Sunday, August 07, 2005

The Man Who Saved Online Advertising

The Man Who Saved Online Advertising
John Battelle has a posted a neat little excerpt from his new book which describes how Bill Gross went about creating GoTo.com, whose pay-per-click model now generates the bulk of online advertising revenues.

Bill's insight was that some clicks were worth more than others, and that search engines were the best means of divining intention. The problem was that Bill needed a lot of advertisers to make his model work. The solution? Offer a minimum bid of $0.01 per click, far below what anyone else was offering.

Bill counted on being able to build enough momentum such that the bidding wars between advertisers would boost the average CPC beyond his cost of traffic acquisition.

Bill hoped that someday people would pay $2 per click.

Little did he realize that someday people would pay $100 per click, and that his creation would be propping up the value of the world's most valuable media company.

Not all of Bill's ideas worked, but you have to give him credit for this one!

2 comments:

Justin K said...

"Back in 1998, the idea of basing a business on the idea of pay
per click was viewed as a wild and rather dismissable gamble. After
all, if you’re Yahoo or AOL, why would you ever want to be held ac-
countable for the performance of what you sold to your partners? If
marketers couldn’t turn the traffic into profits, that was someone
else’s problem."


I wonder if that was the case, or were the "tiffany networks" so worried that consumers might question their purity of search results that they felt it was something that they did not want to be associated with. Could they have felt that going to bed with advertisers would tarnish their reputation with their visitors?

Paid search is something that seems so straightforward and logical that I cannot fathom that the larger search companies:

a) Never thought of it.

b) Didn't jump into it when they saw GoTo.com making a boatload of money off of it.

I wonder if anyone who was at Yahoo/AOL/AltaVista at that time could share some of the thought processes going on at that time.

Justin K said...

http://news.com.com/Overture+proves+search+skeptics+wrong/2100-1024_3-1025687.html?tag=nl

"The company, which pioneered the paid search model, was widely panned when it launched, especially by purists who worried that the paid search model would tarnish the freewheeling information hub of the Web. Critics including consumer advocate Ralph Nader accused paid search companies of misleading Web surfers. An influential technology columnist in a 1998 comparison of search engines said Overture's paid model could result in a "useless and distorted set of hits."