25.4.09

How Google won the search engine wars

April 2009

The Story of Search: How Google beat Overture and Yahoo by backing the long tail



Gary Flake, Microsoft technical fellow and director of Microsoft Live Labs, first became renowned for failure.
In 2003, he joined Overture as chief science officer. At the time, as he reminded an audience at the 2009 Advertising Research Foundation's 2009 Annual "Re:think" conference, the search-engine business largely was a duopoly. In fact, a year later, Overture had a 55-percent market share, Google 35 percent, and a variety of other providers shared the remaining 10-percent.

Five years on, Flake said, "the pie had grown by a factor of four. And it had changed from a duopoly to a monopoly." In 2008, Google's market share was 80 percent; Yahoo, which had acquired Overture in 2003, had 15 percent and Microsoft rounded out the selection with five percent.
"Google's dominance almost didn't happen," Flake told the ARF audience. And, the drivers were as much Overture's failure to understand the market dynamics as they were Google's successful understanding of the search value proposition. From a personal perspective, he added, such a momentous change in just a half-decade led to two questions: " 'WTF?' or 'How did I lose so badly - with greatness in my grasp - and snatch defeat from the jaws of victory?'"
Although acknowledging he is a technologist and only a "tourist" in the marketing world, Flake began answering both queries by acknowledging the need to address three different constituencies:
*Customers: "They only want what they want."
*Advertisers: "They want low cost and low risk."
*Media/Publishers: "They need to engage customers and they want to do so at a low cost and with low risk."
"For each to get what it wants, someone has to sacrifice. If a publisher wants to make more money, an advertiser has to pay more. If an advertiser wants lower risk and still get out in front of customers, the customers may not get what they want."
In the case of paid search, a customer types in a query; advertisers, in advance, bid on a click because they presume a click translates to interest; and, with each click, publishers presumably make money. "If the interests of all three partiers are aligned, new value is created to all parties. It's something all three want: Something is exchanged at a pricing that's market-determined."
When GoTo.com - the original name of Overture - was founded in 1988, "There were valid questions about the model", Flake said. Would users actually be willing to pay up on a sponsored search result? Up to that point, search had been almost entirely non-commercial. Would destinations show these server-sponsored ads, when so much emphasis had been placed on preserving an editorial voice on search-engine pages? Would advertisers be willing to take the risk of a new medium that was completely new with no demonstrated return on investment?
The hesitation all added up to "a serious cold-start problem." The solution, Flake offered, was to make paid search completely transparent.
Overture tried to engender confidence with three strategic platforms: Exact search meant that users would get exactly what they wanted. Type in "Flowers" and you'd get flowers. Type in "Flowers" and "Mother's Day" and you'd get a list of sites that specifically matched those criteria. "But if you typed in, 'Where can I buy flowers for my beautiful mother in San Jose,' - and, I kid you not, we received long verbose proposals like that - you'd likely not get anything."
The reasoning, Flake explained, was that "we felt that the thoughtful advertiser wanted to know precisely what they were getting." Three other Overture features that reinforced the concept of transparency: A "human" editorial filter that reviewed every ad, "high-touch relationships with advertisers through all parts of the workflow," and partnerships with such premium destinations as MSN, AOL, Yahoo, and Microsoft.
To explain how Overture went wrong, Flake used three models of the new digital word that "that might explain the past and look toward the future":

  • The Long Tail
  • The Innovator's Dilemma
  • Network Effects
The Long Tail
Before either organization fully realized the model or its implications, Overture focused on the head of the long-tail model and Google concentrated on the tail. And, as Flake described, those orientations would be the paid-search market-mover.
From day 1, Google defaulted to the approximate match. "'Where can I buy flowers for my beautiful mother in San Jose" generated a bunch of responses - florists in the specific market, 1-800 order-by-phone services, even grocery stores that offered plants as a sideline ordering. There were no specific matches (the head), but scores of approximate matches (the tail) that better served the needs of the consumer.

Similarly, Google used automated click-through rates (CTR) instead of staff people to determine whether a search was relevant to a query. If a search seemed to work, it was kept. If not, it was rejected from the system.
A CTR filter also served as a proxy for the relevancy that the destination partners had provided for Overture.
The pattern was not an isolated one. Flake pointed to other instances of head/tail distinctions that have become more common as the model has become better understood: mainstream media (head) and news aggregators/citizen journalism (tail); network TV (head) and "stupid YouTube videos (tail); radio (head) and podcasts (tail); RIAA (head) and unsigned artists (tail); shrink-wrap software (head) and software mashups (tail).
The Innovator's Dilemma
"The first companies in an industry (the innovators) must be willing to eventually destroy their own business to create something new," Flake told the ARF assembly. "They must destroy their business before someone else does."
Flake's career began in the hardware industry, "where the epitome was to program on a supercomputer." Although "it took decades to unfold," priorities for hardware moved from supercomputers to main frames to scientific workstations to personal computers to laptops to handhelds and to cell phones…. Comsumerization of that market actually drove innovation and drove the bigger things out of business."
"Innovators start off by doing something very natural," Flake said. "They focus on a small number of large, high-margin customers. They want to make money, they want to prove the model works as soon as possible. And they want to maximize their own ROI."
Late arrivals, by contrast, are left to focus on lower-margin customers - again, a common-sense strategy: Why go head-to-head with the market leader when there's a whole pool of customers for whom they don't have to compete?
"Meanwhile, through competition, margins begin to shrink," Flake continued. "Both the original innovator and the newcomer invade each other's space, looking for more business."
The difference in their histories, however, begins to reveal different strengths: The older companies - the original innovators - have not had to learn to grow up looking for more efficient ways to do business. The younger companies have a heritage of going head-to-head with competitors, of scaling up, on learning new ways to operate more efficiently. "And the late arrivals win because they can take the lessons of optimization" they've learned working on the tail and apply them to the head, Flake said.
In the paid-search business, the cycle of evolution took just 18 months to unwind. And, the change happened as - naturally enough - the principal players tried to move from their position of strength to the areas where they still could grow. As paid search matured, he added, the industry survivors naturally try to capture a fuller market share by moving to the opposite end of the long tail. Yahoo, which had purchased Overture in 2002, tried to expand its market from the head to the tail; Google attempted to move from the tail to the head.
But, as Yahoo discovered, it was much easier to move from the tail to the head than from the head to the tail.
Network Effects
"If you're the only person in the world with a telephone, it doesn't have much use to you," Flake told the ARF audience. "If everyone else in the world has a telephone, it has great use to you because potentially you can call anyone."
Any kind of network that has more participants simply provides both greater individual value and greater aggregate value, Flake continued. And, as networks grow, "virtual cycles emerge."
In an eBay network, he explained, the more buyers there are, the more opportunities there are to sell. And the more sellers who participate, the more opportunities there are to buy. It's a model that's replicated in operating systems (developers and users), file formats (writers and readers) and search engines (authors and searchers), marketing (advertisers and consumers), and payments (payers and payees).
"In the virtuous cycle of paid search," the director of Microsoft's Live Labs added, "You need advertisers. The more advertisers you have, the more bids you have. The more bids you have, the more traffic you have. The more traffic you have, the more money you get per search. And, with the more money you get, the more syndication you get. And, as you get more syndication, you get more traffic. And it's traffic inventory that pulls in the advertisers and the process begins to snowball."

Overture - and, in time, Yahoo - operated independently and allowing the cycle to develop "organically," said Flake. Google, by contrast, "primed the pump with a destination site that could effectively make them as powerful as any affiliate on the network. And, in doing so, they were able to bootstrap their own network in a way that was quite stunning."

Overture, he explained, "did not understand that one network could prime another…. We were constrained by our own idea, by our focus on the head [of the long tail]. We didn't understand how it all could play out so rapidly."
The future plays out with "an even longer tail" and as "tools become simpler, more powerful and more prevalent, the pools of creators will increase dramatically." Everyday examples include desktop publishing, digital photography, garage bands, Songsmith, podcasting, and blogging. "What does it take to make an online business?" Flake asked. "Ten years ago, you needed a substantial amount of money. Today, it's $5 or for free…. The barriers to entry are dropping to zero."
And, as the opportunities proliferate, so will the occasions grow that enable additional long-tail partnerships - pools of intelligence that can overlap with (and reinforce) one another.

Bite me



Agency: Y&R Bangkok







Client: Johnson’s tooth brushes
Agency: DPZ Propaganda, Sao Paulo.

Lisbon store brings back forgotten favourites


Taking a firm stand in the face of globalization, A Vida Portuguesa has tracked down Portugal’s unique brands and opened a store dedicated to products that have resisted the urge to keep up with changing times.
At the store, located in a former soap factory in Lisbon’s traditional-yet-hip neighbourhood of Chiado, customers can find over 1,000 products that
1)have maintained their original packaging,
2) that are made by hand,
3)or that represent traditional Portuguese craftsmanship.
Soaps, pencils, mugs, jewelry, notebooks, coffee, tea, blankets and even toothpaste—everything on stock holds a fragment of the nation’s collective memory.
Some items are widely available and familiar throughout Portugal, while others were almost impossible to find and buy before the store opened.
A Vida Portuguesa appeals both to
a) nostalgic adults delighted to find the brands of their youth, and to
b)younger generations attracted by old-fashioned products and retro packaging that provide an alternative to mainstream brands.
It’s a testament, once again, to the enduring appeal of (still) made here, a trend that rewards brands for staying true to their local roots and identity.
Website:
http://www.umacasaportuguesa.com/

Western Union::: Rural movie project

BRAND OWNER:Western Union
CATEGORY:Financial
REGION:China
DATE:Jul 2008 - Oct 2008
Western Union’s money transfer service relies on brand awareness but also brand familiarity to drive usage.

Consumers need to trust Western Union to use the service.
In China a key target was people living in villages around tier 3 and 4 cities who tend to be older with lower educational attainment.
Reaching these consumers is hard because there are few targeted media options, printed materials may not be effective or understood and they are also conservative when it comes to testing new services.
The key way to earn their trust, however, is recommendation from family and friends and the communications solution was to create a family event in their villages and use the occasion to personally explain the Western Union service.
It created a tailor-made event in 95 different locations, promoted via posters, offering villagers the chance to see a relatively recent movie.
Before each screening a 10-minute video about Western Union was played with representatives on the ground also giving out leaflets and one to one explanations.
The event was totally branded with Western Union yellow stools, banners, event and leaflets.
Research carried out after the event showed nearly everyone questioned said they would try Western Union products for future transfers. The activity is being expanded for 2009.

Hansaplast::: Marching blisters

BRAND OWNER:Beiersdorf
CATEGORY:Pharmaceuticals/ Healthcare
REGION:Germany
DATE:Apr 2008 - Jan 2008


Special plasters for blisters are a niche product. Hansaplast had been mainly targeted at women to help them adapt their new shoes but the product was also suitable for other groups.
The Beiersdorf brand needed to ensure potential customers didn’t use less specialised products when they needed protection from blisters.
It identified new army recruits as a rich potential market – around 60,000 young men join the German army every year and undergo a gruelling fitness programme for nine months.
Their best friends will not only be their fellow recruits but also the boots that will carry them through the miles of route marches and exercises.
They need blister plasters just as much as they need the rest of their uniform.
And with extreme experience of the pain of blisters they would become advocates for the benefits of Hansaplast both in through the army as well as to their civilian friends.
The brand decided that each new recruit should receive not just a sample pack but also information on how to treat blisters.
Each quarter 35,000 sample boxes, including a camouflage sample were handed out.
Questionnaires revealed 40% satisfaction rates with the blister plasters and there was also a significant boost in sales at barrack shops, which rose permanently by 15%.

WWF::: Visualizing charity donations

BRAND OWNER:WWF
CATEGORY:Charities
REGION:Brazil
DATE:Feb 2009 - Mar 2009

When people give to charity, it is often hard to visualize where exactly their money is going. Many people can question that the money they donate is actually going to directly help the cause they are donating to.
WWF wanted to create a tangible link between donation and the animals that were going to benefit from the cause.
WWF was particularly concerned about the plight of the toucan, the sea turtle and the marsh deer.
WWF decided to set up donation areas in public places including gyms, cinemas and company reception areas.
It created large magnetic posters with a faint painting-by-numbers style outline of a toucan, a sea turtle or a deer. Within the outline were markings where people could place different types of coins to create the features of the creature. The message on the poster read: “Make your donations to WWF Brazil here and see who you’ll be helping”.
Silver coloured 50 centavo coins would form the lightest parts of the animal, gold and silver coloured 1 real coins would form the bulk of the animals, while the darker coppery coloured 5 and 1 centavo coins would build the shaded areas.
As more people donated by placing their coins on the magnetic surface, the image of the animal appeared.

Twilight:The dawn of Twilight

BRAND OWNER:Hoyts
CATEGORY:Entertainment
REGION:Australia
DATE:Oct 2009 - Dec 2009


Stephanie Meyer’s teen vampire saga is a smash in the US but that didn’t help promote the movie of the book Twilight in Australia.
Launching at the same time as The Quantum of Solace and Australia, distributors Hoyts had a tough challenge to attract the girls and young women it wanted to watch the movie.
Research showed that Meyer’s Aussie 14-19-year-old fans could act as cheer leaders to their peers.

The campaign made Twilight part of the conversation with communities on MySpace and Facebook, bespoke MSN Messenger packs and viral trailer distribution.




Young women were targeted via celebrity gossip magazines, incorporating the Twilight characters into the target’s every day reality and backing this up with bespoke and high frequency placements on popular websites.
Twilight generated more than $20m dollars at the box office, 1,110% above Hoyts average revenues for a movie and $7m ahead of target.

Holiday Inn :::Stay smart, presidential style

BRAND OWNER :InterContinental Hotels Group
CATEGORY :Travel/Airlines
REGION :USA
DATE :Feb 2008 - Apr 2008


The Holiday Inn Express frequent business traveller spends a lot of time on the road and they know what they like: practical amenities, without all kinds of extra fluff (and cost).

This is the premise for Holiday Inn Express’ “Stay Smart” brand promise: you’ll feel smarter for having stayed with HI Express instead of “fancier” full service hotels.
Holiday Inn capitalised on the unprecedented level of media interest in the 2008 US Presidential race by creating a media conversation around the Holiday Inn Express brand positioning.

In the midst of the most expensive campaign in history, the Stay Smart, America website exposed how fiscally responsible- and irresponsible- the Presidential candidates were.
The success of the website hinged on a risky but hugely successful communications strategy that relied solely on PR to push the website and its message. No paid media was purchased, online or offline, to tout Stay Smart America. This was an unconventional strategy that paid off huge for the brand.
Leveraging the candidate’s public FEC filings, the website analysed and published the candidate’s campaign lodging expenditures and determined how much they would have saved if they stayed with Holiday Inn Express.
The story was first offered up to respected journalist and blogger Chris Elliott of The New York Times for inclusion on his blog. Once Elliott ran the exclusive, the release was then strategically distributed right before Super to the Top 100 daily newspapers, national television and relevant Web sites, blogs, social networks and message boards.
In the first 2 weeks the website generated over 85m media impressions and secured online and offline, national and international coverage on Fox News, CBS, The London Times, The New York Times, The Washington Post, LA Times, and USA Today, among dozens of political and news blogs. The Stay Smart, America website, developed for $100K, set off a storm of press activity that returned over $2.5MM+ in free media coverage.

Obama :::Rock the vote in-game

BRAND OWNER:Obama
CATEGORY:Government/Public Sector
REGION:USA
DATE:Oct 2008 - Nov 2008

For Barack Obama to win the 2008 election, he needed to secure a majority of young voters in key battleground states. The Rock the Vote campaign sought to engage and incite young Americans under 30 to register and vote.

In-game advertising has become an effective way for brands to reach coveted young audiences. Among the hard to reach 18-34 male audience, console and PC gaming is strongly preferred as their favorite leisure activity.
While playing videogames, engagement is extremely high and multitasking is almost non-existent compared to watching TV or surfing the internet.
Brand Obama partnered with Microsoft in-game advertising specialist Massive to reach the Xbox Live community.
Rock the Vote was able to successfully call this social community to action through relevant political issues that they care about. Gamers could get voter registration forms sent to their email, vote in an online presidential poll, download themes and gamer pics to show their allegiance for favored candidates.
Obama ran his “Rock the Vote” campaign in 11 Xbox 360 titles across 10 battleground states using geo targeting, time date targeting and content targeting. Gamers who were online in those states saw key messages in realistic settings while playing the video game titles running the campaign. ‘Early Voting has begun’ and ‘Vote Early’ were on billboards, stadiums and outdoor locations.
Additionally, the Xbox LIVE community was polled on their candidate of choice. Nearly 100,000 participants cast their votes, with Obama trending 12 percentage points ahead, providing a unique insight into young voters minds and served as one of the largest unofficial polls in the nation.
The campaign was a first for a political party and succeeded in targeting a hard to reach audience that spends more time gaming than on other media. Some 80,000 voter registration forms were downloaded through Xbox LIVE and Xbox.com and 100,000 Xbox LIVE member were polled voting preference and often acted as the bellwether of national polls.

Know better::: I Cant Believe Its Not Butter

BRAND OWNER :Unilever
CATEGORY :Food
REGION :USA
DATE :Jan 2008 - Mar 2008

I Can’t Believe It’s Not Butter!(ICBINB) was under a new threat. The growing health trend towards all-natural products reinforced many women’s long-held belief that butter is healthy because it is natural.
ICBINB had been communicating that it was the healthier alternative to butter for years, but consumers were confused about which health messages to believe.
ICBINB had to reinforce its health credentials and dispel some incorrect beliefs held by the target audience of women aged 45-54.
The brand worked with MSN Games to develop Now You Know Better, a custom online trivia game with an opportunity to win $1 million. In the game, players answered a variety of trivia questions dating back to the '50s on topics ranging from U.S. history to health to movies.
The questions focused on ‘then vs. now’ and took a tongue-in-cheek look at the naiveté of the past, while educating on the present and on ICBINB.
Players could compete against up to four other players online and select an animated online personality and screen name. Celebrities like Gary Coleman and Dustin Diamond took part in the game through a series of public service announcement-style vignettes in which they confessed their "Know Better" moments. In addition to the $1,000,000 grand prize, there were more than $40,000 in prizes up for grabs during the Sweepstakes.
The Web site also featured recipes and instant print coupons for I Can't Believe It's Not Butter! Now You Know Better was the most popular trivia game on MSN Games ever, with 1.2 million unique players. Among its target 45–54 female audience, the campaign increased the perception that the brand “is healthier than butter” (21.4% increase) and “has the great butter taste” (11% increase). The campaign helped ICBINB to outperform the category during the first half of 2008 in terms of both volume and dollars.

24.4.09

McDonald’s::: Personalised coupons

BRAND OWNER:McDonald's
CATEGORY:Food
REGION:China
DATE:Feb 2008 - Mar 2008


Discount coupons are an important element in driving in-store traffic, but McDonald’s wanted to help lower cost of its coupon strategy while breaking through the cluttered coupon market and targeting 18-25 year olds.
McDonald’s came up of a way of putting the target audience in control of their coupon – allowing them to customize their personal coupon according to their preference.


McDonald’s partnered with China’s largest online network QQ, and created an advertising banner that was embedded within the QQ Member Instant Messaging screen to encourage click-thru.
After clicking on the banner, users are able to customize their meal according to their preference.
They could then either print or download their personalized coupon onto their mobile phone.
In just 4 weeks a total of almost 550,000 clicked through and some 800,000 coupons were created. 680,000 QQ members downloaded the coupon onto their mobile or printed them after having customized them.
This represented a 43% conversion for McDonald’s. Furthermore, 190,000 people redeemed their coupons at a McDonald’s store, giving the campaign a total response rate of 11.87% (compared to a traditional insertion coupon campaign that yielded a 0.62% response rate).

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