Around this time, Google emerged as perhaps the world’s greatest and most accurate search engine. In just a few years’ time, it launched a search engine that was superior to rivals such as Hotfoot, AltaVista, Lycos, and others. It quickly gained market share but ironically launched an impression-based advertising business in 2000. Advertisers were tired of spending a lot of money on ineffective banner ads, and consumers were ignoring them.
Realizing this, Google abandoned its impression-based advertising program in favor of experiments with click-through advertising, text-based ads for which the advertiser would only pay if a user clicked the ad (Figure 1.4). This invention was named Google Ad Words, and the rest is history.
Google Ad Words was a self-serve advertising service similar to services offered around the same time by competitor GoTo.com, later renamed Overture by Yahoo!. Advertisers would enter the text for a relevant ad that adhered to style guidelines and character limitations. The advertiser would then add the search terms that would trigger these ads along with the highest bid they would be willing to pay for the click.
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The final step was setting a daily budget; without a budget, a lot of money could be spent on these ads! Using an automated auction system, Google would serve ads based on the total bid and the amount remaining in the budget for each bidder. It may seem simple now, but this was a revolutionary shift in Internet advertising for a few reasons. First, an advertiser could effectively guarantee traffic to a website by simply bidding high enough and devoting enough budget on a daily basis to the advertisement.
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Now this wasn’t particularly difficult in 2002—many click-through cost as little as a nickel a piece, so 100 new visitors for a website per day could cost as little as $5.00. Not a bad deal. But more importantly, Google realized that the folks clicking on these ads weren’t just any users. They were highly targeted users by virtue of the fact that they had searched for a specific term in a search engine.
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This was a stark contrast from banner ads, which generally were not targeted to specific users looking for specific things. So in summary, Google took an increasingly large audience and made it available to advertisers on a relatively inexpensive, self-serve basis. It was pure genius.