Google: You have to pay to play

Daily Newsletters

Sign up to ZDNet UK's daily newsletter.

NEWS
Google on Wednesday said it has begun auctioning ad-sponsored links on its search results pages, firing another shot across the bow of paid-search leader Overture Services. The program, called AdWords Select, ranks ads based partly on how much an advertiser pays and partly on popularity, or click-through rates. AdWords Select requires advertisers to pay only when a visitor clicks on the ad. Google's previous program, AdWords, was based on a traditional online system that required payment by the number of impressions delivered. "It's not just about how big your wallet is anymore; it's about creating the most relevant ads for our users," said David Krane, a Google spokesman. The move escalates the battle between Google and rival Overture. Both are searching for new ways to generate revenue in an increasingly tight ad market. Overture's stock price has seesawed in recent weeks as investors have been gauging the potential effect of Google's moves on the company's growth prospects. On Wednesday, Overture shares tumbled more than 10 percent after Google announced its new ad programme -- the company's second tumble in two weeks. Last week, the stock surged after Overture beat earnings expectations for its most recent quarter. Some analysts have downplayed the Google threat. In a statement on Wednesday, US Bancorp Piper Jaffray analyst Safa Rashtchy pointed out that Overture has a "lock" on the major Web portals, having struck deals with AOL Time Warner's America Online service, Microsoft's MSN and Yahoo! -- although Yahoo! has said it plans to create its own paid search service within the next few months. He added that Overture has a huge lead in this market, with 54,000 advertising partners compared with an estimated 1,000 partners for Google. In a separate report issued on Wednesday, Merrill Lynch analyst Justin Baldauf said Google's move could affect Overture's shares in the short term, but eventually Overture's deals with AOL and Microsoft will prove winning partnerships. "Because Overture is much bigger than Google, Overture can afford to pay distribution partners more money (and therefore retain them)," Baldauf said. He said Merrill Lynch expects Overture to pay $250m to distributors in 2002 on revenue of more than $440m. "By contrast, we have heard that Google (a private company) currently generates less than $100m in annual revenues. "Importantly, Google is to some extent caught in a catch-22 as it competes with Overture," Baldauf said. "It will be difficult for Google to increase distribution before it can grow its advertiser base. At the same time, growing the advertiser base is difficult without greater distribution." Protesting pay for play
Though it's been heralded as a way to boost earnings, the pay-for-play concept has drawn fire from consumer groups and trademark holders, who claim it can lead to customer confusion. Diet pill maker Mark Nutritionals sued four pay-for-play sites two weeks ago, alleging they were aiding trademark infringement. The company claims the search sites are breaking the law by listing links to competitors' sites when a person types the phrase "body solutions" into the search bar. Google is actively trying to avoid running into the same trouble by clearly marking the search results that show up on the right-hand side of the page as ads. Unlike Overture and for-fee listing service FindWhat.com, which incorporate paid listings into their main search results, Google is allowing pay for placement only along the right-hand side of its search page. In addition to pay-per-click ads, Google sells "premium" sponsorships on the top of its results that are targeted to keyword searches. The paid placements sell for a flat rate based on the number of impressions, or ads, delivered. They cost between $25 and $80 per thousand impressions. News.com's Stefanie Olsen contributed to this report.
For everything Internet-related, from the latest legal and policy-related news, to domain name updates, see ZDNet UK's Internet News Section. Have your say instantly, and see what others have said. Go to the ZDNet news forum. Let the editors know what you think in the Mailroom.

Post your comment

In order to post a comment you need to be registered and logged in.

You can also log in with Facebook. Log in or create your ZDNet UK account below

  • Login

Will not be displayed with your comment

By signing up for this service, you indicate that you agree to our Terms and Conditions and have read and understood our Privacy Policy. Questions about membership? Find the answers in the Community FAQ

Get ZDNet UK's daily newsletter

Enter your email address to sign up

ZDNet UK Live

tinycg

Don't forget to check out apps like GoodReader or SlideShark either, they're indispensible for people on the go in presentation situations. Best...

2 hours ago by tinycg on Four top iPad apps for people on the move
TerryRK

Well it seems there is something a number of us agree on. Why is the Ubuntu Unity launcher so ugly? I thought perhaps it was something to do with...

6 hours ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint
Freebies202

Duplicate comments are not made intentionally. Its very good to know that now you are keeping check on this problem because sometimes a commenter...

16 hours ago by Freebies202 on Microsoft fixes blog comments, speeds up blogs with open source
kevinmchapman

"the very significant number of users" and "many (most) of us" - you have no evidence for these statements. It is a fact that most users are saying...

24 hours ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint
Marg Menzies Harrison

Another grammar faux pas is the improper use of "you". When sitting down down in a restaurant, for example, I get cringe when the waitress...

1 day ago by Marg Menzies Harrison via Facebook on 10 flagrant grammar mistakes that make you look stupid
zdnetukuser

And NOW, folks, for Canonical's next trick... Kubuntu is late. Here's a pencil. Draw your own conclusions. cf.:...

1 day ago by zdnetukuser on Linux Minterface
Moley

@kevinmchapman. The discussion here reflects the very significant number of users who really do like the traditional menu system and who wish to...

1 day ago by Moley on A tale of two distros: Ubuntu and Linux Mint
kevinmchapman

Er, no... It is an efficient means of finding the application/file/setting you need in one place. The icons are a simply a fallback for when you...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint
TerryRK

Isn't the provision of a text based search an admission by the developers that the mass of icons approach does not work? I don't need to use a...

1 day ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint
kevinmchapman

"Unity and GNOME 3 both abandon the old text-based cascading menus in favour of a graphical icon-driven system." Point truly missed. Both use a...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint
TerryRK

whs001 - Thank you, I'm glad you liked the article. I absolutely agree with you on your first point. I should perhaps have made it clearer that...

1 day ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint
Dennis Nilsson

If we allow corporate interest to dictate the way our government circumvents due process against foreign entities then we should accept the same...

1 day ago by Dennis Nilsson via Facebook on ACTA stumbles in Germany
GHar123

I totally dislike pirating of works, I fear that artists will be deterred from creating works if they think that they are going to get ripped off....

1 day ago by GHar123 on ACTA stumbles in Germany
JCB33

How dare film makers, artists or anybody that invests in creativity stop us pirating their works for free. I want to be able to walk into my local...

2 days ago by JCB33 on ACTA stumbles in Germany
Moley

@GrueMaster. I prefer horses for courses rather than one size fits all. I, and I suspect most other computer users, do not really wish to have...

2 days ago by Moley on A tale of two distros: Ubuntu and Linux Mint
greycynic

The product that scares me every time I have to use it is the Office 2007 version of Excel. The first bug that I found was applying the median...

2 days ago by greycynic on Ten flawed products that derail productivity
GrueMaster

Nice review and very informative. One thing I'd like to add (in reply to whs001's 1st question), the main reason to have the same interface from...

2 days ago by GrueMaster on A tale of two distros: Ubuntu and Linux Mint
Frederick Wrigley

I'be been using Mint 12 since the RC came out, and I am far more happy with the Cinnamon, the Mate, and, yes (with extensions), theGnome 3...

2 days ago by Frederick Wrigley via Facebook on A tale of two distros: Ubuntu and Linux Mint
bdantas

Excellent article. One small correction, though--although a fresh installation of Linux Mint 12 will, indeed, provide the user with a version of...

2 days ago by bdantas on A tale of two distros: Ubuntu and Linux Mint
Alan Ralph

In related news, the ISPs club together to get the members of the Home Affairs Select Committee (ya goofed on that part, ZDNet UK) copies of "The...

2 days ago by Alan Ralph via Facebook on MPs urge ISPs to take down terrorist material