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Friday, January 16, 2009

Nah, Microsoft didn't "blow it" with PPC in 2000

I'm a bit concerned with the take by Larry Dignan on this WSJ story about Microsoft shuttering a service called Keywords in 2000.

The point is not that they didn't do much with paid search (or even that Yahoo could have "done more" with Overture).

The point is that there have been dozens of viable and interesting keyword purchase and auction inventions. There were even some solid contenders from well known brand names, such as LookSmart, and before that, AltaVista, and virtually the first appearance of the concept ever, Open Text. Metasearch engine MetaCrawler sold keywords too, prior to 1998, though the system wasn't slick.

But, and it's a big but, the real issue has always been share of searches, not quality of monetization platforms.

Google built the lion's share of searches *and* had a slick monetization auction. The reason Overture and Yahoo were second is because Overture pioneered that auction *and* Yahoo was a solid second in search share. Prior to the Yahoo acquisition, Overture enjoyed share by partnership. Its distribution network was very solid. Lest we forget, one of its early wins was Microsoft bCentral, and later, MSN used Overture to monetize its paid searches. While paying the revenue share to Overture might have cut into profit slightly, Microsoft would have "won" if it had grown search share. It could have kept sending those checks to Overture, switched to any number of other partners, and built its own solution more quickly, if that had seemed to matter.

Today, Microsoft adCenter is a fine PPC auction platform and would be even better if more resources were devoted to it. But advertisers won't begin to care until the share of searches and paid search ad spend reaches, say, 15%. It's also missing the distribution advantages of the Google Content Targeting network, which has grown and improved by leaps and bounds since its introduction in 2003. So here again, Microsoft is behind on distribution and the convenience of buying more ads, not on monetization platforms. Google acted with desperation to get ahead of competitors like Yahoo, Microsoft, and DoubleClick in the nascent "text ad display space" and really innovated by acquiring semantic matching resources and building their own technology aggressively on top of that. They iterated and failed often; they shipped new releases early and often.

So to recap the point about monetization platform vs. share of searches (and secondarily share of network partners and publishers): all of those other properties -- AltaVista, Open Text, LookSmart, and many others -- went by the wayside as consumer engines, so there was nothing left to monetize. Microsoft (to date) has not grown its search share high enough to "compete" with Google, though they're way ahead of zero.

Yahoo has also been a disappointment in that regard, and both Yahoo and Microsoft did a poor job of chasing Google in the "text display ad" auction space, as well. It's all about reach. Google saw the race developing, and began running it at least a year sooner than anyone else would have.

That's the point. As is usually the case, market leadership doesn't turn on a single event. It's all about immersion and total commitment to a market. Only Google displayed that. Yahoo came close. Microsoft? The jury is still out.

Posted by Andrew Goodman




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