Happy 10th birthday, pay-per-click (PPC) advertising -- part 2 of 2

...Continued from yesterday (click here for yesterday's post)

It's Independence Day, the birthday of our country. But in addition to celebrating America's special day, I'm celebrating the 10th birthday of PPC advertising.



GoTo was making constant improvements to its interface and its bidding system. The company had pioneered the "search term suggestion tool" in its early days, to give advertisers an idea of which terms might be relevant to their campaigns. The GoTo tools could also give approximate counts on the number of searches being performed on any given term, which was extremely helpful for determining howmuch traffic you'd get.



Another GoTo innovation involved full disclosure. From the very beginning of GoTo's pay-per-click days, the company made advertisers' bids transparent -- not only to other advertisers, but also to search engine end users. When you did a search on GoTo, you could instantly tell how much an advertiser was bidding per click  because a note like "Cost to advertiser: $0.05" appeared next to each listing.



Despite the dot-com bust in 2000-2001, GoTo kept growing. In October 2001, the company changed its name to Overture. Through established partnerships with Yahoo! and MSN, it was distributing its paid search results to a huge number of Internet users. At one point I remember seeing Overture marketing materials that claimed the percentage reach of their PPC ads. Although I don't remember exact numbers, I recall they were quite impressive.



Although Google -- the current market leader -- launched its AdWords platform in 2000, it was started as a CPM (cost per thousand impressions) product. It wasn't until 2002 that AdWords received a major update, switching to the CPC model it uses today. Google's deal to distribute its ads through AOL was also a major milestone in 2002.  My first experience with AdWords came in 2002, shortly after the company switched to the CPC model. I remember being amazed that it had taken Google two years to make the move from CPM to CPC! This was the beginning of Google AdWords' dominance in the sponsored search market.



Overture was acquired by Yahoo! in 2003. Shortly thereafter, the Overture name was dropped in favor of Yahoo! Search Marketing.



In 2004, Google and Yahoo settled a patent lawsuit. GoTo (later Overture, then Yahoo!) owned a patent related to pay-per-click bidding. Overture sued Google for patent infringement in 2002, and the suit was finally settled out of court in 2004 after Yahoo!'s acquisition of Overture, with Google issuing 2.7 million shares of stock to Yahoo!.



Microsoft, the last of the "big three" to the PPC advertising game, launched MSN adCenter in 2006. I participated in the beta in late 2005 prior to launch, and I wasn't impressed at all. It was quite buggy during beta, with ads not displaying for me and a number of other advertisers. Since then, adCenter has seen a lot of improvements, but it still has only about a 5% market share, compared to Yahoo!'s 15% and Google's 79%.



According to eMarketer, paid search will continue to dominate online advertising for at least the next few years, near a 40% share of all online ad spending. The market is maturing, but it's still the cash cow of the Internet advertising world. The revenue from pay-per-click has fueled Google's growth, and I suspect it will continue to do so.



Happy 10th birthday, sponsored search! It's been a crazy and fun ride. But I have a feeling the ride is just getting started.