Google does pride itself on their “separation of church and state” i.e. their religious segregation of the non-paid, organic search departments from the paid advertising departments. Both paid and organic search use separate algorithms and Google has a strict policy of keeping the two branches incommunicado. Their professed goal is to keep the organic results “pure” and untainted by commercial interests. Are they trying to prove a point that organic listings really are separate from paid listings?

Or maybe the paid search algorithm blew a fuse? Or maybe it was part of a calculated strategy to increase ad revenue?

In my opinion it’s most likely the latter. But before I get into that, let me describe how it happened:

Screen 1:
Earlier today I Googled “car insurance” because it’s a very expensive click with fierce competition and I was curious to see who was organically number one and who was paying for the ad space to be alongside them. There was nothing too surprising: a bunch of organic listings for car insurance along side paid text ads for the same thing.

Screen 2:
Then out of vanity I googled “indianapolis web design company” to see Small Box at the top and also to see who was paying for the neighboring text ad real estate. Image my surprise when I found that Geico and Allstate were paying for that space!

Screen 3:
I thought, “Maybe Google’s PPC algorithm is broken and is just showing the text ads late.” So, I searched for “group health insurance” to see if local web design companies were listed next to insurance brokers. But there were no text ads for web design companies in Indianapolis.

You can see the sequence of search engine results pages (SERPs) in the three screen shots below:

What was going on?

After some searching I found a few blog posts addressing this strange Ad Words phenomenon. Turns out that for roughly a year Google’s been using cookies to track the search history of users even when they’re not logged into their Google account.

They then use this search history to create custom text ad listings that blend the previous queries. See this blog post to see how previous searches for “weather forcast” and “holiday to spain” listed text ads for Spanish weather forecasts. You can see this same sort of blending of searches in the last screen shot above. The searches “indianapolis web design companies” and “group health insurance” generated text ad #5 for a web design company targeting insurance agents and agencies that need a website.

In this article from last summer Google confirmed that they were tailoring text ad listings based on previous queries and the author is more than a little critical of Google’s lack of transparency in how they do it. It even looks like this prior search “feature” is coming to organic listings too.

But none of this fully explained or described what I experienced. The text ads alongside the listings of Small Box and Slingshot SEO were not a blend of “car insurance” and “web design”. You might think it’s a blend of “indianapolis” and “car insurance”, but Ad Words has been serving up geographically targeted ads based on our IP addresses for ages (to see an example of this look at the #4 text ad in the first screen when I queried “car insurance”). Instead the “car insurance” text ads completely trumped the “web design” text ads. Why?

I can’t prove it and haven’t done any testing that could even be remotely described as “scientific”, but I have a hunch that Google is doing this to squeeze as much money out of advertising as they possibly can.

On average, a text ad’s click following a query for “car insurance” can cost as much as $26, but a click for “web design companies” brings Google less than $5 – and a click for “indianapolis web design companies” will cost less than half that. So, if you were Google and had the choice of selling a click for $25 or for $2.50, which would you pick?

The cost per click for text ads displayed following a search for “group health insurance” is roughly $10. This probably explains why I didn’t see any text ads for web design companies alongside the organic results for insurance carriers and brokers.

This is clearly a nice feature if you’re an owner of Google stock and depending on the circumstances it could be a nice feature if you’re a search engine user (especially when the previous queries blend appropriately to deliver targeted results). But is it a feature you want as an advertiser?

If you’re Geico, do you want to be paying $25 for clicks that come from ads displayed alongside web design companies?

If you’re one of our unfortunate competitors that has to pay to get on page one, are you happy that your ads for a highly targeted search got trumped by ads for more expensive search terms?