The bids on AdWords are soaring to new heights everyday. Some advertisers are even shelling out up to $10 per click. So, naturally the question arises - Is this complete madness or is there any logic behind such aggressive advertising?

To me, it does make some sense to bid aggressively if you have the right strategy in place. These are two scenarios you can consider:

1) Every client you acquire, on an average spends $12000 with you in a year. In this case, you do not mind spending 10% of the revenue as customer acquisition cost. Therefore you can comfortably bid $10 per click (provided you have a site which can convert 1 out of 120 visitors). Thus, looking at a lifetime value of a customer makes it a good investment.

2) If you have mastered the art of persuasion (or have hired a master of persuasion), and have come up with a website with converts well (visitor > customer conversion), every visitor you are driving to your website is equivalent to revenue . So go ahead, rock the boat and bid out all your competitors. You will get more customers and will also have lower customer acquisition cost. What more do you want?

So, expensive keywords bidding do work, if they are backed with high lifetime customer value and/or higher conversion on the website. And yes, those Internet marketing experts are not insane! In fact most of them are very smart.

So bid smartly!

Yahoo announced that they are opening up their search results for third party data integration. This will allow third party to contribute to Yahoo search experience and make it more useful for their users. It will be interesting to see how other webmasters use this open search platform to gain popularity by sharing data with Yahoo, while still retaining their competitive edge, by virtue of their database, in their respective area. We can expect to experience a long-tail of innovation in days to come. This will help webmasters, visitors and Yahoo! A perfect win-win-win situation.

On the other hand, Google already have a open platform called Google Co-op, where anyone can create custom search engine. As per Google Co-op,

"Google Co-op is a platform that enables you to customize the web search experience for users of both Google and your own website."

Google also offer Google Subscribed Links which in their own language they define as:

"Subscribed Links let you create custom search results that users can add to their Google search pages. You can display links to your services for your customers, provide news and status information updated in near-real-time, answer questions, calculate useful quantities, and more"

The challenge

However, both the services that Google offers, has a great deal of focus on promoting Google, Google Search & Google Subscribed Links. Again, they are not directly making any change in the Google Search (at least it has not be publicly explained how it will effect user experience of a normal search).

Therefore, Google Search or Yahoo Search cannot be termed as true "user contributed" or "Web2.0" as described by Tom O’Reilly. People won’t contribute unless they see that their contribution is making a positive impact in the search pattern and it is visible. In the current state both Subscribed Link and Yahoo Open Search will only help if a user wants to use the enhanced engine. Most Internet users will never switch these engines. Even if they are told the benefit of the plug-ins, how are they supposed to select the ones which will help them from a collection of thousands of user contributed plug-in channels? And what happens when new plug-ins come out?

Suggested solution

If search engines want to go the Web2.0 way with user contribution enhancing the overall experience and defining the way search engines display results, they need to bring user contributions to the mainstream. I feel that themed searches are the way to go. Google / Yahoo shall classify a particular user contributed plug-in into a theme. When a visitor wants to search for a business, he may choose a "Finding a business" theme. On a contrary when a visitor wants to learn about the subject he may chose the "Tutorial" theme.

Let us see an example.

We search for a very competitive keyword - "web design". This is the result we get.

If you see, there are three different intents that the search result satisfies. A person might be searching "web design" because he:

• Want to find a web design company (blue marker)
• Want to learn web design (red marker)
• Get web design resources (green marker)

All three intents are very different. Most people do not type-in their intent in the search box to make it a specific search, because they are not specialists in using search engines. Therefore, a search engine should suggest a possible intent and display results only related to the given theme. The theme model can best work when they are formed based on a collection of user generated plug-ins. Thus user generated content can find its way to the end user in an organized way.

It goes without saying that pulling in the user generated content directly into the main search result has its challenge of weeding out spam. But this seems to be the most logical way as of now. 

I recently came across Google Answers (answers.google.com/answers/) and found that they are no longer accepting questions.

So Google closes down its Google Answers service. Though I did not sense this coming, but once I saw it, I felt this is a logical step Google has taken. I anticipate the following reasons:

1. Google does not want to concentrate its energy in “people intensive” business models as they are not very scalable. They are “technology focused” and backed with solid processing infrastructure.  They will like machines to do the work!

2. Google Answers is a pay-and-use model. This makes it “less popular” compared to free services available. Again the money Google makes out of it is so small that it does not make good business sense to continue with this.

Yahoo on the other hand has a free service which has gained much more popularity than Google Answers, putting up a tough competition.

3. I saw few answers which were very well researched and were done for only $10-$20. I doubt that they were done with an intention to make money. The fees was kind of a reward or a way to say “thank you”. It was not purely business driven.

4. Google in itself is a “Answering machine” and therefore it does not need Google Answers! (as suggested by my colleague, Mukul)

Overall, I feel that Google Answers was not fitting into the long term strategy of Google and a stiff competition in the same market by Yahoo (which is a very successful in leading people backed systems dating back from its famous directory) made them retract from this business.

Links to few discussions:

www.webmasterworld.com/forum35/3728.htm
www.webmasterworld.com/goog/3171877.htm