The sentiment of it being an extortion ring is correct. However, it's not as simple as placing the highest bidders' product at the top-K spots, because it's not a true auction system; not anywhere close. Amazon runs an ML algo that attempts to determine the actual cost benefit of serving an ad, and does everything in its power to maximize the value of the underlying ecosystem. It applies weights to warehousing fees, shipping fees, CVR, CTR, referral fees, customer retention & satisfaction, LCV, LSV, loan interest, etc. It's not that relevance isn't a focus, but the considerations are complex and somewhat reliant on sellers' data inputs.
You could bid $100 on your own brand KWs and get charged $0.37/click while a competitor in the adjacent slot will get charged $25. You could bid $100 on a competitor's brand KW and never get an impression because the algo has determined your product is a complete waste of that virtual shelf space.
I would think it’s like an auction for the things that don’t matter. For the most valuable brand KWs do you think the winner is randomly allowed to be determined by “the market”? Why not bring the brand to the table directly, and outside of the auction determine what they’ll have to pay.
To me, it seems like no company could keep their hands out of the cookie jar that is running an auction. Too much short term pressure to move things up and to the right. Amazing cash cow though.
You could bid $100 on your own brand KWs and get charged $0.37/click while a competitor in the adjacent slot will get charged $25. You could bid $100 on a competitor's brand KW and never get an impression because the algo has determined your product is a complete waste of that virtual shelf space.