Saturday, April 10, 2010

Search engines: an online money making organization

Google, Yahoo, MSN, and now Bing are synonymous to online search. Like, this seemly "free" service is offered to users for the sole reason the data provided by the interaction users have with their product produces valuable information that can be monetized.

This isn't something new, we have experienced this for at least the last hundred years with radio advertising as well as television commercials, and before that newspapers. We have gone to accept that we get a general subset of radio stations and television channels for free without realizing that although we do not directly pay for their service, the service is subsidized by their advertisers.  The popularity of a certain show and time period dictates the price a client would have to pay to advertising during that time slot.  This is why during the Super Bowl, 30-second television advertising slots cost upwards of $1 Million dollars.

Crazy, huh?

The only downside of these types of advertisement is tracking. Although through Nielson (and other similar companies) one can get fairly accurate demographics on users who are using the service at any one time, it is near impossible for clients who advertise there to know how many people who hear their advertisement actually transacted.   Precise tracking a competitive advantage online advertising has over more traditional advertisement.  Online advertising as pushed ads from impression based or time based to transaction based or lead based.  Because people searching online have already taken the initiative to start looking for a product or service, it is very easy for the advertiser to have a seller take the additional step towards a transaction.  With this type of precise tracking, advertisers can now very quickly see what campaigns are successful and what are not, and which ones meet their ROI.  

Now instead of paying a lump sum up front and hoping the advertisement worked, clients can Pay Per Lead for consumers who indicated interest for a product, or Pay Per Acquisition for consumers who actually already acquired a product.  CPA (Cost Per Acquisition) deals tend to be popular with consumer purchasing items online and/ or when an individual signs up for a credit card or savings account online.  CPL (Pay Per Lead) is more common with services that may require more involvement of the user through the transaction process, like remodeling your kitchen or refinancing your home. 

Most of these advertisement are fairly transparent.  If you don't believe me, just look at the right "rail" (column) of this article.  You can see Google Adsense/ Adwords at work.  In addition, when you search for something through any search engine, you can find advertisement through sponsored listings as well as advertisement on the right rail of the search results.

Even online communities like and offer their services for "free" in return for individuals filling out every single detail about themselves.  Information is powerful, and monetizable.  Demographic data that would have required numerous surveys and telephone calls to produce back in the 1980s now individuals freely and eagerly share and put online. uses the compiled data to help their clients advertise to you.  The fan pages you belong to, the personal data you provided, your age, where you went to school, who your friends are, and where you work.  In many ways, they're using the information you volunteered against yourself!  With services like, most people are complete "open books" to their potential advertisers. operates and monetizes in a different manner by mainly selling their user's data to their clients (who are mainly headhunters and recruitment firms).  Next time you put any personal information about yourself online, just remember, someone is letting you do so for free so they can make money off it.

As our society become more integrated on to the world wide web, we are more and more relying on the various search engines for both news, entertainment, as well as research.  We hold that information we read off our search results are "factual".  There is a famous saying that "if you can't find it on Google, then it must not be true". But is that a fair statement?

To be continued...

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