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PAID SEARCH

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PAID SEARCH - RHS

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PAID SEARCH - FEATURED

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IN THE 1990s, STANFORD STUDENTS SERGEY BRIN AND LARRY PAGE DEVELOPED A SEARCH ALGORITHM

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THEY TRIED TO SELL THEIR SEARCH ALGORITHM TO YAHOO FOR $ 1 MILLION Source: Hal Varians Berkeley Lecture on Search Economics

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THEY FOUNDED GOOGLE IN 1998 AND WENT PUBLIC IN 2004

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AROUND TEN YEARS AGO THERE WERE MANY SEARCH ENGINES

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TODAY, THERE ARE EFFECITVELY 5 PRIMARY SEARCH PROVIDERS comScore April 2008 Search Engine Rankings

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AND 3 PAID SEARCH PROVIDERS Based on June 2008 Covaris numbers reported at mediapost (msn is inferred)

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PAY PER CLICK MODEL $0.25 x 10000 clicks = $2500 $1.00 x 2500 clicks = $2500 $10.00 x 250 clicks = $2500

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GOOGLES ORGANIC SEARCH GOAL IS USER SATISFACTION

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GOOGLES PAID SEARCH GOAL IS USER SATISFACTION ADVERTISER SATISFACTION MAXIMUM PROFITABILITY

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PAY PER CLICK MODEL $0.25 x 10000 clicks = $2500 $1.00 x 2500 clicks = $2500 $10.00 x 250 clicks = $2500

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WHY AD POSITION MATTERS EYE TRACKING Source: Jan Pedersons Search Quality Presentation at Berkeley (2007)

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PPC - BIDDING ashtonsd90.com bids $1.38 ritzcamera.com bids $1.17 shopcartusa.com bids $3.23

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ashtonsd90.com bids $1.38

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ritzcamera.com bids $1.17

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shopcartusa.com bids $3.23

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HOW RELEVANT IS THE LANDING PAGE AND AD?

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RANK THEM ashtonsd90.com bids $1.38 ritzcamera.com bids $1.17 shopcartusa.com bids $3.23

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NORMAL AUCTION ashtonsd90.com bids $1.38, ranks 2 nd and pays $1.38 ritzcamera.com bids $1.17, ranks 3 rd and pays $1.17 shopcartusa.com bids $3.23, ranks 1 st and pays $3.23

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VICKREY AUCTION (VCG) ashtonsd90.com bids $1.38, ranks 2 nd and pays $1.17 ritzcamera.com bids $1.17, ranks 3 rd and pays ??? shopcartusa.com bids $3.23, ranks 1 st and pays $1.38

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GOOGLE AND YAHOO USE A GENERALIZED SECOND PRICE (GSP) AUCTION Googles customers are ranked based on a quality score * their bid and pay slightly more than the next ranked bidder not exceeding their maximum bid. PRICE AND RANKING ARE RECALCULATED EACH QUERY

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AD RANK = BID x QUALITY SCORE (QS) ashtonsd90.com 1.38 x 4 = 5.52 ritzcamera.com 1.17 x 6 = 7.02 shopcartusa.com 3.23 x 1 = 3.23

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HYPOTHESIZED PRICE = NextPlace(AR) / QS +.01 ashtonsd90.com 1.38 x 4 = 5.52 pays 3.23/4 =.82 ritzcamera.com 1.17 x 6 = 7.02 pays 5.52/6 =.93 shopcartusa.com 3.23 x 1 = 3.23 pays minimum.05

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HOW MUCH WOULD NIKON HAVE TO PAY FOR NUMBER 1? HYPOTHESIZED PRICE = NextPlace(AR) / QS +.01 CompanyBidQSAR Ashtonsd90?4 Ritzcamera1.1767.02 Shopcartusa3.231.05

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GOOGLE SYNDICATES ITS ADS TO PARTNER SITES

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GOOGLE SYNDICATES ITS ADS VIA ADSENSE

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A FEW ADSENSE SITES GENERATE GOOD REVENUE As compiled on mindofmichael.com

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ADSENSE PARTICIPANTS AGREE NOT TO DO BAD THINGS

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CLICKFRAUD

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PAID SEARCH IS SANDBOXED FROM ORGANIC

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WHEN I CLICK HERE, I DONT CLICK HERE

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PHOTO ATTRIBUTIONS Slide 37: 'Happy Kids NEED A Healthy Sandbox www.flickr.com/photos/44124458380@N01/567277264www.flickr.com/photos/44124458380@N01/567277264