poorly defined metric that accounts for the ‘quality’ of the relationship between the keyword, ad text and landing page. Arbitrageurs adapted and found other sources of traffic (SEO being chief among them).

So, finally after four years of automated attempts at making AdSense Arbitrage uneconomic, Google is kicking MFA-publishers out of AdSense. I’m sure they are using algorithms to identify accounts for manual review, but they’ve clearly made an important directional shift in how they think about the problem.

Avoiding the Algorithm Trap - Scalability does not require pure automation

At Quova, we initially tried to build an all-automated IP Geolocation system. In 2002 we acquired Real Mapping, a Dutch company that had taken a purely manual approach to mapping the Internet (rooms of analysts). We made the purchase to consolidate the market, however we got lucky with the technology synergies (yeah, I hate the word synergy too). Their manual approach was a great complement to Quova’s automated algorithms. By the time I left Quova in 2004 we had achieved the ideal blend: expert network geography analysts teaching an automated mapping system.

I’ve seen countless hours poured into automated solutions to intractable problems. In many cases (particularly in startups), the answer isn’t a more elegant algorithm. A lot more can be accomplished quickly if you use automation to solve 95% of the problem and manual labor to get the rest. I’ll use Excel to clean data to the point where I can manually clean the rest or we’ll outsource a project to Elance instead of trying to automate the full task.

But what about Google’s Algorithms?

Although Google is most known for their algorithmic prowess, they depend heavily on legions of people that review:

  • web sites
  • ad text
  • search results

They are even now reaching out to the web at large, asking for help in identifying things like search spam and paid links.

In many ways, Google has become a master of blending automation with manual techniques. I have to admit that I’m surprised how long it took them to acknowledge that their algorithms alone couldn’t beat the Arbitrageurs.


No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License. | Dave Naffziger's BlogDave & Iva Naffziger