Forbes traces Google’s history, discusses its AdWords program and says that Microsoft wants in on the search business.
In Adwords, businesses use an auction system on the Google site to bid for the most popularly searched words and phrases. Google gets paid every time someone clicks on the ad itself. Bids start at 5 cents per click but can go to $15 or more for high-end products like helicopter parts. Critically, Google demotes a sponsor to a lower rung on its page if its response rate is too low, elevating a rival’s ad for getting more clicks. This imposes a built-in pressure on businesses. They’re even asked to revamp wording if less than 0.5% of viewers click on their ads. By contrast, many traditional banner ads get click rates of just 0.3%.
This could transform the $193 billion business of direct marketing. Junk mailers constantly work on narrowing the recipient list to the people most likely to respond and on jazzing up the envelopes to trick them into looking inside. Google ends the guesswork. People directly declare what interests them, and Google feeds them an appropriate ad. The ad’s few pitch words are critical. For big corporate accounts like Dow Chemical, Google account executives continually recraft the message, like a haiku of commerce, aiming to maximize the click-through.
As everyone waits anxiously for Google’s IPO, its revenues have risen from USD 20 million in 2000 to a projected USD 700 million this year. I came across this post on VentureBlog which quotes David Drummond, Google’s General Counsel, on the four key reasons for Google’s success:
1. Technology. Along with its innovative approach to page ranking, Google is a purpose-built hardware company, building all its own servers from components it buys directly for their manufacturers. Google now operates the world’s largest distributed computer system.
2. Business Model Innovation. By perfecting the nature of targeted ads, Google not only has created a highly effective revenue generator, it has produced what it hopes to be a better experience for its users. It is Google’s goal to make their targeted ads at least as relevant and useful to users as the search results themselves.
3. Brand. A European study recently determined Google to be the number one most recognized worldwide brand. Indeed, Google has become a verb (“I can’t wait to get home and Google him”) which poses real challenges to a company seeking to protect the strength of its mark.
4. Focus On The User Experience. Product decisions at Google are driven by optimizing for the user experience first and for revenue second. The folks at Google firmly believe that the better the user experience, the more easily money will follow.
A related story in Forbes looks at the different approaches being taken by the different search companies:
[Overture’s] Flake plans to add machine learning, which improves each search by drawing on past efforts. Data from human editors who currently review key words for their relevancy to Web pages will be keyed into the machine learning process.
Ask Jeeves makes semantic distinctions, so that “curry,” the spice, will be distinct from “curry,” the horse care. Like Google, it judges a page’s utility in part by how many other people have linked to it. Yahoo wants a guided search, leading users through a series of steps to find the perfect page. Microsoft wants search that remembers everything you have seen, letting you call it back up by date, topic or what you were doing when you saw it–surfing, reading e-mail, etc.
Google does not want human entanglements. Norvig plans to solve the curry problem with software tricks. “Search should be like HAL in 2001,” he says. “It should understand what people say–hopefully without killing anybody.”
Google is likely to introduce blog search soon.