one nickel at a time
Posted on | September 20, 2009 | No Comments
Chapter 5 of The Search is called “One Billion Dollars, A Nickel at a Time: The Internet Gets a New Business Model.” It’s a great description of the way that GoTo.com exploited the long tail of attention on the internet to create the business model that Google uses today. Battelle says:
Gross’s core insight, the one that now drives the entire search economy, is that the search term, as typed into a search box by an internet user, is inherently valuable – it can be priced.
This was a revolutionary idea, and it’s related to Chris Anderson’s core idea in Free, that of attention as a scarce commodity in the internet age. Gross figured out that you can make millions (or billions) of dollars with thousands or millions of transactions that net you a few cents each. The other important piece of Gross’s work with GoTo was a new business model where advertisers only paid when someone clicked through to their site, instead of paying for the basic advertising space, like you do in a newspaper or on TV. Gross realized that this model is significantly more accountable, and the accountability enables companies that might otherwise feel uncomfortable venturing into web advertising to do so, because if no one clicks, they haven’t lost anything.
So GoTo.com (which eventually became Overture) had a viable business model before Google ever did, partly because Larry Page and Sergey Brin were originally loath to mix organic search results and paid advertising.
Google eventually warmed to the idea, though, and created AdWords, which is at the core of its business model to this day. After that, AOL decided to use Google instead of Overture for its paid search results, which meant Overture lost a $50 million deal. That was the beginning of the end for Overture, which was sold to Yahoo soon thereafter. Today, Google pretty much gets the credit for pioneering the new business model. But Bill Gross is still inventing away, and after reading this chapter, I wouldn’t be surprised if another one of his creations changes the way we think about the internet yet again.
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