History of Search-based Online Advertising
The concept behind search-based online advertising is fairly simple: advertisers in germany bid on keywords and when a user types in that keyword as a query in a search engine, their advertisements show up along with the organic search results. The amount the advertisers bid determines the position and ranking of their ads; the higher the bid, the better their position. Advertisers pay fees only when their ads are clicked upon (‘pay-per-click’ model). The interesting aspects of this market are the auction system determining ad position as well as in predicting users’ behavior around search-engine and potential ad-clicks.
The history of search-based online advertising began in 1995 when an early search-engine, InfoSeek, began to target banner-ads towards keywords entered into their system. In 1996, Proctor and Gamble, introduced the “pay-per-click” model of online advertising when they were able to convince Yahoo! that they would only pay for ads that users clicked on. At the same time, another search engine, OpenText, tried to target text-based ads to user search queries. However there was considerable backlash from their user community. It seemed users were not ready for their search engine to become commercialized. Other search engines observed this user response and decided to hold back on any similar initiatives they had planned.
In 1998, IdeaLab! developed GoTo.com which introduced clearly labeled text-ads which correlated to the keywords typed in by users. GoTo.com later changed their name to Overture. Yahoo! eventually acquired and incorporated Overture into their system. Google also introduced their system, AdWords, which also sells keyword targeted ads for their search-engine. Overture (now Yahoo Search Marketing) and AdWords control a vast majority of the market revenue for search-based advertising.
However, due to the complexity and vast potential of managing keyword advertising, many smaller and specialized search marketing firms have recently been formed and become players in this market. These firms address specialized needs for companies and their search-based advertising programs. One of the major firms in this area is DoubleClick with their Performics division and DART Search program which specialize in tracking and evaluating the ROI of advertising in various search sites.