Google as Auction King

Ryan McIntyre has an interesting viewpoint:

To me, the most profound aspect of Google’s pay-per-click model is the fact that it is powered by an auction marketplace that resembles eBay’s, only it is far more efficient and is sublimely frictionless, with Google collecting a much larger share of each transaction since they are not only the marketplace, but also the supplier and seller of the inventory. Even more impressive is that Google runs a real-time auction (which is really a hairy multivariate optimization problem that would impress even the brightest Wall Street quant) to serve advertising links every time someone searches on Google or views an AdSense-enabled page.

To put this in perspective, the NYSE and NASDAQ see average daily trading volumes in the low billions, while Google is certainly processing and delivering a comparable order of magnitude of advertising auction transactions every day given the number of searches performed daily coupled with the much greater number of page views generated by AdSense publishers.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.