How auctions set ad prices

<span class="byline-author">Posted by Hal Varian, Chief Economist</span><br /><br />All of the major search engines use auctions to price ads. The reason is simple: there are millions of keywords that need to be priced and it would be impossible to set all those prices by hand.<br /><br />Using an auction removes the burden of having to do this: the prices are determined by the auction participants. These auctions run every time a user enters a query, so they always reflect the current values that advertisers place on keywords.<br /><br />The outcome of the ad auction is <span style="font-style: italic;">efficient</span> in the sense that the available ad slots are awarded to those who value them mostly highly. The outcome is also <span style="font-style: italic;">equitable</span> in that the price an advertiser has to pay is determined by the other advertisers -- those with whom it has to compete for slots.<br /><br />But how do they actually work? There are several steps in the process.<br /><br />1) Each advertiser enters a list of keywords, ads, and bids.<br /><br />2) When a user enters a query, Google compiles a list of all the ads whose keywords match that query.<br /><br />3) The list of ads is then ordered based on the bids and the <a title="http://adwords.google.com/support/bin/answer.py?answer=10215&query=quality+score&topic=&type=f&%20onclick=" id="e-jk0" href="http://adwords.google.com/support/bin/answer.py?answer=10215&query=quality+score&topic=&type=f&%20onclick=" target="_blank">Ad Quality Scores</a>, which measure the relevance of the ad to the user.<br /><br />4) The highest ranked ad is displayed in the most prominent position, the second highest ranked ad gets the second most prominent position, and so on.<br /><br />5) If the user clicks on an ad, the advertiser is charged a price that depends on the bid and Quality Score of the advertiser below it. The price charged is the minimum necessary to retain the advertiser's position in the list.<br /><br />A simple example is when all ads have the same Quality Score. In this case, the ads will be ranked by bids and the price an advertiser pays per click will just be the bid of advertiser below it in the ranking. Hence the amount that advertisers pay is no more than what they bid and typically less.<br /><br />In the general case, where ad qualities differ, the price an advertiser pays for a click will depend on its Quality Score relative to the quality of the ad below it in the auction. Roughly speaking, an ad that has twice the quality of another ad will tend to get about twice as many clicks, and will only have to pay half as much per click as the competing ad.<br /><br />Where does this Ad Quality Score come from? It was originally determined by historical click through rates but has been refined over the years using sophisticated statistical models. Using ad quality as a factor in ranking ads provides strong incentives to advertisers to make sure that they provide relevant ads to end users.<br /><br />There are many additional tweaks on top of this basic design. For example, Google actually runs two auctions: one for ads at the top of the page, and one for ads on the side of the page. Only ads with particularly high quality are eligible to compete in the top-ad auction. Ads that have particularly low quality may be disabled, and not shown at all. Advertisers also can set and adjust their daily and monthly budget so as to cap their maximum spend.<br /><br />But the essential structure is that outlined above: advertisers bid for position and pay just enough to beat their runner-up. Prices for keywords are, ultimately, determined by the advertisers.

How auctions set ad prices

Posted by Hal Varian, Chief Economist All of the major search engines use auctions to price ads. The reason is simple: there are millions of...

Đọc thêm »

Your vote matters

<span class="byline-author">Posted by Marissa Mayer, Vice President of Search Products & User Experience, and Dennis Hwang, Webmaster Manager and Chief Doodler</span><br /><br />A couple of months ago, we announced the <a id="tkgu11" href="http://googleblog.blogspot.com/2008/02/what-if-you-could-have-your-doodle-on.html" title="Doodle 4 Google art competition">Doodle 4 Google art competition</a> and invited students in grades K-12 across the U.S. to redesign our logo around the theme "What if...?".<br /><br />Since then, more than 16,000 kids across the country have been busy creating their doodles. It's been a lot of fun for us and the kids (see for yourself in this video):<br /><br /><object height="355" width="425"><param name="movie" value="http://www.youtube.com/v/BJZ2WA8EClo&hl=en"><param name="wmode" value="transparent"><embed src="http://www.youtube.com/v/BJZ2WA8EClo&hl=en" type="application/x-shockwave-flash" wmode="transparent" height="355" width="425"></embed></object><br /><br />Today we're excited to announce the <a href="http://www.google.com/doodle4google/finalists.html">state finalists and 40 regional winners</a>. The thousands of wonderful entries made judging difficult, but with the help of experts at Young Audiences, Teach for America and reporters from across the country, we've managed to narrow the field to the very best.<br /><br />Now it's your turn. Starting today, you can <a href="http://www.google.com/doodle4google/vote.html">vote</a> for your favorite doodle. Your votes will determine the four national finalists. Just make sure to vote soon: you only have until May 18th. The national winner will be announced and the winning doodle will replace our usual logo on the Google homepage on May 22nd.

Your vote matters

Posted by Marissa Mayer, Vice President of Search Products & User Experience, and Dennis Hwang, Webmaster Manager and Chief Doodler A co...

Đọc thêm »

Growing our connection to food

<span class="byline-author">Posted by Diane McClamroch, Food Services Team</span><br /><br />Today at our Mountain View headquarters we're celebrating the one-year anniversary of an important project: our organic garden. Not only does it provide a stunning centerpiece for the central campus; it yields produce and herbs that are used daily in the cafes on campus. Although many Googlers would like to think of themselves as <a href="http://googleblog.blogspot.com/search/label/googlers%20and%20culture">Renaissance men and women</a>, a green thumb didn't exactly come as easily to some as <a href="http://www.google.com/support/jobs/bin/topic.py?loc_id=1116&dep_id=1056">C++ development might</a>. Fortunately, the garden wasn't just an ambitious 20% project but rather, an initiative that we took on with the partnership of <a href="http://www.thegrowingconnection.org/">The Growing Connection</a>.<br /><br />The Growing Connection is a grassroots project of the <a href="http://www.fao.org/">UN's Food and Agriculture Organization</a> (FAO). The work of the Growing Connection originates with a humble <a href="http://www.earthbox.com/">earth box</a>, a patented growing system that helps growers to cultivate produce with limited space and water. The project really has two parts: teaching people around the world, especially kids, how to cultivate their own food, and giving them a hands-on lesson in nutrition. The latter entails connecting growers so that kids growing corn on rooftops in Harlem can share their experiences with students planting earth boxes in Ghana.<br /><br />To earmark today's anniversary, we had a little get-together at the Googleplex, complete with cucumber and lemon verbena infused waters, organic snacks and a few words from Robert Patterson, Senior Liaison Officer at FAO. "Like Google, Growing Connections combines growth and information," he observes. "So coming to Google has been a natural fit. We work from kids from all over--Africa, Latin America, the Caribbean and the United States. They learn to like each other through food and realize that they're part of an actual solution for hunger and poverty."<br /><br />Check out today's photo album:<br /><br /><embed type="application/x-shockwave-flash" src="http://picasaweb.google.com/s/c/bin/slideshow.swf" flashvars="host=picasaweb.google.com&RGB=0x000000&feed=http%3A%2F%2Fpicasaweb.google.com%2Fdata%2Ffeed%2Fapi%2Fuser%2Fdmcclamroch%2Falbumid%2F5198498502072372369%3Fkind%3Dphoto%26alt%3Drss" pluginspage="http://www.macromedia.com/go/getflashplayer" height="192" width="288"></embed>

Growing our connection to food

Posted by Diane McClamroch, Food Services Team Today at our Mountain View headquarters we're celebrating the one-year anniversary of an ...

Đọc thêm »

OSO conference takes the cake

<span class="byline-author">Posted by Katie Hotchkiss, Online Sales and Operations Manager</span><br /><br />Last week at the annual meeting of our Online Sales and Operations (OSO) organization, a group of us (1,211 Googlers from around the world, to be exact) made an attempt to set a new <a title="Guinness World Record" href="http://www.guinnessworldrecords.com/default.aspx" id="qy40">Guinness World Record</a> for the "largest cake decorating lesson." This isn't the first time we've <a title="taken our culinary talents to great heights" href="http://googleblog.blogspot.com/2007/10/if-you-build-it-they-will-eat-it.html" id="xz-s">taken our culinary talents to great heights</a>, but it <span style="font-style: italic;">is</span> the first time we've attempted to bake our way to a new record.<br /><br />The event brought our teams together, united around something we all love: good food. We decorated a total of 171 cakes, using 800 pounds of butter cream and 500 pounds of fondant along the way. In addition to this fun foray into the sugar arts, the two-day conference featured a keynote speech by Al Gore, workshops with faculty from the Harvard Business School, and several panels on industry trends, including one on bloggers moderated by <a href="http://allthingsd.com/about/kara-swisher"><span id="s7eq0"></span></a><span id="s7eq0"><a href="http://allthingsd.com/about/kara-swisher">Kara Swisher</a></span>.<br /><br />Check out this video of the day:<br /><br /><object height="355" width="425"><param name="movie" value="http://www.youtube.com/v/cIyx2o2Hgds&hl=en"><param name="wmode" value="transparent"><embed src="http://www.youtube.com/v/cIyx2o2Hgds&hl=en" type="application/x-shockwave-flash" wmode="transparent" height="355" width="425"></embed></object><br /><br />We'll report back if (and hopefully when) we hear the news from Guinness.

OSO conference takes the cake

Posted by Katie Hotchkiss, Online Sales and Operations Manager Last week at the annual meeting of our Online Sales and Operations (OSO) orga...

Đọc thêm »

Internet protection on the go

<span class="byline-author">Posted by Matthew O'Connor, Product Manager</span><br /><br />Protecting employees from Internet threats is tough enough when they're at work, much less when they're on the road. Off-network users are particularly vulnerable to web threats because they must remember to connect via VPN for protection when they're away from the office.<br /><br />Today we're making Internet security easier for people, wherever they may be working. Google Web Security for Enterprise, powered by Postini, provides real-time malware protection and URL filtering with policy enforcement and reporting. An additional feature extends the same protections to users working remotely on laptops in hotels, cafes, and even guest networks without requiring any action on their part.<br /><br />Read more on the <a href="http://googleenterprise.blogspot.com/2008/05/google-web-security-for-enterprise-now.html">Enterprise Blog</a> or <a href="http://www.google.com/a/help/intl/en/security/web.html">get protected now</a>.

Internet protection on the go

Posted by Matthew O'Connor, Product Manager Protecting employees from Internet threats is tough enough when they're at work, much le...

Đọc thêm »

Investing in the future of the open Internet

<span class="byline-author">Posted By Larry Alder, Product Manager</span><br /><br />As <a href="http://newsreleases.sprint.com/phoenix.zhtml?c=127149&p=irol-newsArticle_newsroom&ID=1141088">you may have read</a>, Google, Comcast, Intel Capital, Time Warner Cable, Bright House Networks and Trilogy Equity Partners have entered into an agreement to invest $3.2 billion in a new wireless broadband company. The new company will combine Clearwire's existing consumer WiMAX business with Sprint's broadband infrastructure and 2.5 GHz spectrum to create a new nationwide wireless broadband network. In addition to our $500 million contribution as part of the investment group, we will provide search and applications to the network's users, and will work with Clearwire to offer additional services and applications. This will include jointly creating an open Internet protocol to work with mobile broadband devices (including <a href="http://code.google.com/android/" id="e_d:" title="Android">Android</a>-powered devices) and implementing other open network practices and policies.<br /><br />We believe that the new network will provide wireless consumers with real choices for the software applications, content and handsets that they desire. Such freedom will mirror the openness principles underlying the Internet and enable users to get the most out of their wireless broadband experience. As we've supported open standards for spectrum and wireless handsets, we're especially excited that Clearwire intends to build and maintain a network that will embrace important openness features. In particular, the network will: (1) expand advanced high speed wireless Internet access in the U.S., (2) allow consumers to utilize any lawful applications, content and devices without blocking, degrading or impairing Internet traffic and (3) engage in reasonable and competitively-neutral network management.<br /><br /> We're looking forward to seeing the Clearwire network take shape and begin to deliver benefits to users, and we will continue to look for new partners to promote openness and bring compelling applications and services to end users. There's more information on Clearwire and the transaction on <a href="http://www.clearwire.com/transaction/">Clearwire's site</a>.

Investing in the future of the open Internet

Posted By Larry Alder, Product Manager As you may have read , Google, Comcast, Intel Capital, Time Warner Cable, Bright House Networks and T...

Đọc thêm »

Helping victims of Cyclone Nargis

<span class="byline-author">Posted by Josh Mendelsohn, Program Manager</span><br /><br />Over the past few days, we've followed the devastation left in the wake of Cyclone Nargis in Myanmar (Burma). News reports have tallied more than 22,000 dead with another 41,000 missing. We're extremely saddened by the loss of life due to this cyclone, and hope you'd like to help assist with the relief effort.<br /><br />As we did after <a title="last fall's wildfires" href="http://googleblog.blogspot.com/2007/10/wildfire-relief-donations.html" id="j9np">last fall's wildfires</a> in Southern California, we've created a <a title="Checkout Donations page" href="http://www.google.com/myanmarcyclone/" id="gyvr">Checkout Donations page</a> so you can easily donate to <a href="http://www.unicef.org/infobycountry/myanmar_43788.html" id="c4jh" title="UNICEF">UNICEF</a> or <a href="http://www.directrelief.org/EmergencyResponse/2008/CycloneNargisMyanmar/CycloneNargisMyanmar.aspx" id="eiu0" title="Direct Relief">Direct Relief International</a>. Both organizations are working to directly assist the victims on the ground in Myanmar.<br /><br />To help visualize the damage, there are Google Earth layers showing an <a href="http://google-latlong.blogspot.com/2008/05/tracking-path-of-cyclone-nargis.html" id="x2oi" title="animation of the cyclone's path">animation of the cyclone's path</a> (using satellite imagery from the Naval Research Laboratory) and <a href="http://google-latlong.blogspot.com/2008/05/unosat-layer-of-myanmar-cyclone-data.html" id="nzjs" title="the extent of the flooding">the extent of the flooding</a> using data from the UN Institute for Training and Research Operational Satellite Applications Programme (UNOSAT). We'll keep posting information to the <a href="http://google-latlong.blogspot.com/" id="m3i_" title="Lat-Long blog">Lat-Long Blog</a> as more data comes available.<br /><br />There are also several Google Grants non-profits working to provide relief to those affected. <a href="https://secure.ga4.org/01/cyclone_nargis" id="cedv" title="Save the Children">Save the Children</a> currently has a 500-person staff in the area, while <a href="https://donate.oxfamamerica.org/02/myanmar" id="eu.h" title="Oxfam America">Oxfam America</a> has committed $800,000 to help NGOs meet the immediate needs of people. <a href="http://www.worldvision.org/news.nsf/news/myanmar-cyclone-20080505?open&lid=20225&lpos=fea_txt_ReadMore" id="mi.s" title="World Vision">World Vision</a> and <a href="http://doctorswithoutborders.org/news/article.cfm?id=2656" id="b4h7" title="Doctors Without Borders">Doctors Without Borders</a> are also taking action with two of the most vulnerable populations in the crisis: children and the injured. We are pleased to be working with and supporting these organizations that are contributing directly to cyclone relief. We encourage you to visit them and consider lending them your support, too. For more details on these organizations and other non-profits providing support for the victims of the disaster, visit the <a title="Google Grants blog" href="http://googlegrants.blogspot.com/2008/05/grant-recipients-helping-victims-of.html" id="b:qu">Google Grants blog</a>.<br /><br />In addition to the Google Grants non-profits, we want to highlight a few additional organizations we've gotten to know through Google.org's <a title="Predict and Prevent" href="http://google.org/predict.html" id="chd-">Predict and Prevent</a> initiative, which supports a regional disease surveillance network with six Mekong Basin countries, including Myanmar. These on-the-ground organizations are working around the clock to deliver resources to the victims of Cyclone Nargis. <a href="https://www.care.org/myanmarg" id="cp2r" title="CARE">CARE</a> has more than 14 years’ experience in Myanmar and will assist hundreds of thousands of people in the coming days with their immediate needs (including water, food and shelter), as well as providing long term recovery solutions over the next few years. <a href="https://secure2.convio.net/imc/site/Donation2?df_id=1852&1852.donation=form1" id="ovzg" title="International Medical Corps">International Medical Corps</a> is deploying an emergency response team that will help address urgent health needs in addition to distributing medical supplies in the hardest hit areas, and <a href="https://secure.groundspring.org/dn/index.php?aid=10514" id="s.3p" title="NetHope">NetHope</a> is working to provide technology and satellite communication solutions for many responding organizations. <br /> <br /> The Google Earth and Maps team continues to make <a href="http://google-latlong.blogspot.com/2008/05/imagery-for-myanmar-burma.html" id="c2f9" title="new imagery">new imagery</a> and relevant data available. The <a href="http://google-latlong.blogspot.com/2008/05/using-google-earth-to-inform-cyclone.html" id="a.n9" title="latest Lat Long Blog post">latest Lat Long Blog post</a> shows how Direct Relief International is using Google Earth to plan its work, including a KML layer of health facilities in Myanmar. We continue to follow the political situation with concern and hope aid can flow rapidly to the people of Myanmar who need it so desperately.<span id="gau40" style="font-size:85%;"><span id="gau41"><br /> </span></span><span id="gau40" style="font-size:85%;"><span id="gau41" style="font-family: Arial;"><br /></span></span><span style="font-weight: bold; font-style: italic;">Update:</span> Added two new paragraphs at the end.

Helping victims of Cyclone Nargis

Posted by Josh Mendelsohn, Program Manager Over the past few days, we've followed the devastation left in the wake of Cyclone Nargis in ...

Đọc thêm »