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> If there were 100 good search engines the price for advertising would be 90% lower Why do you think that? The revenue is determined by the number of searches

by jsnell 5y ago

> If there were 100 good search engines the price for advertising would be 90% lower Why do you think that? The revenue is determined by the number of searches showing ads, the click-through rate, and the cost per click. The total across all companies would clearly not change for the first two metrics. Would the cost per click change? Given it's determined by an auction, I don't see how it could change. If you have an incentive to bid $1 on an ad on a single site with 100x traffic, you'd be equally willing to bid $1 on each of 100 separate sites with 1x traffic.

gitfan86 5y ago
If competition existed company A would offer a better product than just cost-per-click. Then company B would offer another product better than company A, and so on. Google is like a person that owns the only road between two towns. You have to pay them until other people can build ferries or airports or trains. At which point you can exit the mentality of "we have to take this road and pay per drive"
- jsnell 5y ago
  Sorry, that still makes no sense to me. Why would company B have to make a better product in reaction? They're not being impacted at all. Company A having more and cheaper ads certainly won't make any users switch from B to A. It also won't make any existing advertisers stop spending on ads on B and run more ads on A, since the ads on B must have been profitable at the current price, and those ads are reaching a different set of users than the ads on A. Is it possible that those cheaper ads could create more demand for ads somehow? It seems hard to believe it could. Either it's a search term that people were already willing to buy more expensive ads for, and are now just happy to pay less, or it's a search term that nobody was willing to bid even minimum price for. What's actually going to happen in your scenario is that company A loses 90% of their revenue, goes bankrupt, and their domain is sold for a fair price to Company B or one of the other 98 remaining competitors.

by jsnell 5y ago

gitfan86 5y ago

If competition existed company A would offer a better product than just cost-per-click. Then company B would offer another product better than company A, and so on. Google is like a person that owns the only road between two towns. You have to pay them until other people can build ferries or airports or trains. At which point you can exit the mentality of "we have to take this road and pay per drive"

jsnell 5y ago
Sorry, that still makes no sense to me. Why would company B have to make a better product in reaction? They're not being impacted at all. Company A having more and cheaper ads certainly won't make any users switch from B to A. It also won't make any existing advertisers stop spending on ads on B and run more ads on A, since the ads on B must have been profitable at the current price, and those ads are reaching a different set of users than the ads on A. Is it possible that those cheaper ads could create more demand for ads somehow? It seems hard to believe it could. Either it's a search term that people were already willing to buy more expensive ads for, and are now just happy to pay less, or it's a search term that nobody was willing to bid even minimum price for. What's actually going to happen in your scenario is that company A loses 90% of their revenue, goes bankrupt, and their domain is sold for a fair price to Company B or one of the other 98 remaining competitors.