A higher priced ad means that the provider is charging extra for the service. Those charges are passed directly to the consumer. If you have a business that is small niche of larger area you will be priced out of ads by larger, higher charging competitors. This squeezes out small and creative organizations and leaves the overall market with a few cookie cutter services that charge much more than the value of the product or service. Consumers without a lot of discretionary income can't find a service to use. Small businesses cease to exist.

Competition for a limited resource (ad space, land, wireless spectrum) selects for companies with higher margin. In one understanding, higher profits mean the business is providing higher value. In another, it means the business is sucking up excess value that could be had by upstream consumers.

Ad space can be seen as land rented out a user request at a time.

Having more competitors to Google will help only a little bit. There's only so many user request x ad space x keyword units to be split among the companies. So the total amount of "land" advertisers bid for remains constant, so prices will be roughly similar. The only difference will be that Google will command a smaller cut of the auctioned price. I doubt that will make as much of a difference as an influx of entrants to the bidding market. Some Google keywords are 10s or 100s of dollars; the Google cut isn't driving hat, but the value of a new customer acquisition.

Disclaimer: I work at Google but not on ads.

When there was more competition for Google, and when ads and links for other Google products didn't take up half the page of search results, there was much, much more eye ball space, even though there were many fewer eyeballs. I'm not going to make the case for causation vs. correlation here, but this is part of the often mentioned general deterioration of the Internet.

In addition to the higher ad costs leading to higher costs for the consumer and the resulting funneling of those consumers to only a handful of outfits, a major point from the article is the "Smart Campaigns". Google is exploiting small businesses' lack of marketing expertise to push them, often persistently, to using automatic, algorithm based targeting instead of manual keyword targeting. The result is that a lot of the money they put up for advertising goes into a black hole devoid of useful exposure due to the useless keywords that the algorithm picks for them.

They're not just being outbid by larger outfits, but are being lead to believe that they can compete with said outfits by using Google's "Smart Campaigns". Google gets the money from both, but one is being relegated to space that leads to nothing.