Networks: Spring 2007 Keyword-based Advertising 1 Keyword-based Advertising

The problem of Web search, as traditionally formulated, has a very " pure " motivation: it seeks to take the content people produce on the Web and find the pages that are most relevant, useful, or authoritative for any given query. However, it soon became clear that a lucrative market existed alongside this for combining search with advertising, targeted to the queries that users were issuing. The basic idea behind this is simple. Early Web advertising was sold on the basis of " impressions, " by analogy with the print ads one sees in newspapers or magazines: a company like Yahoo! would negotiate a rate with an advertiser, agreeing on a price for showing its ad a fixed number of times. But suppose I'm a very small retailer who's trying to sell a specialized product; say, for example, that I run a business that sells calligraphy pens over the Web. Then paying to display ads to the full Internet-using population seems like a very inefficient way to find customers; instead, I might want to work out an agreement with a search engine that said, " Show my ad to any user who enters the query 'calligraphy pens. " ' After all, search engine queries are a potent way to get users to express their intent — what it is that they're interested in at the moment they issue their query — and an ad that is based on the query is catching a user at precisely this receptive moment. Originally pioneered by the company Overture, this style of keyword-based advertising has turned out to be an enormously successful way for search engines to make money; at present it's a $10-$20 billion business per year, and it is responsible, for example, for nearly all of Google's revenue. From our perspective in the course, it's also a very nice blend of ideas that have come up earlier in the semester: it creates markets out of the information-seeking behavior of hundreds of millions of people traversing the Web, and we will see shortly that the connections to auctions and buyer-seller matchings in fact run quite deeply. Keyword-based ads thus show up on search engine results pages alongside the unpaid (" organic " or " algorithmic ") results — paid results on the right, organic results on the left. There can be multiple paid results for a single query term; this simply means that …