This was a strategic study doing a breakdown of some of the key elements of a business and its competitive forces.

  • Why did pay-per-click search grown so rapidly?
    • Rapidly expanding internet going from 130 in 1993 to 600,000 in 1996
    • Initially keywords were only tiny fractional dollars payments per click to websites makes for an initially inexpensive and logical pay as you go type advertising. Owners of websites can easily understand and put value toward with clicks driving traffic directly to their sites.
    • It creates a cause & effect link in ways not possible by traditional marketing & advertising, ex. % of clicks which turn into orders and $, A/B testing, etc. With improved search driving higher quality traffic in the form of people finding the site they were looking for.
  • Analyze the competitive structure of the market for search-based advertising. What are the implications of this structure for the long run profitability of payers in the market?
    • Search is currently very heavily concentrated with Google having a 2/3 majority share in the US and nearly a monopoly internationally (with the exception of Russia – Yandex, and China – Baidu but even there they have ~20%)
  • Why was it entrepreneurial startups, as opposed to established enterprises, that pioneered the paid search market?
    • The search market initially had no viable revenue model which established business could understand. This coupled with the fact that effectively indexing web crawler results are computer resource heavy which scales rapidly with the growing internet creating high capital cost for servers.
    • Search took people away from sites which was actually a negative to most established internet businesses. At the time the business models for internet based companies were focused on portals and keeping people at their sites to see and click on banner ads while search would take people away and directly decrease the only known method of revenue at the time in banner ads.
    • It was seen as either a threat to banner ad business or at best a distraction from core profitable business lines with no clear future to justify significant focus and capital expense.
  • What explains Google’s success in the paid search marketplace? How sustainable is its competitive advantage?
    • Google more effective method for ranking page relevancy consistently yielded search results more appropriate to what users where searching for. They accomplished this with a unique algorithm targeting back linking websites for relevance ranking.
      1. Better search results with a clean UI drove exceedingly fast user adoption and growth of the search engine.
      1. Better relevancy also drove high value traffic from click throughs to sites being by people who would add value to the sites. Increasing Google’s keyword click value
      1. Google is now part of the lexicon of the concept of search itself and trusted
    • Adwords created what is perceived as a fair auction (with the Vickery for less perception of price gouging) and a whole set of complex tools and options to target keywords and search parameters to get better value for internet advertising.
    • AdSense created a new way for publishers of content to monetize their content
    • Overall the competitive advantage has near term sustainability with the sheer volume of user traffic which goes through it and the power and flexibility for keyword targeting with google analytics. The increasing format of Google apps also transforms it into a powerful platform which increases the stickiness of users flowing through pages and their click through flows.
    • Long term competitive advantage has more potential variability with changing landscape of search and mobile. As people drift to different platforms and methods of navigating the internet click through search links has potential to decrease significantly. Competitors especially those like Facebook are capturing and flowing more people through internet connections especially with their increasing dominance in mobile which decrease search. 
  • Does the pay-per-click business model pioneered by GoTo.com and Google constitute a paradigm shift? How? What are the implications for other companies?
    • Yes, this created an entirely new form of revenue stream, method for interacting with the internet and focus of businesses to profit from it. It essentially eliminated the exclusive focus on keeping people within a website to click on banner ads. This made search and sending people to other places on the internet a viable and profitable business model. Removing the walled gardens and making the internet an expansive focus.
    • Transformative strategies changing the way people interact with content and flow of information has the highest potential to create new profitable business models.  Facebook is now reshowing this concept in its mobile focused businesses, including Instagram and whats app which flows people’s click through their friends, followers and other components of their network without using search. Affiliate marketing of tying pieces of info into popular people’s networks who get the new pay per click is nearly as valuable as highly ranking search keywords.
  • What is google trying to do strategically? How should competitors like Microsoft respond?
    • Google is seeking to make themselves into a platform for all things; video, smartphones, web productivity applications to continue to capture users attention and drive their viewing habits through their channels to capture advertising dollars for the activity.
    • Microsoft and Facebook should continue to strengthen offerings to users especially in new platform areas like mobile. And look to create new methods for users to interact with each other and the internet.
    • Yahoo lost…badly