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!