Google just wants to be #3… Here’s why.

My son told me about a breakthrough ad strategy he stumbled upon for his affiliate businesses: Reduce your Google AdWords spend, yes, you drop down from #1 in the Google advertising order to #3 or so, but the conversion rate is still good and it’s costing a lot less.

The reason I’m sharing this tidbit is because it reminded me of this: When Eric Schmidt, executive chairman of Google, testified recently in front of a Senate committee, he was asked about a puzzling set of search results, ones that consistently showed Google sites in the #3 position…

CNET reported that Senators Al Franken, Mike Lee, and the subcommittee’s Chairman Herb Kohl asked Schmidt about this strange set of search results, which nearly always showed Google’s sites in the #3 position, across hundreds of product and service searches.

In one exchange, [Mike] Lee tried hard to pin down Schmidt on why results from searches on 650 different products seemed to look fishy. He noted that very often, Google’s services or products ranked third. Lee made it clear he was skeptical of such “magical” results.

It was tense at the hearing after Lee told Schmidt that he could only conclude: “You’ve cooked it so that you’re always third”.

Google could argue that #3 is not #1. If it were cooking the books surely it would seek pole position?

But #3 is plenty good enough to get a great conversion plus Google can sell the #1 and #2 search slots. Being #3, as my son discovered, can be very profitable. It might be one of the reasons Google has been reporting a massive jump in revenues this year.

Schmidt was adamant, however, that Google hadn’t fixed anything.

Lee was prepared to move on … but Schmidt didn’t let him. “Senator, let me say that I can assure you we haven’t cooked anything.”

I agree with the Senators, it does smell fishy and knowing Schmidt, I don’t think he’s the right person to be answering such questions.

Schmidt was hired to be a distraction, a lightning rod, taking attention away from the founders and “running interference” with Washington. And he is still doing that job. If I were looking to gain insight into Google I wouldn’t be asking Mr Schmidt.

The Senate should be questioning Google’s CEO Larry Page.

Page has embarked on an incredibly aggressive business strategy, one that’s testing the boundaries, it seems similar to Microsoft’s strategy from the 1990s, to aggressively compete then deal with any fallout later. We’re just seeing this new strategy emerge.

It’s wonderfully ironic that Mr Schmidt has to answer the Senate’s anti-trust probe of Google when he spent many years at the helm of Novell, complaining to the government about Microsoft’s business practices.

(It’s interesting that you don’t see news stories mention this fact about Eric Schmidt’s past (it’s not a conspiracy it’s just the youth of the reporters)).

Tune in for more… a future series about Google’s secret war — and it’s not against Facebook — that’s a red herring.