Washington Post has a detailed discussion on the strategy:
The auction market for search terms is a central part of its growth strategy.
Every advertiser willing to pay at least a nickel gets the right to place an ad, but only the top bidders as determined by Google get placement on the first page of search results.
Google did not invent the concept of auctions for search terms. That distinction belongs to Overture Services Inc., which is now part of Yahoo Inc., Google’s biggest competitor. But industry experts say Google refined the bidding process and attracted thousands of businesses to participate in its giant marketplace, where consumers looking for information online carry out hundreds of millions of searches daily.
Google also made it extremely easy for businesses large and small to sign up and start bidding. All a company needs is a credit card so it can pay the search engine every time someone clicks on one of its ads.
“You can launch a Google ad in 10 minutes,” said Dana Todd, executive vice president of SiteLab International Inc., an interactive ad agency. “It is a ready-made market.”
Google’s business model reflects that twofold desire. In many ways, the search engine has come to resemble a free-circulation newspaper that makes its profit by selling ads. In Google’s case, the company gives away the search engine for free to Internet users seeking information on the Internet, and then, like the newspaper, makes its money on clearly marked ads.
One difference is that in a free-circulation newspaper, top dollar can buy prime positioning for ads. But on Google, just being the highest bidder doesn’t guarantee that an ad will appear in the top-tier position.
The ranking of ads on Google is the product of two factors: the price a company is willing to bid on keywords and the frequency with which consumers click on the ad. Even if a company bids higher on certain words than any other firm bids, if consumers are not clicking, that ad will move down to a less prominent spot.
Google said it takes this approach so that computer users see the most relevant ads first. Industry experts say the practice also makes good business sense since Google gets paid only when consumers click on an ad.
This year, the Web completes 1- years. WSJ has an article which asks people to reflect on the period:
IBM’s Linda Sanford: Ten years ago, when I was helping lead our mainframe business through a period of dramatic transition, we weren’t using the Internet internally. We sent e-mail through a trusty old “green-screen” system, no pictures, no cool graphics. Our idea of sending an instant message was leaving a post-it on a colleague’s door. My only recollections of using the Net back in its early days were to browse for product information before making a purchase or to check weather conditions before I traveled somewhere. Finding information, mainly.
Michael Cleary of Bank One: In 1995, Bank One started posting information on checking accounts and loans at bankone.com, basically providing electronic brochures for the relatively few consumers using the Internet back then. Soon, we added access to accounts and then online bill payment. By January 1999, the Internet had picked up steam and we became the first lender to approve home-equity loans online — within 50 seconds after an application was submitted. Electronic tax preparation and filing followed, along with other services. Then we got really bold. That same year, we launched WingspanBank.com, a bank that didn’t need branches.
10 years ago, I had a business that was struggling and nearly extinct. It was then that I went to the US for a couple months to figure out what to do next and experienced the Web for the first time – via Netcom’s NetCruiser account. It was in 1994 that I put the business plan together for what later became IndiaWorld, the first Indian portal on the Net. Seems such a long time ago – almost part of another era…
Lee Gomes discusses TV on the Internet in the WSJ:
A growing number of big content companies are putting programming from “regular” TV out on the Web. Walt Disney, which also owns ABC and ESPN, has been especially aggressive in this regard. So has the BBC, which already has most of its radio broadcasting online. It announced last week that it would be putting much of its TV up, too — though initially as a very limited test inside the United Kingdom.
Sports is another growing source of Internet TV. You can pay $14.95 a month and watch Major League Baseball games at your desk — or even pay-per-view cricket, courtesy of Ireland’s Setanta.com.
Don’t go rushing over to your PC and expect to see a high-definition picture with Dolby surround sound. Video on a personal computer, while better than the matchbook-sized images of a few years ago, is still confined to a relatively small portion of the screen, and it offers quality levels that would get booed out of most living rooms.
But it’s slowly getting better. In Asia, connection speeds are already so good that the Web can be used for full-blown, couch-potato-style TV. In Hong Kong, a new breed of Web-TV suppliers gives you a set-top box that lets you plug in an Internet cable; you then watch TV just as you would with cable or satellite. (Incidentally, you don’t have any Microsoft software controlling things, despite the strenuous efforts of that company to make its player software a part of all Internet-enabled TV viewing.)
In the future, as networks get faster and new kinds of easy-to-use Internet-aware devices are sold for the living room, the role of the Internet in TV will only grow.
And that is where the media-disintermediation business comes in. Disintermediation means getting rid of the middleman, and right now, cable and satellite companies are middlemen because TV is whatever they say it is. But what if you could connect directly to, say, “The West Wing” without Comcast? Without, even, NBC? It would be the video analogue of getting your music directly from the artist. You wouldn’t even need a TiVo, because the whole world would be your TiVo.
In the end, “watching TV” is likely to take on all sorts of new meanings, including catching a pay-per-view game on your cellphone while sitting on the bus. Kids today, who send instant messages to friends while watching music videos while doing their homework, are already tuned into this emerging multiscreen, multimedia world.
Yuvaraj recommended Future Brief, which “provides services to the busy professional who wants to remain aware of trends in a rapidly changing world, yet not be buried under a mountain of information.” From the introduction:
Quantum physics, terrorism, Moore’s Law, global warming, increasing human migration, incurable deadly viruses, ever more sophisticated surveillance, the list goes on and on. We speak of “global community”, but can forget that community-building has always been a painful experience in human history. The reward potential is balanced by the risk potential. Neither should be ignored.
Scientists today speak of the “NBIC convergence” – the interaction of advances in nanotechnology, biotechnology, the information sciences, and the cognitive sciences. Future Brief takes one step back and looks at the greater convergence of the accelerating changes in science and technology with the equally rapidly accelerating changes in society and politics.
Future Brief is an organic, growing resource center. What you see now is only a beginning. Our purpose is not only to provide commentary, but also to provide services to those with an interest in global convergence. This convergence is of critical importance to all of us today and to those who will follow us in the future. We can either choose to deal constructively with it now or be forced to deal with it abruptly following a global catastrophe. We opt for the former.
India is in for alliance politics. The Congress by itself has just over half the seats needed for a majority in Parliament. As such, it is dependent (as was the BJP earlier) on a number of smaller parties for support. The problem with coalition politics is that the chain is only as strong as its weakest link. India’s recent history shows that smaller the size of the party, the greater is its greed for power and influence! So, it is entirely possible that a few can hold the country and its policies to ransom whatever be the good intentions of the largest party. That is where phrases like Common Minimum Programme come in. This effectively has the potential to translate to Cannot Make Progress.
What the Congress leadership needs to tell its partners is that they need to take the oath of stability. It should go something like this: By agreeing to support the Congress, we hereby agree that we will not leave the government till the next elections are called in 2009. We promise not to make unreasonable demands for petty gains. We will respect the decisions of the Cabinet and the Prime Minister. We also promise not to make irresponsible statements to the media.
The government and its key decision-makers needs to be assured that it will be in power for the next five years. Only then can we expect some semblance of smart decision-making focused on the long-term. If a minister knows that the next decision made could be the last (because some 5-member collective decides it is not good and threatens to withdraw support), then we will not make the tough decisions that India needs to build on the platform of the past decade.
Businesses, investors and markets need predictability. Uncertainty is the biggest enemy of the finance world. India needs capital for growth, and this capital will only come if there is stability of governance. This is the first assurance that the new government needs to give us and the world. The goal should be to embrace and extend the policies of the past, and not undo them just because they were done by a different government.
The quality of people chosen to govern India will say a lot about what we can expect in the coming years. If the Prime Minister panders to the various factions, then we can expect the worst and a throwback to the past. If, however, the PM courageously picks the right people for the right jobs, then we can be rest assured that there is hope for good, clean governance. The PM needs to choose ministers on the basis of competence. In fact, this will be the first acid test for the PM.
It is not an easy decision. The people coming to power have been without it for many years. There is hunger (for authority) all around. The people selected will mirror the governance we can expect. There are many good and capable people will they be allowed to govern is the question. I realise that what I am asking for is probably not going to happen many of the plum posts will go to the ones whose support is critical for survival. And that is where the leadership skills of the PM come in. There is a difference between forming a government and providing good governance. The coming days will make it clear what we can expect.