© 2013, published by Flat World Knowledge 15-1 Information Systems: A Manager’s Guide to...

© 2013, published by Flat World Knowledge 15-1

Information Systems: A Manager’s Guide to Harnessing

Technology, version 2.0John Gallaugher

© 2013, published by Flat World Knowledge

Published by:

Flat World Knowledge, Inc.

© 2013 by Flat World Knowledge, Inc. All rights reserved. Your use of this work is subject to the License Agreement available here http://www.flatworldknowledge.com/legal. No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement.

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Chapter 15

Google in Three Parts: Search, Online Advertising, and Beyond

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Learning Objectives

• Understand the extent of Google’s rapid rise and its size and influence when compared with others in the media industry

• Recognize the shift away from traditional advertising media to Internet advertising

• Gain insight into the uniqueness and appeal of Google’s corporate culture

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Introduction

• Google earns by pairing Internet surfers with advertisers

• Advertising drives profits and lets the firm offer most of its services for free

• Voted as one of the best firms to work for in the U.S.• Dominates the search market

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Introduction

• Market capitalization (market cap): Value of a firm calculated by multiplying its share price by the number of shares

• Success of its existing businesses allows Google to:– Experiment and innovate– Withstand failure– Make acquisitions and build new markets

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Figure 15.3 - U.S. Search Market Share (Volume of Searches, June 2013)

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Learning Objectives

• Understand the mechanics of search, including how Google indexes the Web and ranks its organic search results

• Examine the infrastructure that powers Google and how its scale and complexity offer key competitive advantages

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Understanding Search

• Search engine results returned and ranked according to relevance

Organic or natural search

• Algorithm to rank Web sites

PageRank

• Process of improving a page’s organic search results

Search engine optimization (SEO)

• Creating a series of bogus Web sites, all linking back to the pages one is trying to promote• Called spamdexing or link farming

Link fraud

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• Traverse available Web links to perform a given task• Spiders discover documents for indexing and retrieval

Spiders, Web crawlers, software robots

• Temporary storage space used to speed computing tasks

Cache

• Internet content that cannot be indexed by search engines

Dark Web

• Network of computer servers running software to coordinate their collective use

Server farm

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• Google’s server setup is fault-tolerant– Fault-tolerant: Capable of continuing operation even

if a component fails • Colos (colocation facilities): Warehouse-sized

facilities where telecom companies come together to exchange traffic– Help make the Internet function as a network of

networks

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Learning Objectives

• Understand how media consumption habits are shifting

• Be able to explain the factors behind the growth and appeal of online advertising

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Online Advertising

• Factors driving trends– Increased user time online– Improved measurement and accountability – Targeting - Enables a firm to spend money only on its

best prospects– Impressions help advertisers gauge an

advertisement’s effectiveness• Impressions: Each time an ad is served to a user for

viewing

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Learning Objectives

• Understand Google’s search advertising revenue model

• Know the factors that determine the display and ranking of advertisements appearing on Google’s search results pages

• Be able to describe the uses and technologies behind geotargeting

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Google’s Search Advertising

• Search engine marketing (SEM): Designing, running and optimizing search-engine ad campaigns

• Keyword advertising: Advertisements that are targeted based on a user’s query– Advertisers bid on the keywords to be used to trigger

the display of their ad• Linking advertising to purchasing intent makes

Google’s ads highly valuable

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Google’s Search Advertising• Pay-per-click (PPC): Advertisers do not pay unless

someone clicks on their ad• Cost-per-click (CPC): Maximum amount of money an

advertiser is willing to pay for each click on their ad• Top performing ads are measured by considering the:– Maximum CPC an advertiser is willing to pay– Advertisement’s quality score• Quality score: A broad measure of ad performance

– Formula - Ad Rank = Maximum CPC × Quality Score

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Google’s Search Advertising• Factors determining an ad’s quality score– Click-through rate (CTR): Number of users who clicked

an ad divided by the number of times the ad was delivered

– Overall history of click performance for the keywords linked to the ad

– Relevance of an ad’s text to the user’s query– Automated assessment of the user experience on the

landing page• Landing page: Web page displayed when a user clicks

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Google’s Search Advertising

• Provides tools to identify popular words and phrases for selecting keywords to link with an ad

• Offers dynamic search ads– Dynamic search ads: Ads generated automatically

based on the content of a Web site• Advertisers get a running total of ad performance

statistics that helps:– Monitor the return on their investment– Tweak promotional efforts for better results

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Table 15.1 - 10 Most Expensive Industries for Keyword Ads

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Source: Consolidated from SpyFu.com, June 2011.


Geotargeting

• Identifying a user’s physical location for the purpose of delivering tailored ads or other content

• Ads in Google Search can be geotargeted based on IP address– IP address: Value used to identify a device that is

connected to the Internet • Changes depending on how and where one connects to

the Internet

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Learning Objectives

• Understand ad networks, and how ads are distributed and served based on Web site content

• Recognize how ad networks provide advertiser reach and support niche content providers

• Be aware of content adjacency problems and their implications

• Know the strategic factors behind ad network appeal and success

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Google’s Ad Network

• Ad network: Links advertisers to Web sites and other content providers willing to host advertisements– In exchange for payment

• AdSense targets ads based on keywords detected inside the content of a Web site

• Contextual advertising: Based on Web site’s content– Content adjacency problems: Situation where ads

appear alongside text the advertiser would like to avoid

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Ad Networks and Competitive Advantage

• Ability to reach more potential customers attracts more advertisers

• Content providers want to join ad networks with the most number of advertisers

• More participants bring in more revenue and help the firm benefit from scale economies– Better return on investment from its ad technology

and infrastructure

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Learning Objectives

• Know the different formats and media types that Web ads can be displayed in

• Know the different ways ads are sold• Know that games can be an ad channel under the

correct conditions

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Ad Formats

• Graphical advertising, as opposed to text ads

Image (or display) ads

• Online ads that include animation, audio, or video

Rich media ads

• Ads that run before a user arrives at a Web site’s contents

Interstitials

• Evaluates and recommends interactive advertising standards and practices

Internet Advertising Bureau (IAB)

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Payment Schemes

• Most graphical display ads are sold according to impressions– Ad rates are quoted in CPM• CPM: Cost per thousand impressions

• Affiliate programs: Program sponsors pay referring Web sites a percentage of revenue earned from the referral

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Ads in Games

• Sponsorships of Web-based and mobile games • Firms have created online mini games for longer

term, immersive brand engagement • Integrating virtual product placement into gaming

experiences

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Learning Objectives

• Be familiar with various tracking technologies and how they are used for customer profiling and ad targeting

• Understand why customer profiling is both valuable and controversial

• Recognize steps that organizations can take to help ease consumer and governmental concerns

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Customer Profiling and Behavioral Targeting

• Communication between a Web browser and Web server reveals:– IP address - Leveraged extensively in customer

profiling– Type of browser used– Computer type and its operating system– Cookies: Line of identifying text, assigned and

retrieved by a given Web server and stored by one’s browser

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Remarketing

• Shows custom, targeted ads to a user when visiting other sites if the user has already visited a given page on the advertiser’s site– Referred to as retargeting– Reintroduces products to users or targets with special

messages or promotion

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Cookies

• Obtain details on a user’s purchases• Tailor Web sites to display products most likely to be

of interest to a user• Keep track of the contents of a user’s shopping cart• Store user IDs and passwords as part of the

“remember me” feature• Third-party cookies: Identify users and record

behavior across multiple Web sites– Served by ad networks or customer profiling firms

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Learning Objectives

• Understand the privacy concerns that arise as a result of using third-party or tracking cookies to build user profiles

• Be aware of negative consequences that could result from the misuse of third-party or tracking cookie

• Know the steps Google has taken to demonstrate its sensitivity to privacy issues

• Know the kinds of user information that Google stores, and the steps Google takes to protect the privacy of that information

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User Privacy

• The U.S. Federal Trade Commission has called for:– More transparency and user control in online

advertising – Opt-in when collecting sensitive data• Opt-in: Program that requires customer consent

• Google allows users to: – See all the categorizations assigned to a browser’s

tracking cookie• Users can remove categorizations, or add interests to

improve ad targeting

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User Privacy

– Install a cookie or plug-in that opts them out of interest-based tracking• Opt-out: Enroll all customer by default, but allow them

to discontinue participation if they want to• Plug-in: Extends the feature set or capabilities of

another application

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Learning Objectives

• Be able to identify various types of online fraud, as well as the techniques and technologies used to perpetrate these crimes

• Understand how firms can detect, prevent, and prosecute fraudsters

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Types of Fraud Attempted in Online Advertising

• Generating bogus ad clicks to earn PPC incomeEnriching click fraud

• Generating false page views to boost a site’s CPM earningsEnriching impression fraud

• Clicking a rival’s ads to exhaust their PPC advertising budgetDepleting click fraud

• Generating bogus impressions to exhaust a rival’s CPM ad budget

Depleting impression fraud

• Repeatedly searching keywords linked to rival ads, to lower their performance rank

Rank-based impression fraud

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Types of Fraud Attempted in Online Advertising

• Generating bogus clicks or impressions associated with rivals, to ban them from an ad network

Disbarring fraud

• Creating bogus Web sites, all linking back to a page, to increase that page’s results in organic search

Link fraud

• Packing a Web site with unrelated keywords to attract higher-value contextual ads

Keyword stuffing

• Recruiting a network of users to engage in click fraud, thereby spreading IP addresses across several systems

Click farms

• Infiltrated computers, linked and controlled by rogue softwareBotnets (zombie networks)

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Learning Objectives

• Understand the challenges of maintaining growth as a business and industry mature

• Recognize how technology is a catalyst, causing the businesses of many firms in a variety of industries to converge and compete, and that as a result of this, Google is active on multiple competitive fronts

• Critically evaluate the risks and challenges of businesses that Google, Microsoft, and other firms are entering

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Learning Objectives

• Appreciate the magnitude of this impending competition, and recognize the competitive forces that will help distinguish winners from losers

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Figure 15.15 - A Comparison of Stock Price Change—Google (GOOG) versus Microsoft (MSFT)

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Google’s Competitive Forces

• Major scale advantages in search and network effects in advertising– Dominance helps grow a data asset for service

improvement• Multiple ad networks make it easier to shift business

from one firm to another– Google must offer superior value to retain advertisers

• Switching costs for search users are incredibly low

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© 2013, published by Flat World Knowledge 15-1 Information Systems: A Manager’s Guide to...

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