Databases Reference
In-Depth Information
In contrast to OpenText's experiences, by July 1998, GoTo.com had more than
1,000 advertisers paying between one cent and one dollar a click [
4
]. This time, there
were few outcries against the sponsored-search model.
Potpourri
: One of the first patents on sponsored search was filed by GoTo.com
on May 28, 1998 [
5
].
Bill Gross is often credited with creating the business model, although other peo-
ple are also mentioned as deserving credit, including Scott Banister, Vice President
of Ideas at IdeaLab at the time, and Jeffrey Brewer, Goto.com CEO at the time.
The names listed on the original patent are Darren J. Davis, Matthew Derer,
Johann Garcia, Larry Greco, Tod E. Kurt, Thomas Kwong, Jonathan C. Lee, Ka
Luk Lee, Preston Pfarner, and Steve Skovran.
By 2010, spending on online advertising, primarily sponsored search, exceeded
that of spending on print advertising [
6
]. This is an amazing accomplishment in just
twelve years! It parallels and rivals the dramatic rise to prominence of the search
engines themselves as gatekeepers to information on the Web.
Why was Sponsored Search Successful?
It is critically important to understand why sponsored search was successful in 1998,
while it was unsuccessful just two years previously. It is said that many technologies
are ahead of their time. A more accurate statement may be that successful technolo-
gies require the right context. In 1998, the context on the Web was ripe for a change,
specifically a new revenue model for Web sites, a new advertising model for busi-
nesses, and a new frame of reference for people using the Web.
Obviously, much had changed in the two years between the experience of
OpenText and that of GoTo.com. As GoTo.com CEO Jeffrey Brewer stated, “Quite
frankly, there's no understanding of how any service provides results. … If consum-
ers are satisfied, they really are not interested in the mechanism [
4
].”
One reason why searchers may have been more accepting of sponsored search is
that it combated the nonrelevant manipulation of search results (a nice way of saying
spam) that was occurring at the time.
Second, banner ads (the main online advertising format at that time) were prov-
ing ineffective for advertisers [
7
]. Banners were becoming commonplace and the
novelty was wearing off as clicks dropped from between 10 and 40 percent to about
1 percent in 1997 [
3
, p. 7]. In 1996, click-through rates were around 7 percent on
average, declining to approximately 0.6 percent in 1999 [
8
]. Seeing this decline in
click-through rates, Procter and Gamble (P&G) stunned the industry by announcing
they would pay only a $5 cost per thousand rate for banner advertisements [
3
].
Finally, the concept of click-through rates (CTR) was really coming into its own as
an online advertising metric. However, P&G was one of the first companies to insist
on paying only CTR for Internet advertising, although it eventually altered its stance
by supporting a hybrid impressions-and-clicks model [
3
]. Specifically, in 1996, P&G
