Major Players in Search-based Online Advertising

Australia, one of the fastest growing online advertising nation in the world today.

The huge market of search based advertising has become a battleground for the three main search engines, namely Google, Yahoo!, and MSN (with 36.5%, 30.5%, and 15.5% based on volume of search respectively in July 2005). The market share for search-based advertising is correlated to the popularity of each company’s search engine. This difference in popularity and design of these companies’ flagship websites and search engines has led to a different market and pricing strategies to generate revenue from search-based advertising.

 

According to The Economist, Google is the clear leader of Internet search as “the most technological existing and profitable end of business” (The Economist, 2005). It offers two main search-based advertising products, AdWords and AdSense; both of which depend heavily on their search engine data repository. The price of services is flexible in that it is determined by an auction system. Google essentially prices their services on “how much [the advertisers] are willing to pay and how well [they] know [their] audience” (Google, 2005.) The cost of the products is based on the concept of “pay-per-click”, charging a fee for each user click on the advertisment (ranging from from $0.01 – $100) after a one-time activation fee is paid ($5.00).

 

While Google is the leading search engine, the Yahoo! portal is considered the most popular website visited in America (The Economist, 2005). It is often the first site people go to when surfing the World Wide Web.  Yahoo! leverages a vast array of services ranging from web-hosting, web-based mail to personalized portal sites to promote their advertising potential. The company currently offers three products related to search based advertising called Sponsored Search, Local Sponsored Search and Search Submit Express. All of them basically apply a combination of cost-per-click and monthly payment scheme after an initial fee.

 

Microsoft, traditionally a major player in the software industry, is the latest, of the three, into this market. Their main commercial website, MSN, is considered the last in the rankings of these three companies, in terms of search-based advertising. Their products, MSN AdCenter and MSN Paid Search Solution, are late competitors to Google and Yahoo!’s products. Microsoft used to rely on the Overture service owned by Yahoo! to place text advertisements on the result pages of the MSN search service. But with the release of MSN AdCenter, the MSN search engine has become independent. Microsoft/MSN, along with AOL/TimeWarner, have begun to enter the realm of general online advertising, leveraging their dominance in other markets, to gain a foothold in this one. AOL/TimeWarner is known for its dominance in the media (cable television, magazine, etc.) while Microsoft/MSN has dominance in the desktop applications. Because of this they can be considered competitors to Yahoo! and Google in terms of general online advertising. The enthusiastic response to their recent release of search-based advertising application which rely on user demographics and contextual characteristics such as time and day the queries are made serves as an indication of their formidable presence in this market.

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