Happy 10th birthday, pay-per-click (PPC) advertising -- part 2 of 2

...Continued from yesterday (click here for yesterday's post)

It's Independence Day, the birthday of our country. But in addition to celebrating America's special day, I'm celebrating the 10th birthday of PPC advertising.

GoTo was making constant improvements to its interface and its bidding system. The company had pioneered the "search term suggestion tool" in its early days, to give advertisers an idea of which terms might be relevant to their campaigns. The GoTo tools could also give approximate counts on the number of searches being performed on any given term, which was extremely helpful for determining howmuch traffic you'd get.

Another GoTo innovation involved full disclosure. From the very beginning of GoTo's pay-per-click days, the company made advertisers' bids transparent -- not only to other advertisers, but also to search engine end users. When you did a search on GoTo, you could instantly tell how much an advertiser was bidding per click  because a note like "Cost to advertiser: $0.05" appeared next to each listing.

Despite the dot-com bust in 2000-2001, GoTo kept growing. In October 2001, the company changed its name to Overture. Through established partnerships with Yahoo! and MSN, it was distributing its paid search results to a huge number of Internet users. At one point I remember seeing Overture marketing materials that claimed the percentage reach of their PPC ads. Although I don't remember exact numbers, I recall they were quite impressive.

Although Google -- the current market leader -- launched its AdWords platform in 2000, it was started as a CPM (cost per thousand impressions) product. It wasn't until 2002 that AdWords received a major update, switching to the CPC model it uses today. Google's deal to distribute its ads through AOL was also a major milestone in 2002.  My first experience with AdWords came in 2002, shortly after the company switched to the CPC model. I remember being amazed that it had taken Google two years to make the move from CPM to CPC! This was the beginning of Google AdWords' dominance in the sponsored search market.

Overture was acquired by Yahoo! in 2003. Shortly thereafter, the Overture name was dropped in favor of Yahoo! Search Marketing.

In 2004, Google and Yahoo settled a patent lawsuit. GoTo (later Overture, then Yahoo!) owned a patent related to pay-per-click bidding. Overture sued Google for patent infringement in 2002, and the suit was finally settled out of court in 2004 after Yahoo!'s acquisition of Overture, with Google issuing 2.7 million shares of stock to Yahoo!.

Microsoft, the last of the "big three" to the PPC advertising game, launched MSN adCenter in 2006. I participated in the beta in late 2005 prior to launch, and I wasn't impressed at all. It was quite buggy during beta, with ads not displaying for me and a number of other advertisers. Since then, adCenter has seen a lot of improvements, but it still has only about a 5% market share, compared to Yahoo!'s 15% and Google's 79%.

According to eMarketer, paid search will continue to dominate online advertising for at least the next few years, near a 40% share of all online ad spending. The market is maturing, but it's still the cash cow of the Internet advertising world. The revenue from pay-per-click has fueled Google's growth, and I suspect it will continue to do so.

Happy 10th birthday, sponsored search! It's been a crazy and fun ride. But I have a feeling the ride is just getting started.

Google's erratic behavior and relevancy declines -- is Google getting greedy?

Here's a great blog post from Tom Pick about Google and its recent erratic behavior. It's something all online marketers should keep an eye on, because many of Google's actions trickle down and affect so many of the things we eMarketers do every day.

Google's entire business model is built on relevancy. That's what got the company where it is today. Back in the late 1990s when the search engine wars were in full combat gear, it was Google's great search relevancy that made it stand out from the pack.

Tom's article contains links to several other articles, a couple offering "conspiracy theories" about Google's erratic relevancy of late. Is Google getting greedy? Personally I don't buy any of those theories. This almost surely isn't an intentional move by Google -- probably just a series of bad decisions and slip-ups that have snowballed. I think Google will correct them and move on.

Google knows search relevancy is its golden goose. Why would it risk killing the golden goose for short-term gain? That doesn't make sense.

Here's an interesting question though: Could Google be dethroned as the "king of search", if its search relevancy slips and someone comes along with a more relevant product?

I think the answer is yes. But it would take a dramatic turn of events. Google would need to make a series of major and sustained mistakes, of which killing the relevancy goose would only be one of several huge strategic errors.

You'd also need a new king. Could Yahoo or MSN (or with all the Microsoft/Yahoo talk in the past few months, the two joined...) take over Google's top spot? Or would it take a new, different, better kind of startup -- a la Google in 1998, with such a huge relevancy advantage -- to take the crown? It's a much more mature search market today than it was a decade ago when Google entered the game. So I think a new player would need Rupert Murdoch kind of money to even make a dent.

Engagement mapping: good article, and links to more information and resources

About two months ago, I blogged about Microsoft's Engagement Mapping (see post here) and how it could change the industry, since it's a more accurate representation of how online ads really work.

Here's an interesting new article about engagement mapping written in MediaPost's Online Publishing Insider. It does a nice job of breaking down a couple recent reports and white papers on the topic. The article also links to some resources on engagement mapping provided by Atlas, such as a white paper, two webcasts (one for advertisers and another for publishers), and an FAQ about engagement mapping.

Microsoft's (potentially) killer app for online advertising

If Microsoft is successful with one of its latest ventures into online ad tracking, it could end up revitalizing the entire world of brand advertising.

As Scott Karp wrote about in his Publishing 2.0 blog, Microsoft's experimental Engagement Mapping could help advertisers quantify the results of online branding ads -- what he calls the "holy grail of advertising."

Explanation via CNET:

Say a consumer sees an ad for a product in a video ad one day, and then clicks on a text ad to visit the retailer’s site the next day, and then eventually sees a banner ad that leads to a purchase. All of the monetary credit tends to go to the text link that was clicked on, says John Chandler, principal analyst for Microsoft’s Atlas ad serving division.

“Under our (Engagement Mapping) model, those will share the credit,” for example, with 40 percent each going to the video ad and the text ad and 20 percent going to the banner, he says.

Finally Microsoft might have a advertising technology that -- if it pans out -- puts the Redmond-based software giant on par with Google. What Google AdWords has done for direct response/lead generation advertising, Microsoft's Engagement Mapping could do for brand advertising.

I see this as a potentially huge development in the online ad space -- one that could help move many companies' advertising budgets back toward branding ads. During the dot-com boom, brand advertising was in fashion (remember the 600-page issues of Industry Standard and Red Herring magazines?). But after the bust and subsequent advertising recession in 2001, branding fell out of favor at many companies, replaced by lead-generation advertising that enabled easy ROI calculations. Since then, marketers have been addicted to leads because leads have been much easier to quantify than the impact of branding ads. But Microsoft's technology could change that.

Will it actually work? I have no clue. But if it does, be prepared for the next revolution in online advertising.