About Search Marketing

PAID SEARCH

PAID SEARCH - RHS

PAID SEARCH - FEATURED

IN THE 1990s, STANFORD STUDENTS SERGEY BRIN AND LARRY PAGE DEVELOPED A SEARCH ALGORITHM

THEY TRIED TO SELL THEIR SEARCH ALGORITHM TO YAHOO FOR $ 1 MILLION

Source: Hal Varian’s Berkeley Lecture on Search Economics

THEY FOUNDED GOOGLE IN 1998 AND WENT PUBLIC IN 2004

AROUND TEN YEARS AGO THERE WERE MANY SEARCH ENGINES

TODAY, THERE ARE EFFECITVELY 5 PRIMARY SEARCH PROVIDERS

comScore April 2008 Search Engine Rankings

AND 3 PAID SEARCH PROVIDERS

Based on June 2008 Covaris numbers reported at mediapost (msn is inferred)

PAY PER CLICK MODEL

$0.25 x 10000 clicks = $2500

$1.00 x 2500 clicks = $2500

$10.00 x 250 clicks = $2500

GOOGLE’S ORGANIC SEARCH GOAL IS USER SATISFACTION

GOOGLE’S PAID SEARCH GOAL IS USER SATISFACTION

ADVERTISER SATISFACTIONMAXIMUM PROFITABILITY

PAY PER CLICK MODEL

$0.25 x 10000 clicks = $2500

$1.00 x 2500 clicks = $2500

$10.00 x 250 clicks = $2500

WHY AD POSITION MATTERS – EYE TRACKING

Source: Jan Pederson’s Search Quality Presentation at Berkeley (2007)

PPC - BIDDING

ashtonsd90.com bids $1.38

ritzcamera.com bids $1.17

shopcartusa.com bids $3.23

ashtonsd90.com bids $1.38

ritzcamera.com bids $1.17

shopcartusa.com bids $3.23

HOW RELEVANT IS THE LANDING PAGE AND AD?

RANK THEM

ashtonsd90.com bids $1.38

ritzcamera.com bids $1.17

shopcartusa.com bids $3.23

NORMAL AUCTION

ashtonsd90.com bids $1.38 , ranks 2nd and pays $1.38

ritzcamera.com bids $1.17, ranks 3rd and pays $1.17

shopcartusa.com bids $3.23, ranks 1st and pays $3.23

VICKREY AUCTION (VCG)

ashtonsd90.com bids $1.38 , ranks 2nd and pays $1.17

ritzcamera.com bids $1.17, ranks 3rd and pays ???

shopcartusa.com bids $3.23, ranks 1st and pays $1.38

GOOGLE AND YAHOO USE A GENERALIZED SECOND PRICE (GSP)

AUCTIONGoogle’s customers are ranked based on a quality score * their bid and pay slightly more than the next ranked bidder not exceeding their maximum bid.

PRICE AND RANKING ARE RECALCULATED EACH QUERY

AD RANK = BID x QUALITY SCORE (QS)

ashtonsd90.com 1.38 x 4 = 5.52

ritzcamera.com 1.17 x 6 = 7.02

shopcartusa.com 3.23 x 1 = 3.23

HYPOTHESIZED PRICE = NextPlace(AR) / QS +.01

ashtonsd90.com 1.38 x 4 = 5.52 pays 3.23/4 = .82

ritzcamera.com 1.17 x 6 = 7.02 pays 5.52/6 = .93

shopcartusa.com 3.23 x 1 = 3.23 pays minimum .05

HOW MUCH WOULD NIKON HAVE TO PAY FOR NUMBER 1?

HYPOTHESIZED PRICE = NextPlace(AR) / QS +.01

Company Bid QS AR

Ashtonsd90 ? 4

Ritzcamera 1.17 6 7.02

Shopcartusa 3.23 1 .05

GOOGLE SYNDICATES ITS ADS TO PARTNER SITES

GOOGLE SYNDICATES ITS ADS VIA ADSENSE

A FEW ADSENSE SITES GENERATE GOOD REVENUE

As compiled on mindofmichael.com

ADSENSE PARTICIPANTS AGREE NOT TO DO BAD THINGS

ADSENSE PARTICIPANTS AGREE NOT TO DO BAD THINGS

ADSENSE PARTICIPANTS AGREE NOT TO DO BAD THINGS

ADSENSE PARTICIPANTS AGREE NOT TO DO BAD THINGS

CLICKFRAUD

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WHEN I CLICK HERE, I DON’T CLICK HERE

PHOTO ATTRIBUTIONS

Slide 37: 'Happy Kids NEED A Healthy Sandbox‘ www.flickr.com/photos/44124458380@N01/567277264