Arbitrage in Google’s Local Services Ads: What you need to know

Many great articles have exposed the seedy underbelly of Local Services Ads spam and fake reviews. There’s one on Search Engine Roundtable regarding fake reviews and another on Search Engine Land where Len Raleigh talked about location spam, reviews, names and ads.

I recently learned from a client that the dark hole goes a little deeper than just being misleading on locations and reviews.

This discovery will make those in the local SEO space recall what was seen in the personal injury and the garage door spaces.

Fighting spam in local search

In the last two years, we have seen location spam and review spam proliferate.

There were also large lead gen networks involved that would trash an area with fake profiles, bolster them with reviews and then turn around and sell those leads to merchants – usually the same merchants they had buried.

Several people in the local SEO space banded together and helped reduce that volume of spam. And eventually, Google took some action.

While that spam is still around in some form to this day, it appears that they have moved into another area that Google is not good at – or does not want to police actively.

As fellow digital marketer and SEO expert Dennis Yu told me:

“Spam in the garage door space is just as bad as it is in the personal injury law space, it is unfair to businesses and consumers. As marketing agencies embrace LSA more, this has to be taken into consideration as any move you make can be disrupted by bad actors at any time, and it feels as though it is hard to get rid of.”

Spam and fake reviews on Google’s Local Service Ads

Local Service Ads (LSAs) allow consumers to find companies that Google feels they trust because they have passed multiple checks on personnel backgrounds, licenses and insurance, among others.

The big problem here is “trust,” which seems to be easily manufactured and cheated.

We need to know how LSA works to understand where the issues come in.

Entities are background-checked and “Google Guaranteed” or “Google Screened.” Here is Google’s guide on how to qualify.
Google presents providers from those which have been verified. The result is three providers that are returned at the top of a query response (in a row of three).
The customer calls the provider to schedule an appointment, with calls routed through Google. Options exist for messages and booking as well.
The company called is charged for the lead (usually $25 in the garage door space).
A review request is made, or a link is sent. Google does not verify the reviews. However, they state that when they can tie the review to a job booked from LSAs, they verify the review.

LSA was supposed to be a great way of combating spam, but now appears poised for the dark side.

Illustrating the issue

The two companies highlighted in the screenshot both serve Pasadena – and they appear to be owned by the same person (based on the following table).

The issue? It would be a violation of LSA policies.

My source delved deeper and saw that the same people owned many companies in the area.

The table above shows that the same actors in local service ads own multiple entities. To uncover this, a third party looked at licensing owners for California garage door companies. These companies were in LSA at the time of the data collection.

Below is the same list of companies with their related LSAs. (At the time of writing, three were removed from LSA.)

AAA Garage Door Services (removed)
Socal Garage Door Services (removed)
Jordan’s Garage Door Service (removed)

*An affiliated entity is one with overlapping ownership identified through the California Contractors State License Board (CSLB).

Based on research from a third party, the above companies own multiple entities – some of which are also in LSA.

There is a pattern of creating entities for the sole purpose of getting into LSA. We have successfully removed spam LSA entries by looking at the fake entitles behind them. (More on why that is important later.)

So now we have multiple entities. What to do next? How about getting fake reviews?

As astutely noted in Raleigh’s article, it is super easy and cheap to get “verified” LSA reviews.

Sidenote: A “verified” LSA review is not really verified per se. A unique link is generated after a job is completed, which you can send to an LSA customer, but you can also just hand out the generic LSA review link and get reviews – from anyone. Even those who left a Google Business Profile (GBP) review. It’s not super trustworthy and can be easily gamed.

So how are these entities getting non-bought, fake reviews? It’s quite simple.

Call the “company” to schedule a fake appointment on a Google Local Service number.
After the scheduled time, leave a review via the review link.
The cost of this review is the cost of a call to Google Local Service. If the call is to a listed local provider when it is not in the 3-box, this is around $25 for the “lead.” One company was quoted $4,000 for 1,500 reviews.

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How the Local Services Ads arbitrage works

The LSA arbitrage goes something like this:

Create licensed entities and register with the Secretary of State, without having any employees. Only required documents are needed to pass LSA checks.
Buy or otherwise seed the profile with fake reviews from a fake GBP and/or with “verified” reviews on LSA.
When a lead comes in, they subcontract that job to an unlicensed individual or company.
The lead buyer shows up for the job stating the company canceled and they can complete the order. This leaves the consumer dealing with an unknown individual or company that they will never be able to track down. The consumer is usually overcharged and sold parts/services they do not need. (Sound familiar?)
Create more entities.
When bad reviews start happening, turn off ads and turn on new entities.

Google has no knowledge or quality control over subcontracting between the entities it licenses and outside entities that ultimately run the jobs. (To be fair, this could be hard to detect right now, but some mechanisms could be put in place to discover it.)

That said, Google says they investigate allegations of subcontracting on LSA and enforce as appropriate, so report it if you see it.

Ultimately, it is with a combination of strategies that bad actor companies can:

Dominate access to customers, burying good merchants.
Have no constraints on poor service or negative consumer experiences.
Conduct core activities, such as posting fake reviews (against U.S. Federal Trade Commission guidelines) and subcontracting to unlicensed entities, which are illegal. Yet they seem to be able to get away with no consequence for now.
Engage in GBP fraud.

What has Google said?

When I asked our contact at LSA about this, I received the following statement from a Google spokesperson:

“We have strict policies in place for Local Services Ads to protect people and advertisers from industry-wide abuse and fraud. We are committed to fighting fake content and reviews in local ads and listings and are investing significantly in new enforcement systems that help protect both users and providers from abuse.”

In another meeting, I was informed this is going up to the highest levels in LSA and also to Google Legal, so there may be some change here in policies.

For context, Google has previously reported that to help people find reliable local information in 2021, they:

Blocked or removed more than 95 million policy-violating reviews, over 60,000 of which were taken down due to COVID-related instances.
Took down more than 1 million reviews that were reported directly to them.
And as a result of continued advancements in their machine learning, their technologies and teams blocked or removed more than 190 million photos and 5 million videos that were blurry, low quality, or violated Google’s content policies.

Why is this LSA arbitrage a warning sign?

There was a specific cycle when the personal injury and garage door spam started. Spam would pop up in major states/metros, like California, New York, Florida, and Texas.

They would stay in those metros for about six months and then start to spread across the U.S. Based on reports, these are the metros they are in now.

Actions we can take

Getting Google to take this seriously seems like moving a mountain and they do have many legal hoops to jump through. They could also be disincentivized to act simply because the “proof” is hard to find scalably. And, let’s be honest with ourselves, this is a money-making platform.

Regarding making money though, if the bad actors are cleared out then good merchants will spend as much as they can to get leads. I have some customers with $100,000+ of weekly budget!

Here are some ways search marketers can take action.

Prevent repeat abusers from simply creating a new entity to work from. Document and report your proof to Google.
Report fake GBPs and LSAs to the FTC. (Note that Google would like the opportunity to look into any alleged fraud before escalating to the FTC.)
Raise pressure on Google to address the issue.
Raise consumers’ awareness of these issues through industry outlets.

What can Google do?

Part of the value of LSAs to a consumer is in knowing that a contractor is real and is going to be there should there be a problem. Google performs background checks on employees. However, it cannot perform background checks on a changing pool of outsourced subcontractors. Google can make it clear that subcontracting leads to another company or individual is a policy violation (and in some states, like California, a violation of state law). Google can also suspend reported LSA profiles while investigating.
Enhance the ranking algorithm to assess the reliability of the number and rate of reviews received based on the employees in the company. For instance, if a company has one employee, how could they get 1,500 reviews in less than a month? If there are hundreds of reviews arriving between midnight and 6 a.m., there might be a problem.
Hold abusive licensing groups accountable for the violations of their other companies.
Do not allow multiple companies with shared ownership to compete for the same geographic region within LSA.

We should have seen this coming

The Local Services Ads platform is still relatively young.

Marketers should have seen this coming. Google should have, too, given all their experience with spam and arbitrage on Google Ads.

Google can do better. Hopefully, they can take this as a call to action to step up and do the right thing, no matter how difficult it is.

It will cost money in infrastructure and loss of ad revenue, but the upside is that real merchants will spend money for real leads. Consumers will ultimately have more confidence in the platform. That is a win-win in my book!

Thanks to those in our industry championing the effort to raise awareness of these issues.

Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.

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