This link has been bookmarked by 34 people . It was first bookmarked on 24 May 2009, by ddelorme.
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13 Jul 09
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12 Jul 09
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01 Jul 09
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He never mentions how much revenue advertising brings in. But Google is a public company, so anyone can find the number: It was $21 billion last year.
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"You say that an auction happens every time a search takes place? That would mean millions of times a day!"
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His job is to provide a theoretical framework for Google's business practices
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Anything that increases Internet use ultimately enriches Google,
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The microeconomics of Google is more complicated. Selling ads doesn't generate only profits; it also generates torrents of data about users' tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It's a system of constant self-analysis: a data-fueled feedback loop that defines not only Google's future but the future of anyone who does business online.
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It was called a two-sided matching market.
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all the ad slots should be auctioned off
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By turning over its sales process entirely to an auction-based system, the company could similarly upend the world of advertising, removing human guesswork from the equation.
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That client knew math, says Levick, whose secret weapon was the numbers. When the data was crunched—and Google worked hard to give clients the tools needed to run the numbers themselves—advertisers saw that the new system paid off for them, too.
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"But the really gutsy move," Varian says, "was using it in the IPO."
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leveled the playing field
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Google even uses auctions for internal operations, like allocating servers among its various business units.
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The across-the-board emphasis on engineering, mathematical formulas, and data-mining has made Google a new kind of company.
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Wu calls Google "the barometer of the world." Indeed, studying the clicks is like looking through a window with a panoramic view of everything.
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And since prediction and analysis are so crucial to AdWords, every bit of data, no matter how seemingly trivial, has potential value.
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he does think that Google-style auctions are applicable to all sorts of transactions.
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early recognition that the Internet rewards fanatical focus on scale, speed, data analysis, and customer satisfaction.
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28 Jun 09
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19 Jun 09
nikolas smyrlakisHow Google finally makes its money, we were having this discussion some time ago
Google economics googlenomics ads adwords auction varian advertising
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10 Jun 09
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31 May 09
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29 May 09
Philip RothmanIn the midst of financial apocalypse, the gadflies and gurus of the global marketplace are gathered at the San Francisco Hilton for the annual meeting of the American Economics Association.
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charlesijonesWhat could be more baffling than a capitalist corporation that gives away its best services, doesn't set the prices for the ads that support it, and turns away customers because their ads don't measure up to its complex formulas? Varian, of course, knows that his employer's success is not the result of inspired craziness but of an early recognition that the Internet rewards fanatical focus on scale, speed, data analysis, and customer satisfaction. (A bit of auction theory doesn't hurt, either.) Today we have a name for those rules: Googlenomics. Learn them, or pay the price.
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27 May 09
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26 May 09
Gosia StergiosHow Google (and advertisers) make money from Ads - Google as an auction business.
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tho masIn the midst of financial apocalypse, the gadflies and gurus of the global marketplace are gathered at the San Francisco Hilton for the annual meeting of the American Economics Association. The mood is similar to a seismologist convention in the wake of the Big One. Yet surprisingly, one of the most popular sessions has nothing to do with toxic assets, derivatives, or unemployment curves.
"I'm going to talk about online auctions," says Hal Varian, the session's first speaker. Varian is a lanky 62-year-old professor at UC Berkeley's Haas School of Business and School of Information, but these days he's best known as Google's chief economist. This morning's crowd hasn't come for predictions about the credit market; they want to hear about Google's secret sauce. -
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25 May 09
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raman srinivasan"I'm going to talk about online auctions," says Hal Varian, the session's first speaker. Varian is a lanky 62-year-old professor at UC Berkeley's Haas School of Business and School of Information, but these days he's best known as Google's chief economist. This morning's crowd hasn't come for predictions about the credit market; they want to hear about Google's secret sauce.
Varian is an expert on what may be the most successful business idea in history: AdWords, Google's unique method for selling online advertising. AdWords analyzes every Google search to determine which advertisers get each of up to 11 "sponsored links" on every results page. It's the world's biggest, fastest auction, a never-ending, automated, self-service version of Tokyo's boisterous Tsukiji fish market, and it takes place, Varian says, "every time you search." He never mentions how much revenue advertising brings in. But Google is a public company, so anyone can find the number: It was $21 billion last year.
His talk quickly becomes technical. There's the difference between the Generalized Second Price auction model and the Vickrey-Clark-Groves alternative. Game theory takes a turn; so does the Nash Equilibrium. Terms involving the c-word—as in clicks—get tossed around like beach balls at a summer rock festival. Clickthrough rate. Cost per click. Supply curve of clicks. The audience is enthralled. -
David Ing[....] Googlenomics actually comes in two flavors: macro and micro. The macroeconomic side involves some of the company's seemingly altruistic behavior, which often baffles observers. Why does Google give away products like its browser, its apps, and the Android operating system for mobile phones? Anything that increases Internet use ultimately enriches Google, Varian says. And since using the Web without using Google is like dining at In-N-Out without ordering a hamburger, more eyeballs on the Web lead inexorably to more ad sales for Google.\n\nThe microeconomics of Google is more complicated. Selling ads doesn't generate only profits; it also generates torrents of data about users' tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It's a system of constant self-analysis: a data-fueled feedback loop that defines not only Google's future but the future of anyone who does business online.\n[....] Kamangar and Veach decided to price the slots on the side of the page by means of an auction. Not an eBay-style auction that unfolds over days or minutes as bids are raised or abandoned, but a huge marketplace of virtual auctions in which sealed bids are submitted in advance and winners are determined algorithmically in fractions of a second. Google hoped that millions of small and medium companies would take part in the market, so it was essential that the process be self-service. Advertisers bid on search terms, or keywords, but instead of bidding on the price per impression, they were bidding on a price they were willing to pay each time a user clicked on the ad. (The bid would be accompanied by a budget of how many clicks the advertiser was willing to pay for.) The new system was called AdWords Select, while the ads at the top of the page, with prices still set by humans, was renamed AdWords Premium.\n\nOne key innovation was that all the sidebar slots on the result
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24 May 09
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Varian, an upbeat, avuncular presence at the Googleplex in Mountain View, California, serves as the Adam Smith of the new discipline of Googlenomics. His job is to provide a theoretical framework for Google's business practices while leading a team of quants to enforce bottom-line discipline, reining in the more propellerhead propensities of the company's dominant engineering culture.
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The microeconomics of Google is more complicated. Selling ads doesn't generate only profits; it also generates torrents of data about users' tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It's a system of constant self-analysis: a data-fueled feedback loop that defines not only Google's future but the future of anyone who does business online.
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Varian tried to understand the process better by applying game theory. "I think I was the first person to do that," he says. After just a few weeks at Google, he went back to Schmidt. "It's amazing!" Varian said. "You've managed to design an auction perfectly."
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"Ninety-nine percent of companies would have said, 'Hold on, don't make that change.' But we had Larry, Sergey, and Eric saying, 'Let's go for it.'"
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AdWords was such a hit that Google went auction-crazy. The company used auctions to place ads on other Web sites (that program was dubbed AdSense). "But the really gutsy move," Varian says, "was using it in the IPO." In 2004, Google used a variation of a Dutch auction for its IPO; Brin and Page loved that the process leveled the playing field between small investors and powerful brokerage houses. And in 2008, the company couldn't resist participating in the FCC's auction to reallocate portions of the radio spectrum.
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"Google needs mathematical types that have a rich tool set for looking for signals in noise," says statistician Daryl Pregibon, who joined Google in 2003 after 23 years as a top scientist at Bell Labs and AT&T Labs. "The rough rule of thumb is one statistician for every 100 computer scientists."
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Keywords and click rates are their bread and butter. "We are trying to understand the mechanisms behind the metrics," says Qing Wu, one of Varian's minions. His specialty is forecasting, so now he predicts patterns of queries based on the season, the climate, international holidays, even the time of day. "We have temperature data, weather data, and queries data, so we can do correlation and statistical modeling," Wu says. The results all feed into Google's backend system, helping advertisers devise more-efficient campaigns.
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Wu calls Google "the barometer of the world." Indeed, studying the clicks is like looking through a window with a panoramic view of everything. You can see the change of seasons—clicks gravitating toward skiing and heavy clothes in winter, bikinis and sunscreen in summer—and you can track who's up and down in pop culture. Most of us remember news events from television or newspapers; Googlers recall them as spikes in their graphs. "One of the big things a few years ago was the SARS epidemic," Tang says. Wu didn't even have to read the papers to know about the financial meltdown—he saw the jump in people Googling for gold. And since prediction and analysis are so crucial to AdWords, every bit of data, no matter how seemingly trivial, has potential value.
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Can the rest of the world be far behind? Although Eric Schmidt doesn't think it will happen as quickly as some believe, he does think that Google-style auctions are applicable to all sorts of transactions. The solution to the glut in auto inventory? Put the entire supply of unsold cars up for bid. That'll clear out the lot. Housing, too: "People use auctions now in cases of distress, like auctioning a house when there are no buyers," Schmidt says. "But you can imagine a situation in which it was a normal and routine way of doing things."
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Taryn .AdWords was such a hit that Google went auction-crazy. The company used auctions to place ads on other Web sites (that program was dubbed AdSense). "But the really gutsy move," Varian says, "was using it in the IPO." In 2004, Google us
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