MD253/MK252Electronic Commerce

April 3, 2006 Search & Advertising:

Google, Yahoo, Microsoft

Topics Covered

• Online Advertising Spending/Growth

• Google– Firm background– Revenue streams– Weaknesses/challenges w/model– Areas for development

• Competitors– Yahoo, Microosft, & others– Exploitable resources

Ad Spending: Comparisons & Growth

The U.S. Ad Market

$283B

Direct Mail$57.2B

Newspapers$49.6B

Broadcast TV$46.7B

Radio$21.0B

Cable TV$16.7B

YP$14.5B

Mags$13.0B

Internet$11.3B

Other$53.0B

Experiments with Offline Ads

Google Growth

$440M

$1,466M

$3,189M

$6,139M

$0.45 $0.41

$1.46

$5.02

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2002 2003 2004 2005$0

$1

$2

$3

$4

$5

$6

RevenueEPS (diluted)

Revenue ($ Millions)

EPS(diluted)

Google Revenue StreamsAdWords AdSense

Google Enterprise ProductsLicensing

AdSense

• Coverage for advertisers beyond search targeting

– AdSense network covers nearly every topic imaginable

– Matches highly targeted advertising with niche content

• Broad reach for branding advertisers

– Site Targeting allows advertisers to reach their target audience

– Aggregates the long tail

The Power of the “Tail” 3.9 Million Daily Page Views on Hip Hop Related Sites

Top 10 Highest Paying Keywords

$54.33 mesothelioma lawyers$47.79 what is mesothelioma$47.72 peritoneal mesothelioma$47.25 consolidate loans$47.16 refinancing mortgage$45.55 tax attorney$41.22 mesothelioma$38.86 car accident lawyer$38.68 ameriquest mortgage$38.03 mortgage refinance

Source: San Jose Mercury News, March 2006

Despite Click Fraud, Advertisers are Spending More

Source: TNS-MI; 2005 and 2003 US online display advertising, excludes companies with online spend less than $400K in 2003

AdWords Editor for Sophisticated Advertisers

Options for SMBs

Intuitive Targeting

Straightforward Reporting

Simple Bidding

Ads In Local Search

18

Targeted Advertising

Ads In Google Earth

Targeted Advertising

70-20-10 Product Framework

10%

20%

Core 70%Search

Ads

GoogleVideo

GoogleTalk

Gmail

LocalSearch

DesktopSearch

AdSense

BookSearch

Enterprise

MobileSearch

Google Earth

AdSense Offline

Google Movies

Google Code

Google Reader

Google Suggest

Google Pack

Orkut WiFi

Google - A Global Product= Engineering and PM offices

• Mountain View, CA• Kirkland, WA• Phoenix, AZ• Pittsburgh, PA• New York, NY• Santa Monica, CA

• Bangalore, India• Beijing, China• Belo Horizonte, Brazil• Hyderabad, India• London, U.K.• Munich, Germany• Tokyo, Japan• Trondheim, Norway• Waterloo, Canada• Zurich, Switzerland

Cost/performance evolution is not just in chips…

Cookies• stored in a text file on your hard drive• usage

– track users (unique ID)– save passwords / prefs.– temporary storage (shopping

basket)• each cookie can only be accessed by

the domain that placed it (ads have own domain)

• may be disabled (prefs) • a cookie single user

TargetingTargeting Options• site categorization• visitor frequency• geography• domain name• service provider• SIC codes• company size (emp, $)• browser type• operating system• click stream