Google is the largest search engine on the web. But what makes it a tech giant is its ability to monetize this traffic and that is thanks to Adwords. The company has announced that Google Adwords is ten years today. In an email message sent to advertisers, Google has noted,
“Just ten years ago, a small team added the phrase ‘See your ad here’ alongside our search results. A few minutes later, the first AdWords customer placed an ad for live mail-order lobsters.
Ten years and billions of ads later, we want to mark AdWords’ 10th birthday by thanking you for advertising with us. We hope you enjoy this small token of our appreciation, a personalized video just for you”
Check out the video here.
It’s no doubt a momentous occasion not just for Google, but for the internet as a whole. Given that a lot of web properties, including GoRumors, make significant chunk of their revenues from Google advertisements, it is difficult to imagine how much internet would have grown had Google not nurtured the ecosystem with Adwords.
Prof. Eric Goldman at the Search Engine Land writes a pretty interesting article arguing against Google’s practice of publishing self-promoting ads on its search engine results pages. According to Professor Goldman, while it is true that most companies use their own services to cross-promote their offerings, Google is different in that the company runs its advertisements through a keyword-bidding auction system. Now, with all the internal information about keyword prices available, Google may be in a position of conflict in their interest by using their Adwords system to promote their products.
Let me put in an example here. Google has a finance website at Finance.Google.com and as you all know, Finance is one of the most competitive segments in online advertising. Now, will Google benefit from knowing the right price to bid for keywords since they own the algorithm? That means when Google’s rivals in the finance segment lose money guessing a bidding amount, Google will exactly know how much to bid and thus effectively improving their returns on marketing. Alternately, will Google be inflating the ad spend from advertisers by taking part in the advertising themselves. Let’s for a moment assume that advertisers bid $1 per click to take the top position on the sponsored listings. Will Google be affecting this bid amount by, say bidding for a keyword at $3? This would imply advertisers will have to increase their ad spend in order to beat Google’s house ads and take the top spot. That’s most definitely a conflict of interest.
It will be interesting to see Google’s response on the issue. Is a lawsuit likely? I think so.
Advertising on Google Adwords has predominantly been based on the Pay-Per-Click (PPC) model. However, we are now learning that the Mountain View based search engine company is now working on a new Cost-Per-Action model that will charge advertisers for a completed action within the website rather than charge for an ad click.
This could be huge and more beneficial to the advertiser as well as Google. Competitive keywords are right now bid at close to $5 – $10 per click which can be huge expenditure for a lot of advertisers. With CPA, advertisers would tend to spend close to 8%-10% of every closed sale which is not only better on the ROI front, but can also help Google make more money off high-value items like jewelry or machinery.
Here is a screenshot of how the ads look (as seen from the tests Google has been conducting)
Typing Google.com/travel takes you to a really old webpage where Google is seen coaxing travel marketers to use their Adwords program to reach their target audience. This could possibly change soon.
According to reports on the BusinessWeek, Google is in advanced talks with ITA Software Inc., a developer of travel program used by companies such as Orbitz.com, Kayak.com and Microsoft Bing. The cost of acquisitions, by some estimate, is expected to top $1 billion!
However, do note that the talks are still on, and like it happened with Yelp, either party may still walk away from the bid. Nevertheless, we at least now know that Google is interested in venturing into the travel segment.