Advertising’s Holy Grail?

The Economist writes that “the holy grail of advertising is within reach.”

HALF the money I spend on advertising is wasted, John Wanamaker, the owner of America’s first big department store, allegedly said in the 1870s. The trouble is, I don’t know which half. It has been the advertising industry’s favourite witticism ever since. But it may expire soon, at least in the online world.

This week, Microsoft unveiled a new system for placing advertising hyperlinks on its MSN internet search site that could help it to close the gap with Google and Yahoo!, the two most popular search engines and the leaders in so-called paid-search or pay-per-click advertising. (MSN currently uses Yahoo!’s advertising technology.) The basic idea behind pay-per-click is that advertisers bid in an online auction for the right to have their link displayed next to the results for specific search termsused cars, for instance, or digital camerasand then pay only when a web surfer actually clicks on that link (hence pay-per-click). Since the consumer has already expressed intentfirst by typing in the search terms, then by choosing the advertiser’s linkhe is more likely to make a purchase. From the advertiser’s point of view, this reduces some of the waste that bothered Mr Wanamaker.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.