In July Alphabet, the holding company that controls Google, suspended placement of contextual ads for 60-day loans in the AdWords advertising service. The announcement of this decision in May caused a storm of protest in the financial community in the USA. Commenting on the ban, the search engine refers to some research which shows that “these loans can result in unaffordable payment and high default rates for users.”
However, the Community Financial Services Association of America (CFSA) rebelled against the decision. Notably, The Guardian made a reference to Vice-President of PDL-company ACE Cash Express who expressed his uttermost disappointment with the decision and asked Google to present the research the company referred to in its arguments to refuse placement of contextual advertisements of short-term loans.
Boris Batine, co-founder and CEO of ID Finance – a Barcelona-headquartered company with Russian roots which is behind online lending operator MoneyMan – analyzes the impact of Google’s move in markets where the US search giant does not enjoy a dominant position.
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Russia is one of few countries where Google is less popular than a local search engine. While Yandex – which was launched in 1997, several years before Google – holds nearly 60% of the Russian web search market, clients of micro-lending services are among its most loyal users. According to, 84% of short-term loan consumers mainly use Yandex, whereas Google is used by only 16%.
Thus, in Russia the ban for contextual advertising of micro-lenders in Google AdWords from this past July will have no significant impact on lead generation.
On the global scale, however, Google is a quasi-monopolist – with the exception of Russia with Yandex, the Czech Republic with Seznam, and China with Baidu. In this sense, Google’ decision has nothing to do with free markets. The unfolding situation shows once again that competition (ironically, a Russian company) are more preferable and effective for the market.
Google’s move will have a more significant impact elsewhere. MoneyMan, a brand of ID Finance, operates in Russia, as well as Kazakhstan and Georgia (since 2014) and Spain and Poland (since 2015). Following exchanges with each local Google unit, our ads have been changed to comply with their new advertising rules.
However, in any case, Google’s ban on short-term loan ads will not be an obstacle to the development of alternative lending. As a matter of fact, contextual advertisement is not the primary channel to attract clients for financial service providers, be they banks or other types of lenders. More important for financial establishments is affiliate marketing (CPA model). Search engine marketing, which is banned by Google today, accounts for no more than 20% in the marketing mix in the Russian market.
New budget allocations
Another consequence of Google’s move is the fact that advertising budgets will be distributed differently between Google and its competitor Yandex. Thus a larger proportion may be spent on Yandex’s search engine marketing offer, Yandex.Direct, at the expense of Google’s share. Even though using the Yandex context ad service may raise the cost of click on request, this channel needs to be evaluated since reaching out the Google users is no more possible
Another portion of the budget may be allocated to search optimization on Google itself. Finally, a remaining minor portion of advertising budgets will go to other channels of paid traffic.
In this matter, only a tiny part of loan products – payday loans (bullet loans) for a term of up to 60 days – are subject to Google’s ban. So companies are free to advertise payday loans with a longer maturity term. Moreover, alternative lenders provide installment loans – loans repaid by installments in regular intervals, for example, once every two weeks or once a month. These products are similar to banking loans. This is how Google may lead non-banking lenders to develop longer loan products.
Taking into account the public reaction to Google’s initiative in the USA – where the short-term lending market amounts to some $46 billion – and beyond, we hope that Google will soften its position and get back to a fair market approach rather than engaging in market regulation, taking on the functions of governments.
Boris Batine is co-founder and CEO at ID Finance, a financial technology company founded in 2012, specializing in data science, credit scoring and digital lending in both emerging and advanced markets. The company has attracted some 2 million registered users to date via its subsidiaries MoneyMan and AmmoPay. Its R&D efforts focus on developing innovative risk assessment models, big data processing, developing secure applications for both web and mobile platforms ID Finance has offices in Spain, Poland, Georgia, Russia, Kazakhstan, Belarus and Brazil.
