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Last week, Google announced a change to its AdWords policy on payday loans, banning ads for products with high APRs and short repayment terms.
I reviewed this move by Google, apparently made for moral reasons.
According to Google:
“Today we are sharing an update that will be effective July 13, 2016: We are banning advertisements for payday loans and certain related products from our advertising systems. We will no longer allow advertisements for loans that are due for repayment within 60 days of the date of issue.
In the United States, we also ban advertisements for loans with an APR of 36% or more. When reviewing our policies, research has shown that these loans can result in unaffordable payments and high default rates for users, so we will update our policies globally to reflect this.
So, did Google do this for moral reasons?
Well, payday loans can certainly be harmful products. Most quote something like 700% APR or more. It will usually cost around £ 90 to borrow £ 200 for three months. It’s steep, but the longer term loans offered by these sites are worse, while late or missed payment fees can be outrageous.
This decision will not necessarily prevent payday loan companies from bidding over time, but they will be limited on the types of products they can advertise.
The obvious effect is that this removes a quick path to the market for new payday loan companies that sometimes offer even worse terms than the more well-known brands. If they can’t pay for PPC, they’ll have to work on a longer term SEO strategy to gain visibility on Google.
However, Google still allows other products that could be harmful. For example, there are many ads for home electronics that can be paid for in installments at very unfavorable terms.
For example, one of the ads above leads to this LG TV, which can be purchased for around £ 1,600 on multiple sites.
However, with the interest here, customers will end up paying back over £ 4,500 (the compulsory insurance adds an additional £ 522 to the cost). It can be just as damaging as a payday loan.
Of course, we also have categories such as gambling. Indeed, gambling terms represent 77 of the top 100 PPC keywords in the UK. The game can destroy.
So, this is interesting. Google has chosen to take a moral stand on payday loans, but there are many other legal but potentially dangerous products or industries that are unrestricted.
A victory for Wonga?
The most obvious effect is that removing PPC ads for these products benefits established market players, Wonga et al.
No PPC advertising means new market entrants no longer have a fast track to the top of the SERPs and will struggle to beat the organic dominance of established players.
As Will Critchlow says:
How many companies would jump on a deal that means neither they * nor their competitors * could buy search ads? https://t.co/ZRZ0xPqjgf
– Will Critchlow (@willcritchlow) May 12, 2016
Jonathan Beeston echoes this point of view:
Researchers will still be able to find payday loan companies through organic results. For strong brands rated high, this policy change could be beneficial. Competitors and new entrants will not be able to buy their place at the top.
SimilarWeb data suggests that Wonga.com derives 37.5% of its desktop traffic from search, but 99.1% of that traffic is organic. At worst, this change will be neutral for Wonga, and they will most likely do well.
Statistics support this argument. According to data from PI Datametrics, the best performing sites in terms of SEO visibility are Wonga and the most recognizable brands in the industry.
Those paying for PPC ads at the moment seem to be the ones with less organic visibility, none of those listed in the table above.
For example, the site with the second PPC ad has little to no organic footprint.
So, to answer the question, it sounds like a win for Wonga and lenders like it. However, as Jonathan Beeston pointed out, it can also help fintech startups:
The other winners of this change may be Fintech startups. Many companies are trying to disrupt tight credit space, such as Lendup and Lending Club. It should be noted that Lendup has taken investments from Google Ventures. Lending Club received money from Google itself. I’ll let the conspiracy theorists take it from here.
In summary
Whatever the reason for Google’s move, it looks like this move will serve to further establish the most recognizable lenders in this industry. As these are more likely to be regulated than new entrants, this has some advantages for consumers.
It also highlights the importance of SEO in competitive markets like this. While PPC has offered a faster route to seek visibility for many, brands that have looked longer term and implemented an SEO strategy seem to be benefiting here.
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