Taking a Closer Look at How Google Works
With all the speculation about how much Yahoo is worth to Microsoft, or how much Yahoo would be worth if it outsourced its search-advertising platform to Google, it seems like a good opportunity to clarify how Google's system works. After all, it is Google's search and advertising empire that analysts believe to be the biggest threat to both Microsoft and Yahoo.
I wrote a story last week about some online marketers who thought a Microsoft-Yahoo combination would provide an alternative to Google. I've since spoken with a few folks at Google to get a better understanding of the mechanics behind its successful Web search and search-ad systems.
There are three ways for Web sites and companies to get online visibility through Google--Search, Adwords and Adsense--and each one works differently.
Its Search platform gave Google its early fame by making sense of the information on the Web. Once a search query is entered, Google's "spiders" crawl through all the information they can access on the Web and ranks the most relevant pages. There are about 200 factors involved in determining relevance, such as how many other sites link to a particular page and how many times the query terms appear on the page.
Google's AdWords program places sponsored links along the top and to the right of the page, and it operates independently of the organic search results described above. Companies vie for the top spot in the paid results for specified search term, and the company only pays Google when a searcher clicks on its link. The price a company pays for a sponsored link is determined by a split-second auction that happens when a searcher enters a search query. But a site's relevancy is also taken into account to ensure a company that is completely unrelated to a search query doesn't end up at the top of the paid search results. To provide a diverse set of search results, Google makes sure a single company doesn't dominate the top links.
The AdSense system is the publisher program through which Website owners can partner with Google to show AdWords directly on the site. Google is able to contextually target ads that are relevant to the Web page. Through its pending acquisition of DoubleClick, Google hopes to add more display advertising, or graphical ads such as banner ads, to its arsenal of Internet advertising platforms. Currently, the company offers image ads, video ads and gadget ads. Yahoo and Microsoft already have pretty strong display ad systems, but are weaker on the search-advertising side.
Google frequently tweaks its algorithms to make sure the most relevant sponsored links appear next to the search results. Phil Davies runs one of the online businesses affected by an algorithm change that happened about 5 years ago. After talking to Google, he figured out that some of the pages within his site were too similar to each other, so they couldn't all be indexed in the paid search results. He changed some of the sites to make sure they could be visible.
After using Google's AdSense, Digg.com CEO Jay Adelson said he decided to work with Microsoft for its display advertising capabilities. Google, he said, has a vast ad network through its platforms, but does not yet offer the variety of display ads he was looking for.
Earlier this week, I spoke to Marianne Wolk, an equity analyst with Susquehanna International Group, who said the display ad market is a top concern for Microsoft and Yahoo, who want to "lead in branded advertising before Google can catch up." The display ad market is still much more fragmented than the search market. And as more advertising money comes online, every company is trying to be strategically positioned to take advantage of it.
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