iThink makes a good point here. I might add "thus it has always been and will always be."
Yesterday I posted the question on this thread, "Why was Google doing this?" Then I suggested it might reflect the weak ad market.
I've reconsidered. Instead, it could be that Google is taking the Walmart approach with its business model. Let me explain...
While not understood by most consumers, today Walmart does not own the vast majority of the goods on its shelves around the world.
It works, instead, this way: A supplier such a Rubbermade agrees to provide x amount of buckets at Y price. Walmart, usually working with Rubbermade, sets a retail price for the bucket. But, Rubbermade doesn't get paid for the buckets until someone buys them. Until they are sold, they are Rubbermade's buckets. Thus, Walmart has very low inventory costs. This arrangement is not unusual for most large national or regional retail chains today, but Walmart more or less invented it about 15 years ago.
What does this have to do with Google?
Walmart was able to make this arrangement work for them because they controlled a huge segment of the retail channel. In the past, if you wanted Rubbermade buckets to sell at your store, great! Rubbermade would say, buy as many as you want. Buy 100,000 before the end of the quarter, and we'd make a deal, etc. But, typically they were YOUR buckets and YOU had to sell them.
Not now. They are still Rubbermade's buckets when they are inside of a Walmart. Thankfully, for Rubbermade, they have a brand the consumers recognize. So, the strong get stronger. And, there might be other buckets from brand you never hear of, but they are not Walmart's buckets. You want to put up a large sign in Walmarts that says "Buy Rubbermade Buckets!" OK, but it's going to cost.
So, why does this plan work for Google? Because, I fear, Google dominates advertising on the web.
Here is how I see it: You want to sell your buckets on the Internet? Fine. Let's cut a deal. You provide this many buckets at this (hugely discounted, can barely make a profit) price and then pay us (Google/Walmart) x for each one sold. And we'll promote them on "bucket" across the Internet. But, they are your buckets. They don't sell, they're your problem, not Google's.
Bad news? Good news? If you make consumer goods and are the number one brand in your category, can cut your costs even more and you have the best margins in your category, Google is ready to help you increase your sales. But, if you are a second tier company that can't provide the margins on buckets or bird diapers or whatever, well, we have some space for you, somewhere, maybe...
Or, put another way: If you're a consumer goods firm in Walmart with your products now and are happy, then you might be getting happier. If not,... (As you might guess, some vendors to Walmart see the retailer as an unhappy reality they must deal with.)
Oh, and if you are an Internet retailer? Well, I guess you have a new competitor of sorts.
As a publisher with Google ads on their pages...? It's a reality. If you can really sell buckets, this might be great for you. But, I'm looking around for other partners, myself.