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Wednesday, October 25, 2006

Google's New Revenue Stream: Custom Search Engines

The Google Co-Op Custom Search Engine (CSE) program presents a new revenue stream for Google. Digging into the hosting documentation, I see this sentence:
If you are creating a Custom Search Engine for a 501(c)(3) non-profit, university, or government agency and do not want advertisements to appear in your search results, you can opt out of this feature.
It wasn't obvious from the general CSE FAQ, but if I'm understanding the above document correctly, then ads must be displayed on a custom search engine created by a corporation or individual. These will likely represent the bulk of the new search engines created so should provide a nice, new revenue stream for Google. Very clever. The launch of CSE is also clever for the following reasons:
  1. The pre-emption of future vertical search engines to compete with core Google search
  2. Collaborative filter to identify sites to ban from core Google search
  3. An extension of the Google brand beyond the main Google site
  4. The possibility of an even more targeted AdWords advertising platform
Since I work with the AdWords platform on a daily basis, let me address #4 in more detail. Suppose Google created a site-targeted option for keyword search (akin to the existing site-targeting for content ads) that applied to custom search engines. If advertisers could pick and choose vertical search engines on which to run ads, the ads could be tailored to the target audience of those custom search engines. This would lead to an improved experience for the users as well as improved ROI for the advertisers. This would be particularly true for B2B advertisers. When running B2B ads on and search network sites (which include consumer-centric sites like AOL), it can be a challenge to choose keywords and ad text which apply to B2B searches but not to B2C searches.

I do hope Google creates a site-targeted keyword option for custom search engines. This would certainly be welcomed by my firm's clients. I also believe it would improve the search experience for users of CSEs. Whether or not Google does implement such a feature, they've created a potentially lucrative new revenue stream.

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Anonymous Michael Anuzis said...

This is a brilliant move by Google, but I'm curious how much of the initial revenue generated will be new as opposed to current Google users just shifting over.

Coming out of the gates, it even seems possible (albeit unlikely) that Google loses money on the new framework by making it that much easier for their current users to get involved with AdSense and take a cut of Google's profits.

More likely, it seems like a powerful strategic move by Google to further increase market share by empowering organizations whose users were previously divided between search engines based on personal preference to have a valuable incentive to unify under one search engine (Google's). In that capacity, I think we'll see Google's revenue continue to rise. Smooth move.

Thu Oct 26, 10:10:00 AM EDT  
Blogger Richard said...

Hi Michael. Yeah, I think you're right that there'll be some cannibalization of existing Google search. For existing Google users that switch to CSEs and use AdSense, Google will now be sharing revenue instead of keeping it all.

However, as you also point out, it's likely that Google will pick up even more market share as these CSEs are shared around the globe. This could go viral. I suspect the long term net gain will be positive. Yes, smooth move indeed.

Thu Oct 26, 11:02:00 AM EDT  

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