The Genius behind Google Adwords10 Aug 2010
A few years ago Google created an advertising system called Adwords which allowed individuals and companies to advertise on their search engine directly without a middle man. The program was so successful that they later introduced Adsense which allowed other websites to share in the ad revenue. In both programs, advertising money is not spent or made until a user clicks and shows interest in the product or service being sold. Google has made marketing better by providing advertisers with a way to clearly measure their advertisement’s progress and not rely on phony marketing estimates.
In an attempt to make the very popular search engine profitable, Google did not go to the advertising powerhouses and Madison Avenue men of the time to find companies wanting to advertise on the site. Instead it reached out to anyone and everyone wanting to advertise on their site because much like their motto, it believed that people could do the job better than executives. The idea was simple; its ads would not show up on the front page to discourage or confuse newcomers to the site, one cannot target an ad to someone who has not given them what one wants to know about yet. However, once someone does a search, Google provides relevant ads through Adsense which makes sure that an advertiser’s ad is on a corresponding site. By removing the middle man of advertisers, Google was able to reduce the ad costs significantly making them the cheaper. As an example, Adsense is now selling TV ad rates 50% less than the average ad agency because they don’t care too much about getting a large commission from it and are a more obvious choice for businesses.
In Adwords, advertisers would have to bid on a particular word or set of words and depending on how many people wanted that spot, the market would choose the price of the advertisement based on demand. Busineses also only got charged based on clicks which meant that one’s ad would run for as long as it needed to and the advertiser would only get charged based on tangible results, something never seen before in advertising. This created a fair market system where users did not get bombarded with irrelevant advertisements and businesses, in return the site only gets paid when those users show an actual interest in their products by clicking on the links. Of course Google gets a cut of that ad money depending on the data. They avoid getting executive kick backs and sweet heart deals which forces Google to focus on making their system better and more efficient. This makes Google more profitable in the process and creates quality data that advertisers can trust. The advertisers can see when a user clicked on an ad and when as well as match that information with when financial transactions where made on their site to see if Google is bringing in paying customers.
Google has always depended on data and user choice to run the business. There have been many attempts to trick or side track this dependence such as creating link farms, websites solely dedicated to linking to each other and to other sites, for the purpose of tricking Google. Yet even those attempts eventually go away as the search engine learns and adapts to what people do and click on. Aside from giving higher rankings to sites that have been registered online longer than others or demoting sites registered for less than a year, Google has had to do very little to curb these kind of abuses. Letting the user vote on what is better eventually creates a stronger more powerful search. What this all boiled down to was honesty. Google could have sold their search spots like many other companies did, but it believed that their customers needed to trust that it would put their needs above profit. Google’s reliance on data based marketing means that the better and more trustworthy their advertising data is, the more profitable they become.
Marketing executives look at Google and fear their ability to give a better product then they ever could. Yet their ability to do what they do so well has inspired many Ad agencies to join them instead of compete against them. The pay per click system has changed the way advertisers see the business. If I as an individual want to advertise my product, I simply go online and pay Google a few dollars to put my site on their search engine and Adsense websites, it does not cost me a million dollars and I can reach only those who are interested enough on my product to click it. No longer is a company willing to pay for an imaginary number of viewers who supposedly see their ads based off of the Neislen Ratings system; Instead they can use the dependable system within Google to choose where to put more of their money towards with confidence. The trust that is garnered in a system where numbers beat out suggestions makes Google’s advertising seem more like science and the Ad Agencies look more and more like alchemists.
Many would criticize Google saying that they are taking away from current Ad revenues, some spell the collapse of modern business because they no longer have control of modern day advertising. I say that let Google take them apart and make them cheaper and more efficient. There are better advertising systems than Google, and not every product can be sold or advertised this way, but for the most part Google has proved its method by its earnings. There is a boot maker in Arizona who sells his $5000 dollar boots with Google Adwords, he does not need to place an ad on television or in local newspapers and his business still has more orders than he can produce. That is what makes Google better.