Nest, 'Relax' edition

In answering federal regulators' questions last year, Google merely stated the obvious — 'mobile' doesn't fit the new categories of device of the future

Can't say I didn't see this coming.

Late last year, the Securities and Exchange Commission — one of the bodies that helps make sure businesses play fair — had some questions for Google regarding its year-end 2012 fiscal report, which was filed in January 2013. Some of those questions regarded Google's purchase of Motorola Mobility. Some had to do with taxes. Some with Motorola's Home business. Other questions had to do with the difference between the "cost per click" for advertising on desktop versus mobile.

It's Google's answers to that last section that got the headlines, of course. It's blogger gold. "ZOMG Google to put ads on thermostats and refrigerators and your newborn baby's forehead."

Only, that's not really what Google said.

I think we gave you the basic facts in our story, assuming folks would click through and read the SEC notes for themselves. But we know better. So let's take a look point by point.

Here's the question the SEC asked Google (emphasis mine):

  1. Your response to prior comment 1 suggests that platform price differentials remain between desktop and mobile. We also note that advertisers are diverting their advertising campaigns from desktop to mobile and tablets. Please quantify the impact of the various factors identified in your discussion of changes in revenue that caused the six percent decline in average-cost-per click paid by advertisers. If the decline is primarily attributable to mobile advertising, explain why quantification of mobile activity would not be meaningful. Further, tell us whether the increase in the number of paid clicks was the same across each platform. Tell us whether the number of paid clicks for desktops and tablets increased at the same rate as the mobile platform. Tell us what consideration you gave to providing the percentage change by platform.

The blurred line between tablets and phones

Basically, the SEC wants to know why there's such a difference in CPC (that's cost per click, remember) between desktop and mobile. Google's response started with why its year-end numbers were what they were. But the juicy part for everyone comes toward the middle, when Google starts talking about how it's actually getting tougher to say exactly what a "mobile" platform is. Google started with:

We would also like to highlight the significant difficulties we see with the practice of breaking out CPCs and paid clicks — or any performance metric — by device platform. It is increasingly challenging to define what exactly a "mobile" platform is from period to period — and what it will be going forward.

That is to say that simply having two categories — desktop and mobile — doesn't take into account future categories of devices, nor does it accurately reflect how we use our current devices today. Simple enough.

Google went on to explain that "most industry observers would have included tablets (in addition to handsets) in their definition of mobile." I'm inclined to agree — we pretty much do that here as well. And Google notes that it'd been treating phones and tablets as members of the same category for a while as well, including in third-quarter revenue numbers for 2011 and 2012.

But we don't use tablets like we do phones, right?

However, as tablets gained momentum in the market, it became clear to us that their usage had much more in common with desktops than with handsets.

As more people starting buying tablets, Google noticed that they were being used more like desktop (or laptop) computers than phones. And that makes sense. You probably don't keep a tablet in your pocket. You're not pulling it out every 2 minutes to take a peek. It's more of an appliance that you use for a little bit, and then leave it be.

'Mobile' isn't a future-proof category

Ads on thermostats, oh my!This probably isn't what Honeywell has in mind. Or google, for that matter.

Now for the juicy part. Again, emphasis mine:

We expect the definition of "mobile" to continue to evolve as more and more "smart" devices gain traction in the market. For example, a few years from now, we and other companies could be serving ads and other content on refrigerators, car dashboards, thermostats, glasses, and watches, to name just a few possibilities.

ZOMG MOAR ADS IN MOAR PLACES!!!

Folks, that's just Google stating the obvious. As more and more devices become "smart," with touchscreens and connectivity and the ability to reach more people, companies might want to monetize them in some way. That's all. Google's listing possible platforms for ad delivery.

Our expectation is that users will be using our services and viewing our ads on an increasingly wide diversity of devices in the future, and thus our advertising systems are becoming increasingly device-agnostic. Enhanced Campaigns was specifically designed to help advertisers become more efficient in a multi-device future; rather than writing unique desktop campaigns, handset campaigns, and tablet campaigns, etc., Enhanced Campaigns allows our advertisers to write one ad campaign, which we serve dynamically to the right user at the right time on whatever device makes the most sense. Because users will increasingly view ads and make purchase decisions on and across multiple devices, our view of revenue is similarly device-agnostic.

Google didn't say 'Nest' — bloggers did

Google did not say it'll put ads on a Nest thermostat. I get why we used a picture of Nest in our original story. But c'mon, folks. Google didn't even purchase Nest until after it submitted these answers to the SEC. (Update: Engadget got a quote from Google pretty much saying exactly this.)

Google also didn't say it's going to do any of this stuff tomorrow. Google's just saying what any other company in its place would say. There are these potential avenues for advertising. Maybe we'll use 'em. Maybe we won't. But here's what they are, and they're not all what we'd consider to be "mobile." 

And so this "Enhanced Campaigns" system lets advertisers create a single ad campaign across phones, tablets and, eventually, other platforms. That's all. No interstitials between changing temperature settings. No pop-ups asking you to take a poll before turning on the heat.

Just common sense when answering the questions of a regulating body. Again, you can read the full answers here. It's a lot easier than picking up a pitchfork.

 

Reader comments

On Google, advertising, and invading your home appliances

92 Comments

As would I. Pushing advertising to previously sacred screens is a worrying trend, and I'm pleased that the market is sending a signal that this is a step too far.

A recent real world example is that LG just changed the privacy policy for their smart TV's to share usage data with advertisers, and if you don't accept then they take away access to the "smart" functionality. On a device you already own.

Yeah that's utterly ridiculous! It's one thing to sell an ad supported device, it's another altogether to strong arm customers into agreeing to new terms to use functionality they've paid for.

Of course it's not new, anyone own a PlayStation or Xbox?

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My Panasonic TV set has "ads" for their service. I turned them off. My Panasonic Blu-Ray had the same. I couldn't turn it off, so I returned it and bought a Sony.

Hopefully this stuff will become competitive differentiation.

Do you think it's possible that your Panasonic TV will get an "update" in the future that removes the ability to turn off the ads? Not sure why they would force them on one product and not the other, but that's annoying.

I had a similar experience, went Sony for the same reason. I'm not against ads, but there's a place for them. My tv (when not on a non-BBC channel) isn't one of them.

And maybe you should have done it right too, Phil.

Instead of writing the above carefully researched and heavily excerpted denial (excuse) for the previous story by JONNALAGADDA, you should have just yanked the story, issued an apology for hype and misleading headlines and moved on.

Instead you dance all around the issue making excuses, denying that AC said what it obviously did in fact say, handing out reading assignments, and trying to come out back in Google's good graces. Way to deflect!.

Being editor means you get the last word, and you never have to fess up to an actual mistake. So I don't expect you to do that. Haven't seen a "we were wrong, sorry" post here in all the years I've been reading AC.

But at least you could do is start your tirade, not with btichslap to your readers, but rather with a memo to your story editors, starting with Harish Jonnalagadda, about doing a little research, truth testing stories, and avoiding sensational headlines.

Come-on, you're better than this.

"Denying that AC said what it obviously did say" ...

Holy crap. Those voices in your head have learned to type.

I think we're perfectly capable of explaining what Google's said to the SEC while at the same time not exactly relishing in the idea of ads on our refrigerators. And that's what I did here.

lmao. You really do misunderstand the publishing business that bad, eh?

It's not unusual, unfortunately, for writers to write things differently than the editor might have preferred. Especially when the editor's not yet in for the day.

There is a lot of good conversation in this post. Your thread, however, is not among them.

Have read your (two) articles on the Google SEC reply. I thought your first article was good and useful. Harish Jonnalagadda did an excellent job in characterizing the situation clearly.

There is value in this article as well since the first may not have gotten the attention it deserved. However, I did note that the tone of your article appeared to mute the importance of the dynamic shift in ad delivery. Ironically, Google did not echo that tone in their SEC reply.

This is why I wonder if you (in your third from last paragraph) really meant to paraphrase Google’s comment about new ad delivery devices by suggesting Google said or implied "Maybe we'll use 'em. Maybe we won't"?

In fact, Google said: ". . .our expectation is that users will be using our services and viewing OUR ads on an INCREASINGLY WIDE DIVERSITY OF DEVICES in the future..."*

Nowhere Google's SEC reply do I see either the casualness or the ambiguity you posit is present in their reply.

It might be clearer if comments were folded into the conclusion of an article, not in the body as you deliver the facts. In this way readers can gain a better understanding of both the topic and AC's views on it.

* Google answer #1, next to last paragraph. http://www.sec.gov/Archives/edgar/data/1288776/000128877613000074/filena...

I think you're on the right track.

Google recognizes that phones and tablets aren't the only way to get advertising in front of eyeballs. So (in the section you're referring to — the first question) Google is explaining that ad campaigns will be simplified. One campaign for multiple forms. Or, as you quote from google, for the "increasingly wide diversity of devices in the future."

I don't think it's a dynamic shift in ad delivery, nor should it be a surprising one. (And nor should we think it'll supplant standard web display advertising). On the contrary, I think it's a very natural shift.

I did the exact same thing. An App is one thing that needs revenue but I don't want ads on something like a DVD player.

"Sacred screens" reminds me of how folks have come to worship the idiot box and all their other screens. There's nothing sacred about any of them.

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Agreed. Attaching the word "sacred" to something (in this context) is just a way of trying to justify a NIMBY response to something. Makes it sound more terrible if you attach a "scary" word.

I agree!!! I did not pay $250 for Nest to get more advertising. If there would be a cheaper nest version with advertisement, I would still not buy it!

BTW - I believe the reason Google did not answer the question is because they will be more aggressive with advertising then ever before. I already see the with adds in my GMail and YouTube - I tried to out-out but that doesn't work! In fact this sounds very similar to Facebook actually, which is very very bad thing in my option.

And along those lines; why I pay for premium channels (ex. HBO, Showtime, etc.). No ads! Well and typically much better content! :D

As we get better at ignoring ads, you can bet advertisers are investing big bucks in figuring out how to make ads that are harder and harder to ignore. Ever see the movie Minority Report?

I think the more ads that get thrown at me, the better I am able to shrug them off. The only thing that gets me every now and again is an entertaining viral video.

I just feel like this is gonna bite us in the future. Our attention span is dwindling as it is.

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Sonturn off the screen and read a book. No one is forcing you to use your smartphone or watch the boob tube.

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So Google bought Nest after the filing. Nest Labs was founded in 2010. Google has probably had their eye on them for a while. The "uproar" for this is warranted in my opinion. Granted people will say "Well don't buy smart appliances or devices" but how long will that be a solution? With the ever growing "smart" market it's only a matter of time before you cannot simply NOT buy a smart device.

This is the internet. Uproar is rarely truly warranted here. We're talking advertising on luxury devices, not villages being sacked and razed.

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I for one did NOT grab my pitch fork after reading the original story. Amazed at the number of people that did, though. Also consider that even if Google was moving forward with those ads in those locations, everyone who makes those products will too. So, how will you escape them all then? Just dodging Google wont be the answer.

"Google didn't say 'Nest' — bloggers did"

Well of course bloggers immediately jumped to Nest. Google is talking about serving ads on thermostats and Nest is the thermostat company that they own. Its almost hard to come to any other conclusion.

Except, as pointed out in the article, Google didn't own Nest at the time those statements were made. Google didn't get to where they are today by being run by a bunch of idiots. The Nest is a premium product, they aren't going to ruin the experience of that premium product with ads.

They didn't need to own the company to have a strategic roadmap for the future. They have a vision for where they want to be that they laid out the groundwork for in that letter and the acquisition of Nest just helps to bring that vision closer to reality.

They didn't pay $3.2B for Nest just to sell some hardware.

Are you really that confident that they wouldn't find a way, at least for generation 2? Did we think even a few weeks ago that Google would serve ads directly in our inbox?

For Nest? I really don't think they will. (Plus Google has said as much.)

Think of it as Nest, not just "a thermostat." The screen is off most of the time. It's a small, 320x320 round display. (I've seen some really bad mockups today using way too much of the diameter as visible space.)

Moreover, it's just not the sort of product you clunk up with display ads. I just don't see it happening.

For something more like the Honeywell I did that really bad Photoshop job on above? Maybe ... There's a whole 'nother question, though. Would other OEMs allow it? Would Google have to do its own thing?

Again, the SEC answer was a theoretical one. It simply was pointing out the obvious — more things we use have screens and are connected, and Google's not ruling any of them out. Except for Nest. ;)

How much time do you spend looking at your thermostat v. your smartphone screen? That's why you won't see ads on Nest.

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Maybe when you go to turn up the heat, it'll serve you an ad for sweaters. Conserve resources, bundle up! Also if the Nest generates ad revenue, maybe the price will come down. At its current price point, there's no way I'd own one.

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Google basically said nest. They just didn't use it by name. And that Honeywell is probably cheaper and does the same thing. I think people would be wise to give the minimum to Google. If you don't need their products use something else. Don't put all of your eggs in one basket. I know for me I could easily cut myself off of the entire Google ecosystem in 5 minutes and it wouldn't hurt. Using a different search engine would be the biggest pain but that is also the least targeted with my personal info. I suppose I am stuck with the Play Store.

Dude... the Honeywill image is a Photoshop job by Phil, the editor and author of this article. It's not actually a thing.

Bloggers may have said "Nest", but for me personally, Nest isn't Googley enough for me to get one yet. I am wanting new thermostats, but I am waiting to see what Google does.

Yeah. Let throw the word "privacy" into this discussion, because that's relevant and not completely misused constantly anyway.

You're way too optimistic, Phil. Of course bloggers jumped on the "ads on Nest" idea, because it makes for sensationalist click-bait headlines that drive ad revenue. Never let it be said that Internet media let facts get in the way of a monetized story.

That said, I'm not opposed to the outrage over the idea of ads on appliances. The more pitchforks that get snatched up at the start, the more likely Google and other companies will approach this idea with great caution and trepidation.

Every time I think I'd be OK with it in principle, I stop and think of what it might look like.

Like others have said here, I paid for the effing device. I'm not renting it. Don't show me ads.

Shocking - Phil again defends Google. I think Phil wouldn't mind if he caught Google in bed with his wife. Would probably want to join in and let Google go crazy on him.

I'm not defending anything. (And the fact that you're beating that same dead horse is as boring as it is uninformed.)

I'm not crazy about the idea of ads on my appliances either, for the same reasons as other folks here.

But the point here is that kids are reading WAY too much into these answers to the SEC without actually actually reading the answers to the SEC.

You seriously drag a man's wife into a conversation in order to make your point? What is wrong with you? Would you say something like that to a person face-to-face? Where I come from, you wouldn't have a functioning jaw for long if you said things like that about a man's wife. That is really sad.

I appreciate the clarity this article brings, but the previous article here at androidcentral was part of the hype that this article is calling out.

Why should this response stop the "Google is evil" train? Google is constantly increasing the scope of what it knows about us, including our GPS coordinates in real time, has barges of unclear purpose off the coast of major cities, is testing driverless cars and bought companies that make weaponized robots. While Google is <I>probably</I> not planning for violent overthrow of world governments, the consolidation of information and technology deserves scrutiny and pushback. While I mostly kid, leadership of the company can change tomorrow and "Don't be evil" can be thrown out completely with it.

I could see a place for ads in the "Internet of Things" space if they are done properly, not in your face. Using the smart thermostat as an example, say it monitors your air filter and pops up a notice that it's time to change your air filter and helpfully provides a few ads for where you can purchase a new one. Or for a general appliance, the smarts in it detect some type of maintenance needs and provides ads to local repair shops. Just popping up random ads for displaying would be pitchfork time though.

I have an electric company who subsidized my nest, and I couldn't be happier with it. Ads and privacy are relatives and I think their penetration in our lives is like the analogy of the frog in boiling water. We complain but do little to change it while we can. I agree with Phil, our wallets are our best defense against this growing problem.
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Phil, you're going to make me get all nit-picky. :o(

I'm not sure it matters that Google's statements were made prior to their purchase of Nest. Even from what you've quoted, it seems like their stance is that if it has a screen, that screen needs an ad on it. Their purchase of Nest is in line with that vision. And I think their crossing a line.

To be fair, it's a blurry line. After all, phones didn't used to have ads on them, but now we're all pretty okay with the ads on our smart phones. I think the difference is that our phones, like TVs and computers, are platforms where we seek content. And when you're looking for something it seems appropriate for someone to put a banner in front of you asking you if this is what you're looking for.

The same cannot be said of thermostats and appliances. Even though they have screens, their UIs are geared towards very specific tasks; you're not consuming or looking for content on them.

Maybe I'm splitting hairs, but the distinction strikes me as important. Am I crazy?

Well said! I think this states what a vast majority are thinking. :)

Although personally, I reserve the option of using ad blocking as I see fit.

I think you put it perfectly!

Except for the Nest stuff. In fact, Google's came out (in an update to Engadget) and said it in no way meant Nest — which, again, it never said in the first place.

Again, I don't think I want to see an ad on a big wall panel. Certainly not on my TV. On my fridge? I dunno. Whatever. My point here is that all Google was saying was that phones are different than tablets, and there's this world of other screens on the way that it as an advertising business (and its investors) will have to consider.

Didn't see the Engadget update. Thanks for linking me.

I appreciate the distinction being made. That they haven't mentioned Nest is important. However, the idea that they might advertise on Nest isn't much of a stretch. They mentioned advertising on thermostats to the SEC and then they bought a thermostat company. I don't think it's unreasonable to suggest that those dots might be connected.

Eh, maybe I'm just cynical.

I'm off to sharpen my pitchfork! I'm out of torches, though. Does anybody have fuel and such? We should organize this thing. Maybe advertise...

Google is entering this field to collect data about you down to every detail (when you are at home and not; the contents and usage pattern of your fridge, oven, stove, washer/dryer, etc.) to sell to 3rd parties. So we sharpen our pitchforks about ads, which is just the visual reminder that this is what they are doing? I feel about Google how I feel about the NSA - I am probably not interesting enough to warrant individual attention and the surveillance I have submitted to is probably not going to harm me personally (and may even help! better info on Google now, thwarting terrorist threats), but I don't have to like it.

I voluntarily give my information to Google. And at any time I can stop giving them that information by buying a new phone, starting a non gmail email account, and by changing browsers and search engines.

I can, as Phil says, vote with my wallet.

On the other hand, I cannot stop the NSA from archiving or reading my emails and text messages.

And like you, I don't particularly like that fact.

Having said that, comparing Google to the NSA is inappropriate. If you don't like what Google is doing, the adult thing to do is stop doing business with them.

Why is it inapprpriate to compare the two? The NSA is charged with protecting the safety of US citizens, Google as a corporation exists to make money. You can opt out of NSA surveillance by leading a completely analog existence; you can opt out of Google surveillance by not using any of their services. It is very hard to live a life online without using any Google services, with YouTube (nothing remotely compares in terms of content), search (which remains the best engine), gmail (used by my work), Google Maps (also the best). It is a credit to Google that they make their products and services excellent and ubiquitous to the point that it is more annoying to opt out than to participate, but at the same time scrutiny of their business practices and data aggregation by the EU, for example, is quite reasonable.

It's inappropriate because one is voluntary and the other isn't. I'm not sure I posses the vocabulary to explain the distinction (or the importance of said distinction).

There are many alternatives to Google's services. Many of them are very good. YouTube, a service that doesn't have a decent competitor, doesn't require you to have a Google account to view it's content.

As for opting "out of NSA surveillance by leading a completely analog existence," do you think anyone would find that reasonable? We live in an increasingly digital world and quality of life suffers if you aren't apart of it. You might as well suggest that people can avoid the NSA's activities by living like cavemen or by committing suicide. You'll get as many takers.

I'm not suggesting that Google's practices aren't alarming. Big data can be scary, and you should be careful. But the differences between the scope of the NSA's scope, authority, and power and Google's mean that you might as well compare apples and oranges.

To compare two things doesn't imply a lack of distinctions, I was just stating that how I feel about the two is similar - annoying but probably does not affect me personally. Obviously if I were truly paranoid about Google, I would not be here, own an Android phone and use their services. Sharing your data with Google to sell to 3rd parties is "voluntary" but there are a series of minor annoyances that arise if you don't agree to their TOS (I don't know what eventually made me break down and actually log into my Google+ account). If it does not make you uncomfortable at all that the scope and power (to use your terms) of Google continues to increase and that the information about you that they are selling to 3rd parties is getting more and more detailed, then more power to you.

Google never sells your data to third parties. It uses the data internally to apply relevant ads from third parties and will delete all of it on request. Very important difference.

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This is what they say and we have to trust that this is all true, but the whole process is totally opaque to consumers (how is this data stored? what kind of identifying info is there? how easily can it be hacked? and what data is actually completely deleted on request and what remains in some form on some server? what kind of info can 3rd parties glean indirectly?) This is why the SEC, the EU, Al Franken and the rest have to act on our behalf because as consumers we are powerless to make those kinds of inquiries.

One day, with Google, everything will have ads.

I read the whole article and while the comments to the SEC was generalized, they are NOT out of the equation. Why you ask? I'll tell ya. Everything Google has bought has generated ad revenue. They sell the hardware at a low cost (moto x, nexus, glass, and etc.) but make the money off the ad revenue putting it your hands. More hands, more money. So with Nest, why would this be any different? Just to have the "connected" of things? I don't think so.

Man, I don't even have the time to explain how much of an idiot you are and how far off base you are...

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Must have a little wee wee and have to name call to make your self feel better huh?

Google makes most of their revenue off ads.Because, well, they're an ad company. Period. More people with devices that serve ads whether it be hardware or software, is in their BEST interest. Period.

Glass is what 1500 bucks now? But Google did say when it's actually sold it won't cost as much. But yeah, 1500 ain't cheap.

Personally, i like the idea of relevant coupons being delivered to a screen on my fridge.

If i didn't i'd bet there will be an "adblock for the fridge" of some kind that i can turn them off with.

ZOMG, Android Central must already be buying ads on my Nest because why else would Phil be defending Google!!!!! 1!!11!

Seriously though, I don't see what the big deal is. Google knows how to do ads right and is continuing to get better. Ads that are relevant and useful and don't interfere with the user experience can actually be hugely beneficial to users.

For example, when I'm almost out of milk, I would LOVE my refrigerator to say... "I see you'll need milk soon. Here a price comparison of milk at grocers in a 5 mile radius. And here's a coupon for $1.50 off milk at grocery x. Select your grocery and I'll send navigation to your car dash and send the electronic coupon to your phone. "

I think that's an "ad" that most people would love.

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Great Idea! And I'm sure they have thought of something similar but still, great idea.

Here's the problem though. On some things, what you described an be useful. On others, not so much. But it's the "I own it" mentality. If I own something, I should be able to have these ads on or off. My choice. Not theirs. Google (and others) are making it more difficult for you to "own" your product serving you ads whenever they please.

Sooner or later, it will be intrusive as they figure out what is considered "mobile" and "connected devices". SIC, the fridge. You bought it cash and outright. It has a screen and the software is powered by Google. In order for you to use that screen that's plastered on the front you have to agree to their terms of service. That service is for ads to be placed on the screen that might or might not be relevant to you. So if you want to use it's features, you have to agree. No internet? No problem! It has cellular built in! Some want it but some don't.

Point is, some do-not-care about coupons, ads, or information on everything they own. If this isn't taken care of now, soon, there will be ads about new toiletry products when you flush your toilet.

This comes down to many of us having fear over our changing business relationships with companies. The norm was to pay for something, hope it worked fine (or great), and not have much of a relationship with the maker again unless we go back in to the market for another item. This changed with ad supported services like Gmail where the farm is given away for nothing except some screen real estate (and much more personal data, unlike traditional TV and print advertising). Now this model is spreading to older product categories and this is the change aversion or outright dislike of that model manifesting itself.

It is good that AC took the time to clarify what was said vs what was heard, but this model and the capacity it has to change our lives is a scary one nonetheless.

There's nothing smart about adverts being in places they do not belong, like refrigerators.

And the promotion of the concept of 'relevant ads' needs to stop, Google uses this phrase in the incorrect understanding and suggestion that it is something we prefer over irrelevant ads.