Can search follow the browser?


In early December 2005, Bill Gates said to an Indian audience that Microsoft would share some advertising revenue from its search engine with users. This would be a move aimed at Google and its search users. However, to succeed, Microsoft needs to come up with a search infrastructure whose results are deemed by users at least as good as Google's. Indeed, the few cents per search a search engine can share with its users are not enough to make one switch for a less satisfying set of results--unless fraud is involved. Speaking of fraud, any such revenue sharing mechanism should be built impervious to fraud.

So, if Microsoft can deliver:
  • a search engine whose results are as good as Google's if not better;
  • a search infrastructure to support searches beyond Google's span;
  • an economic model enticing for all parties involved in a search;
  • a mechanism to protect the above business model from abuse;
then Microsoft search will become a true Internet destination.

Moreover, if Google does not become more for its search users before Microsoft delivers on the above points, search may well follow the browser.


Addendum 2/9/06

Should Yahoo thank Microsoft for the hint? Have a look at this excerpt from TheStreet.com:
Yahoo wants to stop losing search market share to Google, and now it's asking users to do something about it.

"Yahoo! is considering launching a program to reward people who make Yahoo! their primary search engine," says a company-sponsored survey first posted on the Web site of CNet.com.

People would receive a monthly reward if they do most of their searching on Yahoo! through a specialized tool bar. Among the rewards being considered for the program are ad-free Yahoo! mail, unlimited email storage, frequent flier miles and discounts on Yahoo!'s personal and music services.

7 comments:

Anonymous said...

Through AdSense, Google is fostering a cohort equivalent to MSFT's developer network. In other words, MSFT may need to do more to make search follow the browser.



Google's Shadow Payroll Is Not Such a Secret Anymore
By BOB TEDESCHI
FEELING depressed because you missed out on Google's stock bonanza? Not to worry. Just get on the company's shadow payroll.

Hundreds of thousands of people have essentially done just that by starting blogs, forums or other informational sites and getting paid for posting ads on Google's behalf. And while the money they earn might not be enough for them to buy, say, a share of Google's stock, such revenues are growing.

The trickle-down effect from Google does not stop at fledgling entrepreneurs. A growing number of rank-and-file contributors to Web sites are also profiting. Consider Digital Point Solutions, a software company in San Diego, which publishes an online forum (http://forums.digitalpoint.com) frequented by about 15,000 users. Any one of them who starts a new forum discussion topic receives half of the advertising revenue paid to the site by Google for ads on the front page of that topic section. (The discussion's creator then splits his share with others who post messages.)

Google does not actually advertise on the Digital Point site. Rather, through Google's AdSense program, it places ads on the forum, similar to the ads that appear next to search results on Google.com. Google scans the information on the forum's pages, then posts related ads. If the discussion is about computer hardware, for instance, ads for DVD drives might appear.

Google pays Digital Point about $10,000 a month, depending on how many people view or click on those ads, said Shawn D. Hogan, the owner and chief technology officer of Digital Point.

Mr. Hogan said he started the revenue-sharing approach in 2004 "as kind of a marketing gimmick."

"But everyone seemed to think it was a cool idea," he said. "I saw a lot of other sites doing the same thing maybe six months later."

Mr. Hogan said it was difficult to say whether the financial incentives had made the forum's participants more active, because its growth rate was about the same before and after it started paying users. Either way, the payoff is meager. "In the best-case scenario, someone might make $50 a month, so they're definitely not quitting their jobs to do this," he said. "But it might be enough to buy a nice dinner."

One area of concern, Mr. Hogan said, was whether the forum's participants would skew their postings to earn more money. For instance, since advertisers in certain categories, like sexual-performance drugs, pay much more to place their ads on Google and its affiliated sites, you might expect technology discussions to randomly veer in that direction.

"But that hasn't happened, thankfully," Mr. Hogan said. "Probably because there isn't that much revenue in it for them."

That could change, as more marketers adopt this approach, which Yahoo also offers. Google's advertising network sales, which come largely from its AdSense advertisers, reached $675 million in the third quarter of 2005, the last period for which Google reported results. That figure was up 76 percent from a year earlier. AdSense generates slightly less revenue than Google's primary revenue engine, its search Web sites, which sold about $885 million worth of ads in the third quarter of 2005, a 115 percent jump from the previous year.

Google.com and the company's foreign search sites contribute more to Google's bottom line than AdSense, because for every dollar the company brings in through AdSense and other places that distribute its ads, it pays roughly 78.5 cents back to sites like Digital Point that display the ads.

But in some ways, search advertising has a more limited horizon, since the number of advertisements a company can display is limited by the number of searches its users conduct. Internet users continue to increase their reliance on search sites, and Google in particular, but the rate of growth is in the single digits.

By contrast, millions of small sites have not yet signed up for Google's AdSense program, which was introduced in 2002. AdSense quickly gained a following among bigger companies with an online presence, like the Weather Channel, as a way to supplement their advertising deals and populate more obscure pages with paid ads. But as more small sites use the Internet to post photos, journals and other material, the number of pages that can carry new Google ads is growing quickly.

That's what makes AdSense one of Google's most compelling long-term bets, said Charlene Li, an online media analyst with Forrester Research. "I've called Google the one-trick pony for a long time, and for the most part they still are," Ms. Li said. "But they really see AdSense as the next frontier."

To that end, the company has refined the program significantly, with various features intended to attract more advertisers and publishers. For instance, as of late last year anyone who created a blog with Google's Blogger service was automatically enrolled in the AdSense program.

"Before that, it was quite painful to figure out," said Gokul Rajaram, the business product manager for AdSense, "so over the last few months we've seen a sharp uptick in bloggers using AdSense."

For AdSense advertisers, some of the more significant improvements began last June, when Google started allowing marketers to select vast groups of sites on which to advertise, as Paramount Pictures did last year when it chose 100 small sites with hip-hop-oriented content to promote its movie "Hustle & Flow."

Late last year, Google also gave advertisers the ability to display graphical ads on sites within the AdSense network of publishers, as well as the ability to pay different (typically lower) prices for AdSense ads than those available on Google.com. The company will not disclose how many advertisers have joined the program - "thousands" is all it says - but analysts said marketers were quickly warming to it, thanks in part to the recent upgrades.

More advertisers, of course, mean more money for publishers, many of whom would simply not publish if it were not for AdSense, Ms. Li of Forrester said. "Before, if I wanted to put advertising on my site, I'd have to hire ad salespeople, process orders - there's no way," she said. "This has taken away a huge barrier in publishing and made it viable for people to make a couple dollars, or thousands of dollars."

fCh said...

About real and potential PPC-fraud check out: http://www.wired.com/wired/archive/14.01/fraud_pr.html

Anonymous said...

Excerpts from: Techno Bull: Click Fraud Just Another McGuffin, by Cody Willard, originally published on RealMoney on Jan. 24.

Google knows there are some teens in Siberia, and yes, probably Duluth too, who are messing with click-through rates by repeatedly hitting ads.

But the big question isn't whether or not this nefarious stuff is going on. It's whether or not this evil stuff (to borrow the Googlite phrase "do no evil") is going on to an extent that Google's customers will be surprised to find out about.

It's related to how advertisers in television and magazines (and all other media) have to account for TVs that are left on for the dogs while nobody's home, or for subscribers who never open the magazine. And guess what -- both the sellers and the buyers of such advertisements are aware of and account for this ahead of time.

You see, Google tells its customers beforehand that there will be click fraud, and it even accounts for that in its pitch. That's right, when Google tells a customer that they can expect X return on investment (ROI) when using Google's ad network, Google's already included click fraud in those numbers. So in essence, the only way for this supposed click-fraud issue to really become problematic is if it's worse than Google realizes. Consider it the online marketplace version of Wall Street's "worse than expected" scenario.

At this point, click fraud appears to be a tiny, tiny fraction of ad hits, probably less than a couple percent of all clicks.

But even if the problem were to escalate to a higher fraction of all clicks, Google would simply factor that higher rate into its models and work with the customers to maintain a high ROI.

Where the issue could become problematic would be if it becomes such a large fraction of clicks that the ad network ROI becomes unattractive to Google's customers.

The click-fraud issue exists, to be sure, but Google and its customers are plenty aware of it and already factor it in. Let's move on, shall we?

fCh said...

Financial Times Deutschland refers to Google.cn as "Orwell's Search Engine." In Chinese, "Kou tou" describes an act of deep respect bowing the head in reverence to touch the ground. In western usage, however, kowtow connotes scraping servility. German newspapers have taken the events in Peking as Google's betrayal of western values.

For more on this, click here to go to Is Koogle's successor the key to Google's future?

fCh said...

Considering how Yahoo! and the others deal with the privacy of their Chinese customers, one should be so tempted to look for alternatives...

Alas, in China it's not about annoying customers who put their trust in the big companies as it's about years of some customers' lives spent behind bars!

Reuters said...

Google shares may fall another 50 pct-Barron's


SAN FRANCISCO (Reuters) - Shares of Web search leader Google Inc. -- off 24 percent from highs set last month -- could face a further 50 percent decline, Barron's said in the financial weekly's February 13 edition.

Barron's scenario for a fall in Google's stock is based on speculating about what may happen if mounting competition or fraud by users of its Google's ad-buying system led to a 20 percent shortfall in bullish analysts' 2006 revenue estimates.

The weekly uses a back-of-the-envelope calculation to show how a 20 percent revenue miss could cascade into a 30 percent profit shortfall. Such a drop could then lead to a decline in the price-to-earnings multiple of the stock to 30 times earnings from the present P/E ratio of 41, it said.

"That would make the stock worth $188, versus its recent $360," Barron's reported. The stock traded at levels above $471 on January 11, but closed at $362.61 on Friday on Nasdaq.

The story recites the usual litany of threats to Google's business -- potential competition from Yahoo Inc. and Microsoft Corp. and the vulnerability to Google's advertising franchise from "click fraud" fake ad transactions. And it criticizes the wide use of employee stock compensation.

Barron's quotes several Google bears -- two Wall Street analysts with "sell" ratings on the stock, bearish investment strategist Fred Hickey and former Merrill Lynch Internet analyst Henry Blodget, who a month ago laid out a case for Google falling to $100 on his InternetOutsider blog.

The weekly also sees Google in growing conflict with book publishers, cable companies and telephone companies.

fCh said...

There is more to suggest that click fraud is not an issue that will simply go away: http://yahoo.businessweek.com/technology/content/feb2006/tc20060227_930506.htm