The Secret of Googlenomics

Tue 26 May 2009 13:25, Barry Adams

The new issue of Wired magazine boasts an excellent article on the economics that made Google great: Googlenomics, the auction-based system that drives not only Adwords but many of Google's internal operations as well.

The Secret of Googlenomics

The article goes in-depth on how Googlenomics came into being, how it works, and the impact it's had on the way we use search engines, both as consumers and as advertisers. An excerpt:

"Googlenomics actually comes in two flavors: macro and micro. The macroeconomic side involves some of the company's seemingly altruistic behavior, which often baffles observers. Why does Google give away products like its browser, its apps, and the Android operating system for mobile phones? Anything that increases Internet use ultimately enriches Google, Varian says. And since using the Web without using Google is like dining at In-N-Out without ordering a hamburger, more eyeballs on the Web lead inexorably to more ad sales for Google.

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."

This well-written article is a must-read for all search engine advertisers, and for anyone who's ever clicked on a sponsored result and wondered what goes on behind the scenes.


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