On advertising
The only/last business model?

Henry Blodget, the blogger--as if he had it all coming from his name, brings up an interesting thesis by correlating the fates of the advertising and housing markets: As Goes the Housing Market, So Goes Advertising.

Without analyzing the strength of this correlation, why wouldn't one go a step further and ask: If advertising were no longer enough to support Google's growth, could it ever charge for its growing number of services?

I don't have an answer, yet the value is in the question sometimes. What do you think?

June 14 Addendum
People are looking indeed: http://www.internetoutsider.com/2006/06/citigroups_mark.html

June 15 Addendum:
"I think we'll look back at this day as the separation between two eras in software — the first being software in a box, and the second software distributed over the Internet for free and funded by advertising. The new era requires a complete re-examination of Microsoft's business model, which has been one of most profitable the world has ever seen." These were the words of George F. Colony, CEO with Forrester Research, on the occasion of Bill Gates' announcement about gradually leaving Microsoft. I sure hope George got it wrong, even though the history of television would indicate otherwise.


fCh said...

I should probably add that one can see a google-boom at work now. And I am not talking as much about whether or not GOOG is overpriced as about the many companies trying to parrot Google's value capturing mechanism--i.e. targeted advertising. Companies are trying to remake (portions of) themselves as search engines, which reminds me of the time we used to have garden.com and garden2.com

Anonymous said...

Google looks at boosting range of ad networks
By Richard Waters in San Francisco
Wednesday Jun 21 2006 13:50

Google (NASDAQ:GOOG) is testing a new online advertising network that would let merchants pay a fee only when an internet user performs a specific action, such as buying a product or registering for a service.

If successful, the so-called "cost per action", or CPA, network would extend the search engine company's range of advertising activities and reduce its reliance on the "cost per click" model that has been at the heart of its early success.

CPA networks, also known as affiliate marketing networks, let merchants sign up independent websites to help find new customers for their products or services.

The website owner is typically paid only when a customer actually makes a purchase, or when they perform some other pre-determined action such as filling in a form on the merchant's site with their personal details.

Already used by companies like Amazon.co (NASDAQ:AMZN) m, affiliate networks are starting to spring up more widely on the Web.

Ebay launched a form of CPA network of its own last week, offering to pay affiliate websites that carry its auction listings a share of the sales commission if the adverts result in a sale.

A number of online advertising services companies, such as ValueClick and DoubleClick, also run affiliate marketing networks.

Websites that take part in Google's test will be able to select merchants whose adverts they want to carry on their site.

The adverts will be carried on a separate advertising network, rather than the AdSense system that carries the company's existing cost-per-click ads.

According to details from Google circulated to potential test sites, the adverts can run in parallel on a different part of a webpage to the cost-per-click ads, and so represent an additional way for websites to "monetise" their internet traffic.

Google has already extended its reach into cpm (or "cost per mille") advertising, a more traditional form of advertising where websites are paid based simply on the number of times they display an ad.

CPA pushes its range of advertising options in the other direction, by linking payment to actions more specifically than under its main cost-per-click model.

In a note to website owners, Google said that websites would be able to add editorial comments around CPA advertising, for instance by writing "I recommend this product", but should not try to incite someone to click on an advert, for instance, with a prompt like "Click Here."