On Wednesday, May 11, 2016 Google announced that it would no longer serve ads for so-called “payday loans” and other loans with high interest rates. This announcement has rocked the financial lending world and was immediately criticized by those within the payday lending industry – such as Amy Cantu, spokeswoman with the Community Financial Centers Association of America, a trade group representing payday lenders – who felt that Google was treating their businesses unfairly, calling the move “discriminatory and a form of censorship.”
Why Is Google Doing This?
In the blog post from Google, the company stated that it will no longer display these ads because, “…research has shown that these loans can result in unaffordable payment and high default rates for users.”
What Are The Facts?
First, it’s important to note that Google is not completely censoring payday loans and high-interest lenders from its organic search results. It is merely removing the ads for those companies from its search pages and partner websites using the Google AdWords or Google AdSense programs. Web pages offering payday loans will still appear in search engines results pages, but the ads will no longer appear in the sidebar or nestled in between the organic search results.
The policy specifically addresses loans with repayment due within 60 days and loans with APR rates of 36% or higher.
What Does This Mean For Consumers?
To be honest, consumers might not be affected much at all. When they search for the term “payday loan,” lending companies offering payday loans will still pop up right there in the search results. Consumers will click on the links and go sign up for their loans. So for them, nothing really changes.
Is Google Hurting Itself?
Google is probably going to lose some money by enforcing this policy. When someone searches for something on Google and clicks on one of the ads that accompany the organic search results, Google makes money. And ad clicks for payday loan ads are very profitable. So yes, Google could stand to lose a lot of ad revenue, especially if it doesn’t display any ads alongside the search results. Exactly how much money the company stands to lose remains to be seen. However, if other ads for related products and services are displayed, then there might not be any significant loss in ad revenue for Google at all.
Is This A Win For Companies Relying On Organic Search Traffic?
Some websites will receive more traffic as a result, but the increase might not be as significant as they’d hope. Yes, this is such a huge market with millions of customers, and instead of clicking on payday loan ads, users will be more likely to click on regular Google results (i.e. free, organic search results).
But Google didn’t say the search result pages would therefore have zero ads when someone searches for “payday loans”. Rather, some other type of ad will likely be displayed, and it will advertise a related service or financial product. It is also quite possible that the ads displayed will still lead to lending companies who offer payday loans.
But even if there were no ads displayed, the web pages that rank highest for these terms would be the companies offering them, so these lenders will still receive most of the traffic anyway. In fact, they may actually benefit – if they rank high enough in the search results – because now it won’t cost them anything when someone clicks on the link leading to their website, as those links will now be considered free, organic search results rather than paid advertisements.