Google Tweaks AdWords To Reward “Quality”

From TechCrunch:
Google Tweaks AdWords To Reward “Quality” (And Juice Revenues)

Google has made a significant update to their ad word platform. As Tim O’Reilly detailed previously on his blog, much of Google’s power comes from the quality of their ad auction.
“Google’s third (and most profitable) network effect insight was, of course, the ad auction…
It isn’t that the advertising-side network effect has anything to do with Google’s dominance of search, but rather, that Google’s dominance of search is central to the design of their ad auction. You see, while Yahoo! (nee Overture) sold keyword advertising to the highest bidder, Google realized that they could mine their users’ clickstream activity to predict which ads would be most likely to be clicked on, and by what ratio, and thus sell to the best combination of price and actual click through. Thus: higher revenue, more ability to invest in infrastructure, better results for advertisers and users, thus more users, thus better data, thus better results for both organic search and advertising”

Google’s ad auction contributes to the positive feedback loop that keeps increasing their market share. This improvement to the ad auction quality should help them out significantly in terms of revenue and advertiser appeal, which should ultimately increase user appeal. Looks good for my friend with Google options.

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