I don't think this is quite right. If I have a fixed quantity to sell (approximately true for advertising space on the web) then units I buy from myself cost me the same as they would cost other companies.

Suppose I have $100, and 5 advertising spots worth $20 each. I have two options here:

a) If I sell the spots to others then I have $100 + 5 * $20 = $200.

b) If I "sell" the spots to myself (the other wing of my company that needs to advertise) I have $100 and whatever 5 advertising spots are worth.

You are representing the situation of b as if it were "free advertising", thus giving my company an unfair advantage. But in fact, compared with situation a, it is clear I paid for the advertising, as I am up 5 spots and down $100 I could have obtained by selling the spots. So advertising's cost is not lower just because I also own the company that sells the advertising spots. If I'm better off than someone without advertising spots that's because advertising spots are worth something, not because of any purported shady synergy I get from owning both the advertising spots and the company that needs them.

However, Google claims it is not doing this:

> As part of the change, Google said it would operate its shopping-ad service as if it were a profitable, standalone business to ensure doesn’t overbid for ads.

Still, “profitable” could be by the slimmest of margins, and Google would still have a strong incentive to keep the “standalone” business going (that is, the profit to their other business), whereas an independent company wouldn’t.

So the ability to pay yourself unlimited money guarantees a market dominant spot where competition is drastically diminished.

It also strongly affects Google's search incentives, making them prioritize advertising and create inventory where there was none, dying up organic trafic. This is something a profit oriented enterprise would tend to do anyway to maximize revenue, but it's a far cry from Google's original neutrality aspirations.

If Google is the only one who can extract V (likely the case, since they are the ones consuming the spots), they are reaping the benefits of that fact, not of being able to sell to themselves.

Thinking about it, it makes sense for google though. Web scraping and data analysis is their forte. And it fits within google's approach of "answering any question someone has". If someone wants to know the cheapest place to get X, they just want someone to type X into google and get the best answer. For them it's not about making money on commission. Instead it's about getting buy-in into their ecosystem. Apparently they think they can provide a better experience than the commercial sites can.

It seems obvious to me that this is just an artificial product to make more revenue.

Froogle was actually better for results a decade ago when they just sorted the normal web scraping for shopping items. Adding the forced ads to show up resulted in worse deals for consumers. This was part because advertisers had t pay for ads, thus raising prices. And part because advertisers didn’t have the best products, just the most efficient ads.

If a product is actually generating more revenue, what makes it "artificial"? Do you disagree with the use of products to complement an ecosystem, or do you disagree with the use of products that are not intended to turn a profit on their own, like loss leaders?

For example, have a free water fountain and then replacing it with a coin operated water fountain that dispenses warm water is using artificial with my original intent.

My main disagreement is in the use of verticialy integrated products that reduce consumer value but yield higher marginal value to the producer. I’m a huge fan of complementary products within an ecosystem that increase consumer value. I’m also fine with loss leaders, but again I prefer ones that lead to increased consumer value.

Instead, Google gets me the same results, quicker, 99% of the time.

There was a time when Google Shopping was both free and paid listings which was probably a better balance. Even if it still was like this I think having people submit product feeds still leads to much better results than just scraping.

In Case A, google wins the bid, they gain the ad space, but gain no revenue.

In Case B, google does not win the bid, they lose the ad space, but do gain revenue.

Revenue and ad space are mutually exclusive, each is the opportunity cost of the other. Yes, in both cases google wins, but that is because google is the reason the ad space exists in the first place.

I’m not following the logic of how Google’s camera comparison shopping business is unfairly more profitable just because it’s bolted onto an immensely profitable ad company.

Imagine you're a car salesyard in a small town. You don't want your competitors to be able to advertise, so you buy the company that publishes the only newspaper in town. You don't want to be accused of being out-and-out anticompetitive, so you still let your rivals advertise, but you charge them $500 per car advertised. Is this OK?

[1] Although this particular mechanism seems pretty dubious and may even qualify as "shill bidding", which is forbidden at other auction venues such as eBay: http://pages.ebay.com/help/policies/seller-Shill-bidding.htm...

At best, Google is just cheating revenue out of its ad division. I'm not sure this would actually be a huge advantage in the long run unless integration led to Google ads being cheaper to implemented than ads for others.

It's the more specific case of running businesses X and Y where X is dependent upon buying services that Y provides.

If you have a monopoly on Y (advertising), then it's easier to complete in X, because everyone else in X has to buy their Y services from you.

So you end up paying your competitor in order to compete with them.

So not only do you get the extra income from other people buying Y, buy you can operate at higher margins than everyone else in X because Y is available to you at cost.

EDIT: On further thought it seems no different than being vertically integrated.

If you do the accounting in this way, then you make that much less profit on your service, so it winds up being the same as if you are making a greater profit, but count the cost of Y at market value.

> So not only do you get the extra income from other people buying Y, buy you can operate at higher margins than everyone else in X because Y is available to you at cost.

This isn't any different than if Y and Z are different, but you use the excess profits from Z to subsidize your business in X.

Edit: Google has lot more data about a visitor and which enables them to predict more. So, they can sell their competitors (in shopping business) the impressions which never convert while selling the impressions which are highly likely to convert to their own shopping business.

If they do that, then their competitors should notice and then pay them less for giving them bad impressions, so they're just taking money out of one pocket and putting it in another.

This scenario only works out if their competitors are less competent -- but in that case, seems like Google would do well?

You are talking about a different aspect of the scenario, where the company is reaping profits from advertising. Sure, that's kind of beside the point though. Which is why it's important to recognize that the harm happens even without the advertising being profitable.

From what I saw in comments and the (paywalled) article, the problem is that Google isn't siphoning money. They're keeping the ad-space for themselves.

Same should be going with Google. However, people assume things should happen in a different way because Google has become very popular?

Many people scream "regulation" here. But look around: There is plenty of money in Tech and in funding, yet we have a single Google. I'm afraid regulation will kill and not innovate.

This is not a comment on ethics or morality, it's simply one on strategic efficiency.