Google Does It Right, and Still Makes Money

by , Oct 27, 2004, 12:00 AM
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We've done three studies now on how people react with search engines, and one finding that has been consistent across all three studies still amazes me.

All other things being equal, Google dominates as the search engine of choice. In the latest survey, Google was picked as the favorite engine by a walloping 82.9 percent of respondents. Nobody else even came close. Yahoo! limped into second place with a scarce 7.5 percent of the vote.

So, why does Google dominate to this extent? Is it the best search engine? Well, it's good, but arguably there are others at least as good. The brand has certainly become a household word, but Yahoo! was there first, and look how their market share has dropped.

Google's success with users comes primarily from an unwavering respect for those users. Google has always put the user experience front and center, and this commitment to has bought them fierce loyalty.

Sometimes the Bottom Line Isn't Always About Money
Search engines make money when people click on the sponsored listings. Except for some paid inclusion revenue, minimal compared to the paid placement streams, search engines make no money from organic listings.

Following that line of reasoning, it seems to make sense to encourage as many people to click on sponsored listings as possible. Every click puts more money in the bank account.

This line of reasoning has been used at most of the other engines. MSN, Yahoo!, Ask Jeeves and others have all tried to maximize the amount of sponsored real estate on their results page. Ask Jeeves won't usually show an organic listing without the user having to scroll.

The engines love to see more click-throughs on sponsored listings. The advertisers love it. So why not? Everybody wins, right?

Not the user. We go to search engines for organic results. Sure, we'll click on a sponsored listing about 30 percent of the time if it appears relevant, but that's not why we go to the search engine. We go for the unpaid listings. If we can't find them on one engine, we'll go to another where we can.

Tale of Two Engines
Google gets this. They have the lowest sponsored click-through rates of any of the major engines. While sponsored listings have been given prominent placement, the organic listings always have center stage. They've never tried to trick us with vague labeling of sponsored results or tried to push organic off the page by increasing the number of sponsored ads on top.

Short-term, that strategy would certainly boost Google's revenues, but what would happen in the long term? Well, perhaps we have to look no further than Ask Jeeves. They've played games with their organic rankings, trying to boost their sponsored revenue. And if you look at click-through percentages as recorded in our surveys, it's worked.

About half the click-throughs on Ask Jeeves occur on sponsored listings. Google only captures 23.3 percent click-through on sponsored ads. But 82.9 percent of our 1,500 respondents said they use Google and only o.6 percent said they use Ask Jeeves.

When you slice the pie that way, you're going to end up with a lot more revenue, no matter what your click-through percentage is.

The User Giveth and the User Taketh Away
Online loyalty is a fickle thing. Google has never forgotten where it came from. It emerged from nowhere and gained leading market share because it focused on one thing: the user. Then, it found ways to create revenue from that model without jeopardizing the delicate balance between profit and the user experience.

Google has realized that user traffic is a privilege, and you can never lose sight of that fact. If you treat them right, you will be rewarded. Fail to do so, and you'll end up with a very small slice of the pie.

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