Secret of Googlenomics: Data-Fueled Recipe Brews Profitability
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Saved by 32 people (-2 private), first by anonymouse user on 2009-05-24
- Sengrel on 2009-07-13 - Tags economy , google
- Socialmedia2009 on 2009-07-12 - Tags googlenomics
- Driessen on 2009-07-01 - Tags business , trends , google
- Jbruck on 2009-06-28 - Tags Google
- Nikolis1 on 2009-06-19 - Tags Google , economics , googlenomics , ads , adwords , auction , varian , advertising
Public Sticky notes
He never mentions how much revenue advertising brings in. But Google is a public company, so anyone can find the number: It was $21 billion last year.
Highlighted by driessen
"You say that an auction happens every time a search takes place? That would mean millions of times a day!"
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Varian, an upbeat, avuncular presence at the Googleplex in Mountain View, California, serves as the Adam Smith of the new discipline of Googlenomics. His job is to provide a theoretical framework for Google's business practices while leading a team of quants to enforce bottom-line discipline, reining in the more propellerhead propensities of the company's dominant engineering culture.
Highlighted by takuya514
His job is to provide a theoretical framework for Google's business practices
Highlighted by driessen
Anything that increases Internet use ultimately enriches Google,
Highlighted by driessen
The microeconomics of Google is more complicated. Selling ads doesn't generate only profits; it also generates torrents of data about users' tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It's a system of constant self-analysis: a data-fueled feedback loop that defines not only Google's future but the future of anyone who does business online.
Highlighted by driessen
The microeconomics of Google is more complicated. Selling ads doesn't generate only profits; it also generates torrents of data about users' tastes and habits, data that Google then sifts and processes in order to predict future consumer behavior, find ways to improve its products, and sell more ads. This is the heart and soul of Googlenomics. It's a system of constant self-analysis: a data-fueled feedback loop that defines not only Google's future but the future of anyone who does business online.
Highlighted by takuya514
It was called a two-sided matching market.
Highlighted by driessen
Varian tried to understand the process better by applying game theory. "I think I was the first person to do that," he says. After just a few weeks at Google, he went back to Schmidt. "It's amazing!" Varian said. "You've managed to design an auction perfectly."
Highlighted by takuya514
all the ad slots should be auctioned off
Highlighted by driessen
By turning over its sales process entirely to an auction-based system, the company could similarly upend the world of advertising, removing human guesswork from the equation.
Highlighted by driessen
"Ninety-nine percent of companies would have said, 'Hold on, don't make that change.' But we had Larry, Sergey, and Eric saying, 'Let's go for it.'"
Highlighted by takuya514
That client knew math, says Levick, whose secret weapon was the numbers. When the data was crunched—and Google worked hard to give clients the tools needed to run the numbers themselves—advertisers saw that the new system paid off for them, too.
Highlighted by driessen
AdWords was such a hit that Google went auction-crazy. The company used auctions to place ads on other Web sites (that program was dubbed AdSense). "But the really gutsy move," Varian says, "was using it in the IPO." In 2004, Google used a variation of a Dutch auction for its IPO; Brin and Page loved that the process leveled the playing field between small investors and powerful brokerage houses. And in 2008, the company couldn't resist participating in the FCC's auction to reallocate portions of the radio spectrum.
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"But the really gutsy move," Varian says, "was using it in the IPO."
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leveled the playing field
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Google even uses auctions for internal operations, like allocating servers among its various business units.
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The across-the-board emphasis on engineering, mathematical formulas, and data-mining has made Google a new kind of company.
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"Google needs mathematical types that have a rich tool set for looking for signals in noise," says statistician Daryl Pregibon, who joined Google in 2003 after 23 years as a top scientist at Bell Labs and AT&T Labs. "The rough rule of thumb is one statistician for every 100 computer scientists."
Highlighted by takuya514
Keywords and click rates are their bread and butter. "We are trying to understand the mechanisms behind the metrics," says Qing Wu, one of Varian's minions. His specialty is forecasting, so now he predicts patterns of queries based on the season, the climate, international holidays, even the time of day. "We have temperature data, weather data, and queries data, so we can do correlation and statistical modeling," Wu says. The results all feed into Google's backend system, helping advertisers devise more-efficient campaigns.
Highlighted by takuya514
Wu calls Google "the barometer of the world." Indeed, studying the clicks is like looking through a window with a panoramic view of everything.
Highlighted by driessen
Wu calls Google "the barometer of the world." Indeed, studying the clicks is like looking through a window with a panoramic view of everything. You can see the change of seasons—clicks gravitating toward skiing and heavy clothes in winter, bikinis and sunscreen in summer—and you can track who's up and down in pop culture. Most of us remember news events from television or newspapers; Googlers recall them as spikes in their graphs. "One of the big things a few years ago was the SARS epidemic," Tang says. Wu didn't even have to read the papers to know about the financial meltdown—he saw the jump in people Googling for gold. And since prediction and analysis are so crucial to AdWords, every bit of data, no matter how seemingly trivial, has potential value.
Highlighted by takuya514
And since prediction and analysis are so crucial to AdWords, every bit of data, no matter how seemingly trivial, has potential value.
Highlighted by driessen
Can the rest of the world be far behind? Although Eric Schmidt doesn't think it will happen as quickly as some believe, he does think that Google-style auctions are applicable to all sorts of transactions. The solution to the glut in auto inventory? Put the entire supply of unsold cars up for bid. That'll clear out the lot. Housing, too: "People use auctions now in cases of distress, like auctioning a house when there are no buyers," Schmidt says. "But you can imagine a situation in which it was a normal and routine way of doing things."
Highlighted by takuya514
he does think that Google-style auctions are applicable to all sorts of transactions.
Highlighted by driessen
early recognition that the Internet rewards fanatical focus on scale, speed, data analysis, and customer satisfaction.
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Public Comment
on 2009-06-10 by rallip3