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Chapter 18 Notes: GoogleIntroduction From a revenue perspective, google has long been considered a one trick pony The “trick” is matchmaking (pairing internet surfers with advertisers and taking a cut along the way) Google makes more money from advertising than any US media company ($111 billion in ...

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Chapter 18 Notes: Google Introduction -

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From a revenue perspective, google has long been considered a one trick pony The “trick” is matchmaking (pairing internet surfers with advertisers and taking a cut along the way) Google makes more money from advertising than any US media company ($111 billion in 2017 revenue) Alphabet is the name of the largest division of Google Googles success with ad revenue allows it to experiment, fail, innovate, acquire aggresively, and patiently build new markets Google has moved from mobile first to “AI First” Firm also pursues wildly ambitious “moonshot projects” Alphabet is structured so that Google is now the name for google’s core consumer business (search, mail, ads, and YouTube, maps, android, chrome, cloud/apps) (and makes up one branch of the Alphabet conglomerate) and its other project offerings like google fiber, Nest home automation and moonshot projects are all separate entities/branches under the Alphabet conglomerate Google backed ideas are NOT always winners Google controls about a third of ALL online advertising dollars Market Capitalization: the value of a firm calculated by multiplying its share price by the number of shares Google is the most valuable media company in terms of market cap on the planet 20 Percent Time: the ability of employees to spend the equivalent of one work day per week on new projects that interest them, designed to fuel innovation Online advertising represents the only advertising category that, over the last several years, has been consistently trending with positive growth

Understanding Search -

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Organic/Natural Search: search engine results returned and ranked according to relevance Google uses PageRank as its algorithm for ranking websites in search results, it was developed by Google cofounder Larry Page Google does not accept money for placement of links in organic search results, instead PageRank results are ranked based on how many web pages link to the one being searched and a whole host of nearly 200 other signals Search Engine Optimization (SEO): the process of improving a page’s organic search results/rankings Link Fraud: the process of creating a series of bogus websites to link to the page someone is trying to promote to try and trick the PageRank algorithm, Google actively tries to uncover and shut down such efforts (JC Penny was found guilty of this and google manually dropped their ranking to way low, referred to as the Google “death

penalty”) Sometimes the organic results are different on a per user basis because google can tailor search results based on the data they have collected about someone when they are logged into their account - Google handles an average of 40 million searches per second, 3.5 billion a day - When performing a search via Google or another search engine, you’re not actually searching the Web. What really happens is that you’re searching something that amounts to a copy of the Web that major search engines make by storing and indexing the text of online documents on their own computers - Spiders, Web crawlers, software robots: the various names given to software that traverses available websites in an attempt to perform a given task. Search engines use spiders to discover documents for indexing and retrieval - The process of crawling includes both indexing the first page of a public site as well as all sites linked to it - While search engines show you what they’ve found on their copy of the Web’s contents that Google has cachedRefers to a temporary storage space used to speed computing tasks. on its own servers, clicking a search result will direct you to the actual website, not the copy - You can stop crawlers/spiders by placing a line of HTML code or through web administration processes - Deep web results also cannot be accessed by Google or other search engines, either inaccessible to those without a user or behind corporate firewalls - Server Farm: A massive network of computer servers running software to coordinate their collective use. Server farms provide the infrastructure backbone to SaaS and hardware cloud efforts, as well as many large-scale Internet services. - Google does not disclose how many servers it has but estimates put it in the range of 1.4 million - The size of the investment required to set up these server farms serve as a barrier to entry to competitors in the search engine industry which in turn means that Google’s profitability is boosted because it benefits largely from economies of scale as nearly ⅔ of the market uses Google to search - Googles hardware in its server farms is custom built to have only what it needs - The sheer amount of servers all working together means google has high redundancy and is thus fault tolerant - Each server farm layout has also been carefully designed with an emphasis on lowering power consumption and cooling requirements.Uses AI to smartly track maintenance and immediately be notified when a piece of cooling tech needs to be fixed/replaced - The firm’s custom software (much of it built upon open source products) allows all this equipment to operate as the world’s largest grid computer - Not all of the data you get from Google comes from the server farms it owns, they also place servers in data farms of big telecom firms like Comcast and AT&T or inside colocation facilities Understanding the Increase in Online Ad Spending - 3 Factors Driving the growth of online Ads: -

1. Increased user time online 2. Improved measurement and accountability - Ad Impressions: the number of times an ad is shown on a website - Tracking whether a user clicks on an ad and the product purchases or other activity that comes from those clicks allows firms to determine what ads are actually working, a problem that traditional advertising methods struggled to solve - Measurement metrics can be linked to payment schemes, improving return on investment (ROI) and accountability compared to many types of conventional advertising. 3. Targeting - Allows firms to spend their ad dollars only on people they are most likely to get a sale out of Search Advertising 1. Search Engine Marketing (SEM): - The practice of running and optimizing search engine ad campaigns - Google was originally against the idea of ads for revenue but had to out of necessity - Keyword Advertising: Text ads targeted based on the words in a user’s search query, these are the most common types of google ads - Advertisers bid on keywords and phrases theyd like to use to trigger the display of their ad - Makes adds effective because they are relevant to what the person is already searching for unlike FB ads\ - Google ties ads to purchase intent which is what makes them so valuable for advertising - Pay-Per-Click: (PPC) advertisers on Google dont spend a penny unless someone actually clicks on their ad, also used interchangeably with the term cost-per-click (CPC) - Google has developed a precise ad ranking formula that rewards top performing ads by considering three metrics: the maximum CPC that an advertiser is willing to pay (sometimes referred to as an ad’s bid value), the advertisement’s quality score - A measurement of ad performance (CTR) and ad relevance, and landing page experience. Ads that are seen as relevant and that consumers respond to have higher quality scores. The firm uses quality score multiplied by the maximum CPC to determine an ad’s display ranking. —(a broad measure of ad performance) and the expected impact of extensions (e.g., added info like a phone number, address, store rating) and ad formats (in some cases images or video may be expected to perform higher). Create high-quality ads and your advertisements might appear ahead of competition, even if your competitors bid more than you. But if ads perform poorly they’ll fall in rankings or even drop from display consideration - Ad Rank = f (Maximum CPC, Quality Score, expected impact of extensions

and formats) Click-through rate (CTR): the number of users who clicked an ad divided by the number of times the ad was delivered (impressions) - Advertisers usually don’t pay their maximum CPC. Instead, Google discounts ads to just one cent more than the minimum necessary to maintain an ad’s position on the page—a practice that encourages higher bids. - Landing Page: the web page displayed when a user clicks on the ad - In general, the more relevant your ad, and the better the experience of the consumer who clicks that ad, the higher your quality score, and the higher your quality score, the better your ad’s position and the less you’ll have to pay per click. - Google offers tools that firms use to identify popular words and phrases for selecting keywords to associate with their ad and assess its quality score - Dynamic Search Ads: Ads generated automatically based on the content of a website. Dynamic ads are particularly useful for firms with rapidly updating inventory or firms struggling to keep up with new search terms that may be relevant to their product lines. - Google makes its billions for usually 30 cents to a dollar per click but firms that sell large price items/services have been known to spend hundreds of dollars per customer acquisition click IP Addresses and Geotargeting - Geotargeting: occurs when computer systems identify a user’s physical location (sometimes called the geolocation) for the purpose of delivering tailored ads or other content - Allows advertisers to target users in particular regions - IP Address: A value used to identify a device that is connected to the Internet. IP addresses are usually expressed as four numbers (from 0 to 255), separated by periods. These can be geotargeted - Geotargeting via IP address is good but not perfect such as when users use proxy servers which are third-party computers that pass traffic to and from a specific address without revealing the address of the connected users - Geotargeting is also done via Wi-FI, GPS chips, location of cell towers and stored user data Mobile Apps and the Challenge for Google Search - Apps like pinterest and amazon are being used increasingly as search mediums which cuts google out of the equation and thus loses them potential ad revenue - Deep Linking: A link that takes a user to a specific webpage (rather than the home page), or which launches an app and brings up a unique location rather than just launching the app. As an example, a deep link from Pinterest might take a user directly to the Etsy web page or app listing featuring the vendor of that item, rather than generically opening Etsy.com or the Etsy app. - Googles market share went from 82.% percent of searches in 2012 to 65.7% in 2014 - However, revenue from searches is still increasing since more and more users -

are conducting searches online Ad Networks: Distribution Beyond Search - Google runs ads not just in search, but also across a host of Google-owned sites like Gmail, Google News, and Blogger. It will even tailor ads for its map products and for mobile devices. But close to 20 percent of Google’s revenues come from running ads on websites and apps that the firm doesn’t even own - Google’s Ad Network (AdSense): third party websites that are running ads for Google in exchange for a cut of the take. An effort that links advertisers to websites and other content providers (e.g., app firms, games) that are willing to host advertisements, typically in exchange for payment - Google’s AdSense program forks over more than $7 billion a year to more than 2 million publishers - Google AdSense ads are targeted based on keywords that google detects inside the content of a website Content Adjacency Problem - Contextual Advertising: advertising based on a website’s content - Content Adjacency Problem: when ads appear alongside text they’d prefer to avoid - Ad networks provide opportunities for advertisers and content providers to screen out potentially undesirable pairings based on factors like vendor, website, and category - Negative Keywords: tell networks to avoid showing ads when specific words appear - Ad networks also refine ad placement software based on feedback from prior incidents - Google Display Network: A bundle of googles third party AdSense partners and its own properties like YouTube and Gmail - Google is not the first to come up with an Ad Network Ad Networks and Competitive Advantage - Google’s ad network is a distribution play meanings its value comes from its ability to reach more potential customers across more websites thus attracting more advertisers. Additionally, content providers which attract advertisers want to be in the place where there are the most advertisers to attract. Thus a two sided market with strong network effects is created More Ad Formats and Payment Schemes - Different Types of Ad Formats Offered (Other than Text) 1. Display (or Image) Ads - Graphical advertising - Banners, buttons, and “vertical skyscraper” ads 2. Rich Media Ads - Animation or video and sometimes encourage user engagement/interaction

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3. Interstitials - Ads that run before a user arrives at his or her intended destination in a website or app 4. Video and In App Ads Internet Advertising Bureau (IAB) - Sets common standards for display ads so that a single creative can run unmodified across multiple ad networks and websites Different Types of Ad Revenue Schemes 1. Cost per Impression - Most graphical display ads are sold according to the number of times an ad appears (number of impressions) - Quoted in CPM = cost per thousand impressions 2. Cost Per Actions - Ads pay whenever a user responds to an ad by performing a specified activity such as signing up for a service, requesting material, or making a purchase - Affiliate Programs: for of CPA ads where vendors share a percentage of revenue with websites that direct purchasing customers to their online storefronts (Amazon runs the worlds largest AP) 3. Some firms pay for exclusive right to advertise on a site/section of a site and these are billed in any manner of ways

Customer Profiling and Behavioral Targeting - Cookies: a line of identifying text, assigned and retrieved by a given Web server and stored by your browser that can be used to build a profile associated with your Web activities - Upon accepting this cookie your browser has been tagged, like an animal. As you surf around the firm’s website, that cookie can be used to build a profile associated with your activities. If you’re on a portal like Yahoo! you might type in your zip code, enter stocks that you’d like to track, and identify the sports teams you’d like to see scores for. The next time you return to the website, your browser responds to the server’s “Have I seen you before?” question with the equivalent of “Yes, you know me,” and it presents the cookie that the site gave you earlier. The site can then match this cookie against your browsing profile, showing you the weather, stock quotes, sports scores, and other info that it thinks you’re interested in - This information is leveraged to profile you as a customer not just by the website youre visiting but also by the ad networks that serve ads on the site - Cookies are used for lots of purposes. Retail websites like Amazon use cookies to pay attention to what you’ve shopped for and bought, tailoring websites to display products that the firm suspects you’ll be most interested in. Sites also use cookies to keep track of what you put in an online “shopping cart,” so if you quit

browsing before making a purchase, these items will reappear the next time you visit. And many websites also use cookies as part of a “remember me” feature, storing user IDs and passwords. - Third Party Cookies: sometimes called tracking cookies, these are served by a networks or other customer profiling firms. Used to identify users and record behavior across multiple websites - Browsers do let you configure whether you want to accept cookies or not - Cookie Weaknesses: They’re assigned by browsers and associated with a given user’s account on that computer. That means that if several people use the same browser on the same computer without logging on to that machine as separate users, then all their Web surfing activity may be mixed into the same cookie profile. Some users might also use different browsers on the same machine or use different computers. Unless a firm has a way to match up these different cookies assigned across browsers (say by linking cookies on separate machines to a single log-in used at multiple locations), then a site may be working with multiple, incomplete profiles - Cookies offer the greatest degree of personalization and targeting of ads - IP addresses are used for this as well - Remarketing: also called Retargeting: Lets a website show custom, targeted ads to a user when visiting other sites if that user has already visited a given page on the advertiser’s site. This technique allows firms to “reintroduce” products to users or target them with special messages or promotions. Also known as remarketing, a form of online targeted advertising where ads are personalized for consumers based on previous Internet activity that did not result in a sale or conversion. Surf the Web and see ads for products you’ve looked at on other sties? This is likely a result of retargeting Apps, Mobile Browsing, and Default Settings: The Shifting Landscape of Profiling Technology - Mobile apps DO NOT use cookies, they are a web based technology - Google offers an in-app tracking scheme called Advertising ID; Apple’s is called IDFA (Identifier for Advertisers). These technologies are critical for tracking things like ad impression views and click-throughs, but the two schemes behave differently and standards for both schemes have changed in just the past year - Apple’s safari browser also disables third party cookies by default which is very significant when it comes to the ability to target ads to users - Microsoft does the same for internet explorer Profiling and Privacy - Contextual ads have their limits so google offers “internet based ads” which are based on a third party cookie that tracks browsing activity across Google properties and AdSense partner sites. - Google is incentivized to track more and more about a user to show that offline purchases are also influenced by its ads because then executives will be more willing to spend money on ads - One way google does this is through assigning users a number of categories based on what it believe the user is interested in based on their cookie profile. This type of tracking

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is called interest-based tracking Google has begun to partner with third-party firms to tie together its data on consumer ad viewership to in-store visits. While not perfect, the data has shown that many users who view online ads go on to make in-store purchases. Google’s data is reported in aggregate, and not on any individual user. However, this type of intensive tracking can create both legal and user backlash if it is too invasive/exploitative Google has moved to make the user’s control over such tracking very robust by offering plug ins and opt out options People fear that although google does a decent job of giving users transparent control over how they are targeted, this could change in the future Even the best-intentioned and most competent firms can have a security breach that compromises stored information. Google has suffered privacy breaches from product flaws and poorly planned feature rollouts, as well as deliberate hacks and attacks. The firm has also changed policies regarding data collection and privacy as its services have evolved. Such issues may lead to further investigation, legislation, and regulation

Search Engines, Ad Networks, and Fraud - There’s a lot of money to be made online, and this has drawn the attention of criminals and the nefarious. Online fraudsters may attempt to steal from advertisers, harm rivals, or otherwise dishonestly game the system. - Some of the most common types of fraud in online advertising: 1. Enriching click fraud = Generating bogus clicks, either for financial gain (enriching fraud), or to attack rivals by draining their online ad budgets (depleting fraud).when site operators generate bogus ad clicks ...