A Brief History Of Paid Search Advertising
If you're just getting started with paid search, it's helpful to know a bit of history of how pay-per-click advertising got started and why it has become such a major factor in the success of online marketers.
In the beginning, there were websites.
Human-compiled directories like Yahoo sprung up to help users find interesting things on the web, but after a while, it became obvious that the manual process for indexing the exponentially growing number of websites was futile and thus search engines arrived to fill the void with scalable, technology-driven solutions. Hundreds (if not thousands) of search engines competed for the job but the early algorithmic driven engines were ineffective and a source of frustration as spammers cluttered search engine results pages (SERPs) with irrelevant content. Those of you who remember searching on the early engines in the 1990s may recall that sometimes as many as half of the listings on various SERPS were blatantly unrelated to your query.
It was Google, among others, that finally created a search engine that ranked pages in a way that made sense (read more here about that) and by 2000, search engines in essence became the best starting point for finding web content. Since then, the number of searches has grown dramatically (and steadily) and with the widespread adoption of broadband access, search engines have become utterly vital to our web experience.
The first monetization of SERPs began in the mid-90s with a flat-fee directory listing in line with how the Yellow Pages sold their advertising inventory. However, by 2000, with companies such as Overture (purchased by Yahoo in 2003) and Google with its AdWords program, the transparent, auction-based, pay-per-click model we see now in paid search had become the standard. In the early days, any advertiser was willing to pay the most per click would get secure the highest position for their ad on a SERP.
Over time, though, it became increasingly obvious that this wasn’t the most effective model as the engines would gladly have an advertiser pay $1 for ad that got clicked 10% of the time versus a $5 ad that was clicked only 1% of the time. Thus, a major shift occurred in the mid 2000s when Google introduced Quality Score, a way to determine which ads should appear on the page (and in which order) based on various optimization factors—foremost of which were criteria that ensured the ads which generated the most revenue would get pushed to the top. Yahoo and Microsoft followed similarly with their paid search platforms.
Paid search is now the biggest revenue driver for most search engines. In fact, according to eMarketer, Google was on pace to generate $22 billion worldwide in paid search in 2009, with 37 billion clicks at a $.60 average cost-per-click (CPC). That’s a lot of dough!
Not only are search engines profiting from paid search, but advertisers as well. Advertisers spent almost half of their 2009 online ad budgets on SEM ($11 billion out of $22 billion total online advertising) with most of that being paid search.
Generally, Google, Yahoo and Microsoft are referred to as “top tier” engines with a multitude of smaller engines representing the “lower tier” market. According to online marketing research company comScore, the major search engines in the United States include:
- Google (64.9% market share)
- Yahoo (18.8% market share)
- Microsoft (9.4% market share)
- Ask (3.9% market share)
- AOL sites (3.0% market share)
Paid Search has now become a “must do” marketing effort for almost every online and offline business and the demand for search marketing experts has been growing every year.
For a timeline of key milestones in search, see Danny’s The Google Decade: Search In Review, 2000 To 2009, which covers developments in both paid and organic search.
This week’s question: With SEM now amount to a full 50% of U.S. online advertising budgets, do you see that percentage going up or down in the next few years? Please respond in the comment section below.
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