Meet the Man Four Years Ahead Of AdWords

If you’ve never heard of Yaron Galai, don’t worry, you’re not alone. Galai doesn’t keynote tech conferences or write a wildly popular blog. Actually, I did discover that he at least has a blog, but he’s posted three timessince 2011.

And unless you’re an SEM oldtimer (pre-2007), you’ve probably never heard of the company Galai co-founded: Quigo. When Quigo launched its “AdSonar” ad network back in 2003, the Google Display Network (then called the Google Content Network) was known for its ability to drive high-volume,  low-quality traffic. The rule of thumb with “GCN” was to bid at least 30% to 40% less than what you’d pay on AdWords. Many advertisers avoided GCN altogether.

One of the big problems with GCN was its lack of transparency and control; you couldn’t set bids at a domain or URL level, which meant that a few bad-apple publishers could destroy your ROI. This was also a bad deal for publishers -- at least publishers with high-quality traffic -- who saw low CPCs on GCN (called AdSense from the publisher side) because advertisers were afraid to bid highly on GCN.



Quigo flipped this equation on its head with one simple innovation: It allowed advertisers to place bids on specific domains and even specific pages of that domain. So now, instead of just buying a bucket of travel-related keywords and hoping that GCN would match you on relevant domains, you could buy the “flights” section of USA Today and specifically bid and optimize against this page.

It’d be conjecture to ponder whether Google would have eventually offered this level of granularity without the rise of Quigo, but my sense at the time was that Google’s offer of “managed placements” on GCN was a direct response to the Quigo threat. If Google hadn’t allowed advertisers domain/URL bidding, the top publishers would have left and gone to Quigo to reap the higher CPCs.

Sadly, Quigo was acquired by AOL in 2007 and slowly disappeared into oblivion. Given the acquisition price north of $350 million, Galai could have probably retired or become an angel investor, or done whatever the heck he wanted to. Instead, he founded another company that looks like it will once again drive change at Google.

This company -- Outbrain -- is probably one you have heard of. Outbrain created the concept of “native advertising.” If you’ve surfed any news site online and seen links to “articles you might like,” chances are that these are paid placements run through the Outbrain platform.

What makes Outbrain interesting is that it monetizes content online in a way that is both relevant to consumers and profitable to publishers. Advertisers can’t send users to a pure advertisement – they have to provide at least one page of content before trying to sell a user something. But because these links look like actual organic content, they get a super-high click-through rate and drive lots of revenue to publishers.

So much so, that native advertising is starting to show up everywhere, from Yahoo’s homepage to recommended videos on your local newspaper’s Web site.  And guess what: this native advertising is taking away monetization opportunities from Google, be it self-service ads from GDN or programmatic display ads via the DoubleClick Ad Exchange.

In short, just as Quigo might have forced Google to transform GCN from an opaque, low-quality ad network into a highly-targeted, transparent machine, Outbrain and its ilk will likely push Google to come up with solutions that can compete with native advertising upstarts.

For the record, I don’t know Yaron Galai, nor do I have a financial stake in any of his companies (though I wish I did -- Outbrain is rumored to be worth over $1 billion). I have, however, benefited from his innovation: by keeping Google on its toes and inventing new inventory sources, Galai has made online advertising better for all of us.

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