Pass Out the Cigars for Google’s New Baby: AdWords Select

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Google’s got a new baby. It has moved into the pay per click advertising game through a new program called AdWords Select.

There will be no change in how the search engine itself currently works. Google has had the AdWords program in place for some time; until today, it was priced on a CPM (cost per thousand impressions) basis. Now, there is a new cost-per-click pricing format with several cool twists, including a “discounter” that adjusts your bids down while maintaining your positions, and a hybrid of user tracking and bid amounts determining an advertiser’s proximity to the top sponsorship position.

They are not auctioning off search results, in other words; just providing a new format and new options for advertisers bidding (based on chosen keywords and phrases) on the small text ads in the margins. AdWords was already a big reason why Google has managed to turn a profit so soon in its development. With the new, improved ad system, I think it’s fair to say that Google will enjoy a flood of revenue for the foreseeable future. All without annoying users unduly or making them think the search results are tainted. This is really what the search engine industry desperately needed: some proof that you can focus on search and still succeed financially.

The current leader in the pay-per-click search game, as most know, is Overture. Overture supplies its “sponsored listings” to portals like AOL, MSN, and Yahoo. Recently, it lost a small partner, Earthlink, to Google, which had just rolled out its AdWords in Syndication program. This was and still is a harbinger of things to come. If Google can supply its keyword-based advertising system plus high quality search results to Earthlink, it can easily supply the same to the big guys. Since Yahoo already uses Google search results (but Overture sponsored listings), it’s not a huge stretch to predict that AdWords Select will be syndicated to Yahoo before too long. Overture’s deal with Yahoo is only good to the end of June.

For whatever reason, the Internet junkie and search enthusiast communities were quietly growing annoyed with the ascendance of Overture (yours truly included). Breaking the Earthlink news, Search Engine Watch Editor Danny Sullivan was uncharacteristically direct about his feelings on Overture’s lost partner: it was a “good thing” for users.

Response to Google’s latest announcement seems mostly positive. Chris Sherman, Associate Editor of Search Engine Watch¬†, opines that this is “especially good news for searchers,” because it establishes “a new performance-based standard for relevance in advertising links, and by clearly labeling ads as ‘sponsored links,’ Google is setting a powerful example for all search engines — namely, that paid-placement result links are fine as long as they’re clearly labeled and potentially useful for the searcher.”

Jill Whalen (http://www.rankwrite.com) brought up an interesting point: in a cost-per-click program, advertisers are actually enjoying the branding benefit of free impressions. Users who don’t click might still notice your presence. The only catch is that clickthrough rates must exceed 0.5% or Google disables the ad. This is a good way of ensuring that advertising is relevant and interesting to at least some users.

Some critics claim that “no one ever looks at” the sidebar ads on Google. I can only speak anecdotally, of course, but I frequently click on the ads when I am searching for companies who offer certain types of products. On the other hand, I don’t click on them when I’m looking for general info. Today, I tried looking for email forwarding services, for example, for some background research I’m doing on price and service options. The ads were the first listings I clicked on. As Overture has long argued, when people are actually looking for products and services, or wanting to find out who is “in the game,” they actually want to see those sponsored results in many cases [cf. my point in “Paid Search Results Are Here to Stay”, Traffick, August 2000: “While many may lament the increasing commercialization of search engines and the difficulty in finding relevant research materials as opposed to advertisers’ products and services, it is increasingly the case that advertisers’ products and services ARE relevant to what a great many people are looking for.” ]. The downside is, a certain percentage of your clicks will inevitably come from competitors doing due diligence on their industry. Google hasn’t said much to date about fraud protection, but it’s likely to be similar to Overture’s “patented fraud protection.” Multiple clicks from the same IP address will be tracked, and fraudulent clicks can theoretically be investigated, since users must be cookied to see the ads.

More info on Google’s new advertising program can be found here:

Could it be more obvious that they’re competing directly with Overture? (“Ads go up immediately! No three-day wait!”)

It will be awhile before we can get a good sense of how the marketplace reacts to the new program. Average prices per click will vary widely by industry segment and will likely jockey around wildly at first. It’s really not even Day One for this service; more like Day Zero, as even existing AdWords advertisers must sign up separately for this new program and go through the process of setting up accounts, researching key phrases, and determining bid amounts and daily spending limits. Prices might seem high to the “little guy,” but at the same time, Google has designed the system to ensure that huge advertisers can’t swamp the most relevant small company ad placements with ridiculously high bids and irrelevant branding blitzes. And the only time we poor users will have to see ads for greedy online casinos or annoying creepy cheap security cameras will be when we perform a search for “greedy online casino” or “annoying creepy cheap security cameras.” If only all online services were this smart.

In any case, February 19, 2002 may well be remembered as the day that Overture got Googled.

Special Report!

Andrew’s just written a special report for AdWords Select marketers (2003 edition now available). Click here for more information about the special report, “21 Ways to Maximize Your ROI from Google AdWords Select“.

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