3 Ways Google Knows What Ads To Show You

In the past year or so there has been a lot of discussion about privacy, tracking, etc. in the online world. But why is all that data being collected in the first place? In short – advertising.

Google is an Advertising Company

Google had its IPO in 2004, so for nearly 15 years, they’ve been a publicly traded company. As a publicly traded company, one of the main responsibilities is to maximize shareholder value. I won’t go into the details of Wall Street and the stock market, but basically, that means the company is trying to get its stock price as high as possible.

The primary way to do that is to be profitable and meet or exceed the expectations of Wall Street.

These expectations vary, but one very important metric is earnings/share (EPS). This number is basically the profit generated in the previous quarter divided by the number of outstanding shares. Perceptions of stock value are often derived using EPS as a key component. So basically, if Wall Street expects you to report $4.55 EPS in your quarterly earnings report and you report $4.35 your stock value goes down. If you report $5.12 your stock value will go up.

So Google has a very strong incentive to beat expectations and that means they’ve got to do new things or do things better. Hence the never-ending collection of more and more data.

Maximizing Ad Revenue

Online advertising platforms like Google Ads want to maximize the amount they can charge for advertising. The more they know about you, the more likely they are to match you with a company that is trying to advertise to you. These advertisers will pay a premium to get in front of the most qualified people.

So how does Google get the necessary information about internet users that allows them to charge higher advertising rates?

Here are 3 key ways:

3 Ways Google Knows What Ads To Show You

1. You Tell Them

When you sign up for a Google account they ask for your birthday and gender. Various Google services ask for different information, but Google ties it all together.

They’re not hiding it either. Go to www.google.com/ads/preferences while logged into your Google account and they’ll tell you how they’re personalizing your ads.

Here’s my age –

And though they don’t sell the information, they sell the ads that are targeted based on the information. See why this is a little bit of a slippery slope?

2. Advertisers Tell Them

Any website/store/entity where you’ve given your email address could be giving that information to Google in order to target their ads more effectively.

Here Google tells me that Target gave them my info –

3. Actions Speak Louder Than Words

This is the area where I think internet users are least informed AND the grayest area as well.

Basically, if you’re logged into Google and you do searches on Google, they’re categorizing you based on your search history. If you watch YouTube videos they are categorizing you based on what kind of videos you’re watching.

Here is a category I’m in because I’ve watched a few movie trailers recently –

Now think of how many “Google services” you might be using while online? There is a real possibility that Google could be collecting data from virtually everything you do online. Their services are nearly unavoidable.

Innocent Until Proven Guilty

For now, the general internet-using public trusts Google and their data collection policies. It’s handy when online ads are for relevant products and feature offers/promotions that I find valuable. It’s annoying when I get ads for enterprise-level business insurance providers. So, for now, I’ll give Google the benefit of the doubt, but I think consumers need to be more informed and companies like Google need to be more transparent.

We’d love to hear your thoughts in the comments below!