Ten years ago, or even in the late 90's, I would have never suspected that this would turn out to be the area of the internet that made the most money.
Interesting article from the Tribune
Companies swarming to have their names and ads appear next to Internet search results have created a burgeoning marketplace for search words, phrases and brand names.
Progressive Insurance pays $8.08 each time somebody clicks on its ad after searching the phrase “car insurance.” “Laptop” sells for $2.02 per click, while “franchise” goes for $5 and “Internet service provider” for $6. “Financial help” fetches $5.76, although “financial advice” only brings in $2.72.
The prices for such words are set through auction-style bidding in which class-action attorneys have run up the word “Vioxx” to $16.50 per click, while “mesothelioma,” a cancer caused by asbestos exposure, goes for $39.08.
With Americans conducting more than 4 billion Internet searches monthly, often while shopping for airline tickets, credit cards and millions of other products, companies are battling for top advertising positions on Google, Yahoo and other search engines. The competition has become increasingly sophisticated as companies learn how much business they can generate through the ads.
Similar to stocks, the prices of particular words and phrases constantly fluctuate as businesses jockey for top positions.
“It's done wonders for our business,” said William Burr, owner of S&W Manufacturing Co. in Bensenville, which makes industrial parts. “We don't have any salespeople on the street because of that.”
Through an Internet advertising firm, S&W buys search terms like “leveling mount” and “spring plunger” to entice potential customers to its Web site.
Firms like S&W bid the maximum amount they are willing to pay per click for a particular word or phrase, although those bids are handled differently by the two dominant firms in Internet search advertising: Google and Overture, which is owned by Yahoo Inc.
... Still, small firms find ways to get noticed.
Bruce Benton's firm, Bearly Friends LLC in Highland Park, bids on more than 1,000 words associated with new babies, romance, birthdays and anniversaries.
While Benton spends hundreds of dollars a day on the ads, he works with Carpentersville online ad firm JumpFly Inc. to carefully choose terms.
A phrase like “birthday gift,” which recently had a high bid of $1.70, could result in a lot of visits to his site, he noted, but few sales.
“I can run up thousands of dollars in clicks in one day, and that's trouble,” Benton said. He expressed frustration with competitors who aggressively bid up the prices of popular terms. “It makes me want to go click it every time I can,” Benton said.
That has actually become an industry problem. Google warns in regulatory filings that “click-through fraud” could cause it to lose the confidence of advertisers and harm its business. Google and Overture say they regularly give refunds to advertisers when fraudulent clicks are identified.
While competitors use some other devious tactics, such as “jamming” competitors by bidding 1 cent below their offers so they have to pay the maximum price, advertisers have become more scientific in how they approach the market.
Fathom Online Corp., which tracks prices of the 500 most-often searched non-brand-name terms in eight industries, found in December that mortgage-related terms sold for an average of $4.79, while consumer retail terms went for 58 cents. Across all eight industries, the average price was $1.70.
Northbrook-based Lou Malnati's Pizzerias, which operates a mail-order business that ships pizza, Eli's Cheesecake and other Chicago fare, bids on terms like “Chicago pizza” and “mail order cheesecake.”
Dawn Schultz, Lou Malnati's marketing manager, said her company spends about $500 a month on Internet search ads, but doesn't try to compete with larger businesses by bidding on more general terms.
“We can't really be in that category,” Schultz said.