When working full-time in PPC and digital marketing agencies, it is easy to get caught up in platform updates, how-to’s, and customer acquisition strategies. When we are caught up in day-to-day learnings, we often miss the significance of advertising policy changes. Advertising policy changes do more than just limit the types of customers that agencies can work with or the types of ads we can include in our strategies. Advertising policy changes, especially from Google, shape the future of our industry and set moral standards for all corporations.
Within the last two months, there has been one AdWords policy that has generated both praise and contempt for Google from leaders outside of our advertising space.
Newest AdWords Policy Update
On May 11, AdWords announced that a ban on payday loans and related products would take place on July 13. For those unfamiliar with payday loans, here is a definition, provided by one of the largest payday loan lenders in the country, Advance America.
“A Cash Advance (or Payday Loan) is a short-term, small-dollar loan, often used to cover unexpected expenses or to bridge a temporary gap between paychecks. A Cash Advance is a financial solution that provides an alternative to bouncing checks or paying late fees. Cash Advances are used to cover short-term financial situation – they are not a long-term financial solution.”
In theory, these loans can help individuals with little or no savings when an unexpected expense is putting major stress on their financials. These loans are meant for the nearly 70 million Americans that are underserved by traditional financial services (meaning they cannot get traditional loans).
The interest rates for payday loans are much higher than a typical loan. Payday loans with longer installment payback periods can have interest rates from 200-600%. These interest rates are not hidden from customers, but most Payday Loan consumers do not have any other options, as traditional banks will not serve them. An unending cycle of spiraling debt often ensues if the user cannot immediately pay back the first loan.
In Favor Of Google’s New Policy
A documentary called Spent: Looking for Change, covered the stories of 4 different families who found themselves trapped in a cycle of increasing payday loan debt. I highly suggest watching the film if you want additional perspectives on this issue. There are two eye-opening statistics highlighted in the film that paint a clear picture of the scale of this problem:
- “The average lower-to-medium income unbanked person spends almost $40K on unnecessary fees in their lifetime.”
- “In 2012, financially underserved Americans spent $89 billion in fees and interest; an 8 percent increase from the previous year.”
The documentary was certainly not the only source of criticism for the payday lending industry. Consumer groups have been fighting for more payday loan restrictions for years, and those groups praised Google for its decision.
Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights said the following of Google’s decision:
“Banning predatory payday loan ads shows that Google is willing to put people before profits. This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. Low-income people and people of color have long been targeted by slick advertising and aggressive marketing campaigns to trap consumers into outrageously high-interest loans. This ban puts payday loans in their rightful place alongside explosives and tobacco as dangerous products that deserve the highest level of scrutiny from regulators and businesses alike.”
Against Google’s New Policy
Google’s new policy bans all advertising for loans that require repayment due within 60 days of the date of issue and those carrying annual interest rates of 36% or higher. Those limits impact a large segment of online lenders focused on consumer loans. According to the Wall Street Journal, payday-lending is a $38.5 billion industry. An industry of that size will not be taken down without a fight.
Since the announcement, several leaders within the payday loan sector have expressed their disfavor for Google’s choice. The Community Financial Services Association of America, the main trade group for the industry, said, “This is unfair towards those that are legal, licensed lenders and uphold best business practices.”
Google’s Global Influence
At this point, you may feel like this policy change only affects some advertisers, low-income Americans, or payday loan companies. The implications of this policy reach far beyond those directly affected, though.
There are not many global brands more recognizable than Google. Not only that, but Google is respected. According to Business Insider’s 2016 World’s Most Powerful Brands, Google ranks #10. When Google deems an entire industry as dangerous, it is not taken lightly. Billions of people will be influenced by that decision because it sets a standard for all other corporations.
There is an expectation that other companies will now follow suit. The expectation was expressed by Keith Corbett, executive vice president of the Center for Responsible Lending and co-chair of Economic Security Task Force of The Leadership Conference on Civil and Human Rights.
“As a leading search engine and innovator, Google’s announced updated policy on financial services advertising is a major consumer coup. By removing ads that lure financially challenged consumers into long-term and costly debt traps, Google is displaying what corporate citizenship looks like. Our hope is that others will soon follow suit.”
Moving forward, it will be interesting to see if Microsoft and Yahoo follow Google’s example.
As pay-per-click advertisers, we operate under the policies set by the advertising platforms we use. Therefore, it is in our best interest to stay aware of the power wielded by some of the greatest influencers in the global economy. Their standards will almost inevitably become our future norm.