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The Perils of Automation: How Google Uses MAR to Capture More Ad Revenue

In the world of digital advertising, there's a concept known as Minimum Acceptable Return or MAR for short. MAR refers to the minimum return on ad spend that a business needs to justify continuing to advertise. If the results of an ad campaign drop below this threshold, the business will likely pause or stop spending on ads altogether.

What is Minimum Acceptable Return (MAR)?

For Google, understanding each advertiser's MAR is crucial. Google wants to keep businesses advertising on its platform, but it also wants to maximise its own ad revenue. So Google uses automation and advanced algorithms to push advertisers down to their MAR threshold and keep them there.

Say a business determines that an average return on ad spend (ROAS) of 2x is viable for their model. In other words, for every £1 they spend on ads, they make an average of £2 in revenue. This 2x ROAS is their MAR. If their campaign results dropped below this, they would pause spending.

Initially, this business sees much higher returns when they start advertising on Google. They might achieve a ROAS of 3-4x. At this level, the business is highly profitable, but they are also over their MAR. Google sees all of this additional profit above the MAR as revenue left on the table.

How Google Uses MAR to Maximise Revenue

So Google's algorithms go to work to bring the business back down to a 2x ROAS. They may show the ads less often, increase the cost per click, or limit visibility. The optimisations are all designed to reach an equilibrium where the business achieves a 2x return, right at the MAR but not exceeding it.

For the individual business, this can feel frustrating. What happened to those great 3-4x returns?

But Google maximises its own revenues. Any returns above 2x are profits the business is making that could have gone to Google instead.

Google is laser-focused on bringing businesses down to MAR. The company uses automation, artificial intelligence, and sophisticated algorithms to make this happen behind the scenes in an opaque way.

Advertisers may not realise what's occurring.

But the signs are there if you look closely. Has your ROAS recently dropped for no clear reason? Are your ad costs increasing while visibility decreasing? You may be getting optimised down to your MAR.

How Advertisers Can Combat MAR Optimisation

There are a few things savvy advertisers can do to combat this effect:

  • Closely track ROAS and look for patterns of declining returns. If you spot it early, you can make changes to counteract it.

  • Experiment with new keywords and ads to find pockets of opportunity the algorithms may not have optimised yet. Always be testing.

  • Use Google's own tools like automated bidding strategies cautiously. Don't let Google take full control.

  • Diversify beyond Google Ads. Look at other platforms like Facebook, Amazon, and direct publisher buys.

  • Build a first-party data strategy to rely less on Google's data over time.

Google has one goal: maximise revenue. The company will use every technique its powerful technology allows to push advertisers down to MAR. As an advertiser, it's critical to understand this dynamic and be vigilant. Use automation cautiously and always test new approaches. With a smart strategy, you can stay ahead of the algorithms.

But make no mistake, you are battling a formidable opponent in Google. The company's immense data, technical prowess, and AI abilities are all aimed squarely at capturing more and more of your potential profit above MAR. Google's job is to bring you down to the minimum acceptable return. Don't let your guard down.

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