Search Engine Revenues and Online Advertisements
Pranam Kolari, 1:15am 3 February 2005From Marketwatch - On Google
Late Tuesday, Google said fourth-quarter profit rose to $204 million …
Google also said quarterly sales shot up to $1.032 billion from $512 million a year earlier. Excluding the payments Google makes to other companies to acquire Internet traffic, the company generated sales of $654 million, more than the $590 million analysts expected. Google is benefiting as companies spend more of their advertising dollars online and as the prices paid for keyword search results rise.
From CNN - On Yahoo
Five years of stagnant online advertising ended in 2004, according to jubilant executives at Yahoo Inc., helping the Web giant nearly triple its fourth-quarter profit and boosting its financial outlook for this year. The Sunnyvale, California-based company … earned $373 million, or 25 cents per share, for the three months ended December 31.
From MarketWatch - General Trends of online advertising
TNS Media Intelligence forecast a 5.1 percent rise to $150.5 billion in 2005 on top of last year’s estimated 10.6 percent bump. The first half should see the strongest rate, with rise of 6.9 percent; that will tail off to 3.5 percent in the second six months of the year. Media categories that stand to benefit the most include online, expected to gain 11.2 percent …
Online Ads and Search Engines are hot! Search engines make most of their income from paid advertisements. They get paid based on number of advertisement clicks by users. As per my understanding some companies commit a preset amount of money(over a duration of time) to paid advertisements and some don’t. So a search engine’s income largely depends on how many clicks it can get to advertisements on its search pages and on other pages on the Web which explicitly display content specific ads.
One obvious way for search engines to exploit the latter to increase their revenues would be to skew results so as to rank pages which display their advertisements highly. This way the number of visitors to these pages increase resulting in a proportional increase in advertisement clicks.
This raises some interesting questions. Can search engines come up with optimization algorithms so as to maximize their overall income with the following constraints:
- Income from individual companies do not exceed committed boundaries.
- Search ranking skew towards pages displaying paid advertisements are not so as to effect search users significantly.
I don’t believe Google or Yahoo dies or would ever consider doing this, but they are not the only search company and their success will build a market in which other companys will offer similar services. There remains a risk that an unscrupulous company might be tempted to skew its search to increase profits.
Ebiquity Blog
February 4th, 2005 at 9:31 am
What kind of skewing of results are u talking abt? Can you give an example.
As far as the Sponsored Links go, there is a bidding process for the ad spaces. And those are completely based on the bid amt and some other factors.
February 4th, 2005 at 12:33 pm
That’s the bidding process for sponsored links on the search results page which is totally understandable. But seach engines allow advertisements to be part of personal home pages, blogs etc. Now skewing in this scope is ranking pages which show these advertisements highly. This way the number of hits to these blogs increase(since traffic is highly dependent on search engines) and hence a corresponding increase in advertisement clicks on these pages which will finally result in increase in revenues of search engines.
February 4th, 2005 at 3:15 pm
How will it be any increase in the revenue for Search engines, cause as far as I understand the landscape..the revenues generated on an advertisement click on a personal home page or blog page is not shared by the search engine which directed the click. It solely is attributed to the page owner.
February 4th, 2005 at 3:29 pm
That’s a misconception. The search engine being a broker (e.g something on the same lines as Google AdSense, ofcourse I am not pointing fingers at Google) does get a part of the revenue.
February 5th, 2005 at 7:02 am
Well, Google AdSense is something different. There Google is charging you for bringing more ads on your page. And you are getting paid for bringing traffic onto the advertisers page. Well, its is comparable to Amazons Affiliate porgram, just that Google acts as a broker for smaller sites which cannot afford to maintain an affiliate program like Amazon. Also it simplfies the process of ad placement for the webpage owner. Though in cases I feel product placement is not as personal as in the case of Amazon Affiliates.