© 2013, published by Flat World Knowledge 15-1 Information Systems: A Manager’s Guide to Harnessing Technology, version 2.0 John Gallaugher

© 2013, published by Flat World Knowledge Published by: Flat World Knowledge, Inc. © 2013 by Flat World Knowledge, Inc. All rights reserved. Your use of this work is subject to the License Agreement available here No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement

© 2013, published by Flat World Knowledge Chapter 15 Google in Three Parts: Search, Online Advertising, and Beyond 15-3

© 2013, published by Flat World Knowledge Learning Objectives Understand the extent of Google’s rapid rise and its size and influence when compared with others in the media industry Recognize the shift away from traditional advertising media to Internet advertising Gain insight into the uniqueness and appeal of Google’s corporate culture 15-4

© 2013, published by Flat World Knowledge Introduction Google earns by pairing Internet surfers with advertisers Advertising drives profits and lets the firm offer most of its services for free Voted as one of the best firms to work for in the U.S. Dominates the search market 15-5

© 2013, published by Flat World Knowledge Introduction Market capitalization (market cap): Value of a firm calculated by multiplying its share price by the number of shares Success of its existing businesses allows Google to: – Experiment and innovate – Withstand failure – Make acquisitions and build new markets 15-6

© 2013, published by Flat World Knowledge Figure U.S. Search Market Share (Volume of Searches, June 2013) 15-7

© 2013, published by Flat World Knowledge Learning Objectives Understand the mechanics of search, including how Google indexes the Web and ranks its organic search results Examine the infrastructure that powers Google and how its scale and complexity offer key competitive advantages 15-8

© 2013, published by Flat World Knowledge Understanding Search Search engine results returned and ranked according to relevance Organic or natural search Algorithm to rank Web sites PageRank Process of improving a page’s organic search results Search engine optimization (SEO) Creating a series of bogus Web sites, all linking back to the pages one is trying to promote Called spamdexing or link farming Link fraud 15-9

© 2013, published by Flat World Knowledge Understanding Search Traverse available Web links to perform a given task Spiders discover documents for indexing and retrieval Spiders, Web crawlers, software robots Temporary storage space used to speed computing tasks Cache Internet content that cannot be indexed by search engines Dark Web Network of computer servers running software to coordinate their collective use Server farm 15-10

© 2013, published by Flat World Knowledge Understanding Search Google’s server setup is fault-tolerant – Fault-tolerant: Capable of continuing operation even if a component fails Colos (colocation facilities): Warehouse-sized facilities where telecom companies come together to exchange traffic – Help make the Internet function as a network of networks 15-11

© 2013, published by Flat World Knowledge Learning Objectives Understand how media consumption habits are shifting Be able to explain the factors behind the growth and appeal of online advertising 15-12

© 2013, published by Flat World Knowledge Online Advertising Factors driving trends – Increased user time online – Improved measurement and accountability – Targeting - Enables a firm to spend money only on its best prospects – Impressions help advertisers gauge an advertisement’s effectiveness Impressions: Each time an ad is served to a user for viewing 15-13

© 2013, published by Flat World Knowledge Learning Objectives Understand Google’s search advertising revenue model Know the factors that determine the display and ranking of advertisements appearing on Google’s search results pages Be able to describe the uses and technologies behind geotargeting 15-14

© 2013, published by Flat World Knowledge Google’s Search Advertising Search engine marketing (SEM): Designing, running and optimizing search-engine ad campaigns Keyword advertising: Advertisements that are targeted based on a user’s query – Advertisers bid on the keywords to be used to trigger the display of their ad Linking advertising to purchasing intent makes Google’s ads highly valuable 15-15

© 2013, published by Flat World Knowledge Google’s Search Advertising Pay-per-click (PPC): Advertisers do not pay unless someone clicks on their ad Cost-per-click (CPC): Maximum amount of money an advertiser is willing to pay for each click on their ad Top performing ads are measured by considering the: – Maximum CPC an advertiser is willing to pay – Advertisement’s quality score Quality score: A broad measure of ad performance – Formula - Ad Rank = Maximum CPC × Quality Score 15-16

© 2013, published by Flat World Knowledge Google’s Search Advertising Factors determining an ad’s quality score – Click-through rate (CTR): Number of users who clicked an ad divided by the number of times the ad was delivered – Overall history of click performance for the keywords linked to the ad – Relevance of an ad’s text to the user’s query – Automated assessment of the user experience on the landing page Landing page: Web page displayed when a user clicks on an ad 15-17

© 2013, published by Flat World Knowledge Google’s Search Advertising Provides tools to identify popular words and phrases for selecting keywords to link with an ad Offers dynamic search ads – Dynamic search ads: Ads generated automatically based on the content of a Web site Advertisers get a running total of ad performance statistics that helps: – Monitor the return on their investment – Tweak promotional efforts for better results 15-18

© 2013, published by Flat World Knowledge Table Most Expensive Industries for Keyword Ads Source: Consolidated from SpyFu.com, June 2011.

© 2013, published by Flat World Knowledge Geotargeting Identifying a user’s physical location for the purpose of delivering tailored ads or other content Ads in Google Search can be geotargeted based on IP address – IP address: Value used to identify a device that is connected to the Internet Changes depending on how and where one connects to the Internet 15-20

© 2013, published by Flat World Knowledge Learning Objectives Understand ad networks, and how ads are distributed and served based on Web site content Recognize how ad networks provide advertiser reach and support niche content providers Be aware of content adjacency problems and their implications Know the strategic factors behind ad network appeal and success 15-21

© 2013, published by Flat World Knowledge Google’s Ad Network Ad network: Links advertisers to Web sites and other content providers willing to host advertisements – In exchange for payment AdSense targets ads based on keywords detected inside the content of a Web site Contextual advertising: Based on Web site’s content – Content adjacency problems: Situation where ads appear alongside text the advertiser would like to avoid 15-22

© 2013, published by Flat World Knowledge Ad Networks and Competitive Advantage Ability to reach more potential customers attracts more advertisers Content providers want to join ad networks with the most number of advertisers More participants bring in more revenue and help the firm benefit from scale economies – Better return on investment from its ad technology and infrastructure 15-23

© 2013, published by Flat World Knowledge Learning Objectives Know the different formats and media types that Web ads can be displayed in Know the different ways ads are sold Know that games can be an ad channel under the correct conditions 15-24

© 2013, published by Flat World Knowledge Ad Formats Graphical advertising, as opposed to text ads Image (or display) ads Online ads that include animation, audio, or video Rich media ads Ads that run before a user arrives at a Web site’s contents Interstitials Evaluates and recommends interactive advertising standards and practices Internet Advertising Bureau (IAB) 15-25

© 2013, published by Flat World Knowledge Payment Schemes Most graphical display ads are sold according to impressions – Ad rates are quoted in CPM CPM: Cost per thousand impressions Affiliate programs: Program sponsors pay referring Web sites a percentage of revenue earned from the referral 15-26

© 2013, published by Flat World Knowledge Ads in Games Sponsorships of Web-based and mobile games Firms have created online mini games for longer term, immersive brand engagement Integrating virtual product placement into gaming experiences 15-27

© 2013, published by Flat World Knowledge Learning Objectives Be familiar with various tracking technologies and how they are used for customer profiling and ad targeting Understand why customer profiling is both valuable and controversial Recognize steps that organizations can take to help ease consumer and governmental concerns 15-28

© 2013, published by Flat World Knowledge Customer Profiling and Behavioral Targeting Communication between a Web browser and Web server reveals: – IP address - Leveraged extensively in customer profiling – Type of browser used – Computer type and its operating system – Cookies: Line of identifying text, assigned and retrieved by a given Web server and stored by one’s browser 15-29

© 2013, published by Flat World Knowledge Remarketing Shows custom, targeted ads to a user when visiting other sites if the user has already visited a given page on the advertiser’s site – Referred to as retargeting – Reintroduces products to users or targets with special messages or promotion 15-30

© 2013, published by Flat World Knowledge Cookies Obtain details on a user’s purchases Tailor Web sites to display products most likely to be of interest to a user Keep track of the contents of a user’s shopping cart Store user IDs and passwords as part of the “remember me” feature Third-party cookies: Identify users and record behavior across multiple Web sites – Served by ad networks or customer profiling firms 15-31

© 2013, published by Flat World Knowledge Learning Objectives Understand the privacy concerns that arise as a result of using third-party or tracking cookies to build user profiles Be aware of negative consequences that could result from the misuse of third-party or tracking cookie Know the steps Google has taken to demonstrate its sensitivity to privacy issues Know the kinds of user information that Google stores, and the steps Google takes to protect the privacy of that information 15-32

© 2013, published by Flat World Knowledge User Privacy The U.S. Federal Trade Commission has called for: – More transparency and user control in online advertising – Opt-in when collecting sensitive data Opt-in: Program that requires customer consent Google allows users to: – See all the categorizations assigned to a browser’s tracking cookie Users can remove categorizations, or add interests to improve ad targeting 15-33

© 2013, published by Flat World Knowledge User Privacy – Install a cookie or plug-in that opts them out of interest-based tracking Opt-out: Enroll all customer by default, but allow them to discontinue participation if they want to Plug-in: Extends the feature set or capabilities of another application 15-34

© 2013, published by Flat World Knowledge Learning Objectives Be able to identify various types of online fraud, as well as the techniques and technologies used to perpetrate these crimes Understand how firms can detect, prevent, and prosecute fraudsters 15-35

© 2013, published by Flat World Knowledge Types of Fraud Attempted in Online Advertising Generating bogus ad clicks to earn PPC income Enriching click fraud Generating false page views to boost a site’s CPM earnings Enriching impression fraud Clicking a rival’s ads to exhaust their PPC advertising budget Depleting click fraud Generating bogus impressions to exhaust a rival’s CPM ad budget Depleting impression fraud Repeatedly searching keywords linked to rival ads, to lower their performance rank Rank-based impression fraud 15-36

© 2013, published by Flat World Knowledge Types of Fraud Attempted in Online Advertising Generating bogus clicks or impressions associated with rivals, to ban them from an ad network Disbarring fraud Creating bogus Web sites, all linking back to a page, to increase that page’s results in organic search Link fraud Packing a Web site with unrelated keywords to attract higher- value contextual ads Keyword stuffing Recruiting a network of users to engage in click fraud, thereby spreading IP addresses across several systems Click farms Infiltrated computers, linked and controlled by rogue software Botnets (zombie networks) 15-37

© 2013, published by Flat World Knowledge Learning Objectives Understand the challenges of maintaining growth as a business and industry mature Recognize how technology is a catalyst, causing the businesses of many firms in a variety of industries to converge and compete, and that as a result of this, Google is active on multiple competitive fronts Critically evaluate the risks and challenges of businesses that Google, Microsoft, and other firms are entering 15-38

© 2013, published by Flat World Knowledge Learning Objectives Appreciate the magnitude of this impending competition, and recognize the competitive forces that will help distinguish winners from losers 15-39

© 2013, published by Flat World Knowledge Figure A Comparison of Stock Price Change— Google (GOOG) versus Microsoft (MSFT) 15-40

© 2013, published by Flat World Knowledge Google’s Competitive Forces Major scale advantages in search and network effects in advertising – Dominance helps grow a data asset for service improvement Multiple ad networks make it easier to shift business from one firm to another – Google must offer superior value to retain advertisers Switching costs for search users are incredibly low 15-41