We cover Google for a living, so we thought we’d read Steven Levy’s feature about Google’s search business in this month’s Wired and learn nothing, absolutely nothing. We were wrong.
10 things you didn’t know about Google’s (GOOG) search business:
The people Larry Page and Sergey Brin tasked with figuring out how Google should make money in 1998 were a pair of know-nothings in their early 20s. Salar Kamanger, Google’s ninth employee, had been a biology major at Stanford. His partner, Eric Veach studied computer science. Together they implemented Google’s now $21 billion business, AdWords. Neat.
The first company to buy and run an ad through Google’s automated auction business was a live mail-order lobster store.
The ads above the results on Google search results pages used to be sold by impression, not per click like they are now. Then, only the ads on the side were sold by cost-per-click (CPC) auctions
Many of the big advertising customers that bought these ads sold by impression were pissed when Google decided to switch and sell them based on CPC. Former Googler, now AOLer, Jeff Levick says one “threw us out of his office and told us to fuck ourselves.” Yow!
In order to reassure bidders that they wouldn’t be way over-bidding their competition for a keyword, Google used to guarantee the winning bidder it would charge them just a penny more than the next highest bidder. This immediately encouraged higher bids.
Now the price advertisers pay is determined by the formula P = (B2 X Q2)/Q1, with P = price paid by the advertiser, Q2 = Quality score of the next highest-placing ad, Q1 = Advertiser’s quality score, and B2 = the next-higheset-placing ad’s bid.
Obsessed with auctions, Google even makes its own divisions bid for servers by auction.
The order of ads on a Google search results page isn’t determined by simply putting the highest bidder at the top. Something called a “Quality Score” also comes into play. Steve reports an ads Quality Score is composed of “relevance of the ad to the specific keyword or keywords, the quality of the landing page the ad is linked to, and, above all, the percentage of times users actually click on a given ad when it appears on a results page.”
Google tries to forecast which ads will get clicked on based on the day’s temperature. This makes sense when you start to think about queries like “ski boots” and “bikinis.”
Berkeley professor Hal Varian, Google’s “chief economist,” keeps an apartment on campus — the ranch house where Google got its start. Since Google HQ is called the Googleplex, Steven calls the apartment Hal’s “pied-a-Plex.” We hope Hal calls it that too.
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