The History of Pay Per Click Advertising and Yahoo! Sponsored Search

By jameszol
Published on November 1, 2007

Have you ever wanted to know HOW and WHERE PPC advertising got started? Here is the story I copied from Wikipedia:

“In February 1998, Jeffrey Brewer of Goto.com, a 25 employee startup company (later Overture, now part of Yahoo!), presented a PPC search engine proof-of-concept to the TED8 conference in California. This and the events that followed created the PPC advertising system. Credit for the concept of the PPC model is generally given to the Idealab and Goto.com founder, Bill Gross.

Google started search engine advertising in December 1999. It was not until October 2000 before the adwords system was introduced. Allowing advertisers to create text ads for placement on the search engine. However PPC was only introduced in 2002, until then, advertisements were charged at CPM. Yahoo Advertisements have always been PPC, since its introduction in 1998.

Goto.com was an Idealab spin off and was the first company to successfully provide a pay-for-placement search service.

In February 1998, GoTo offered advertisers the option of bidding on how much they would be willing to pay to appear at the top of results in response to specific searches. The bid amount was paid by the advertiser to Goto every time a searcher clicked on a link to the advertiser’s website. By July 1998, advertisers were paying anything up to a dollar per click.

GoTo’s business model was based on the idea that its paid listings would make it more relevant than other services, especially for general searches, and web sites that pay more are probably better sites. A similar service had been offered by Open Text in 1996, but this precipitated outcries and bad publicity because searchers at the time did not want the search process more commercialized.

In contrast, GoTo’s pay-for-placement model was very successful. Commentors theorised that the web had matured in the intervening two years, and these type of economic models were more acceptable since the web was no longer just a place for academic research, but also a place for buying products. GoTo founder Bill Gross speculated at the launch that GoTo would succeed because, as a relatively new service, it had no reputation to taint with paid listings, unlike Open Text.

On October 8, 2001, Goto.com, Inc. renamed itself Overture Services, Inc. GoTo’s chief operating officer Jaynie Studenmund said “We also felt it was a sophisticated enough name, in case our products expand.”

Through partnerships, Overture enabled portals such as MSN and Yahoo! to monetize the hundreds of millions of web searches made each day on their sites. Indeed, these partnerships proved highly lucrative, and in a period otherwise marked by dot-com failures, Overture became a substantial profit driver for portals like Yahoo!

This success enabled Overture to acquire web sites such as AltaVista and AlltheWeb.

In 2003, Overture was acquired by its biggest customer, Yahoo!, for $1.7 billion. The old brand name of Overture has now been phased out as Yahoo! re-brands many of its products under the Yahoo! name. The exception to this is in Japan and Korea where the local businesses continue to use the Overture brand.”

Interesting, right? What a young industry with so much potential. It’s too bad that the Quality Score is still a ‘black box’ in a way while we have the ability to manipulate and improve a PPC account on so many levels!

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