AdWords is a natural monopoly, so it is unlikely that someone will ever create a successful competing keyword driven advertising network. In order to generate high prices for the search ads, Google needs to have multiple bidders competing against each other for each keyword. Advertisers will only bid if there is lots of inventory to buy (lots of searches on those keywords). 10% of the search market does not generate 10% of search advertising revenue because of this lack of market participants -- on second tier pay-per-click advertising networks whole swaths of keywords are not competitively bid. The Bing-Yahoo search merger was an attempt to address this problem, but it hasn't worked so far according to the most recent financial reports. Google still generates 50% more revenue per search than Microsoft due to the network effects.
Ask HN: What will happen to Google when somebody disrupts AdWords?
11–20 of 35 posts
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#12Diversification is usually a huge waste of money. It is hard for one company/culture to make money doing lots of things. Be glad they know their niche is ads and that they are doing everything they can to protect their castle (as a shareholder). Relentlessness will enable them to hold on to their position for longer than other companies would. However, all companies will eventually fall to competitors as t approaches…
Not sure about that, doesn't sound true.
It is certainly simpler to make a lot of money in the short term by focusing on one core business only. But diversification and redundancy are known survival techniques. Think IBM and Microsoft: both companies do a lot even if they have some sort of a core. But even the core is somehow intermingled with much of the else they do.
It's also not so simple to connect different dots if you only have one kind of dots. Google can combine stuff in novel ways because they're kind of a technological crossover. Not so easy if you've purged out all that clutter that doesn't fit in your core work.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#13Google will buy them out.
Just like how Microsoft bought out Google and IBM bought out Microsoft.
None of these once up-and-comer's markets were properly established before their respective companies came along. AdWords is an established product in an established market-- Google's on the watch.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#14What happens when Adwords gets disrupted? Well, first, it will take a long time for the competitor to establish itself. Businesses don't change overnight. Second, even if the competitor manages to steal ALL of Google's income overnight, Google has billions in the bank. There will be years for them to find a way to recover, or, in the absolute worst case, years for you to reinvest.
There will be years for them to find a way to recover, or, in the absolute worst case, years for you to reinvest.
No, there wouldn't be years for him to reinvest. If it was revealed that Google's best days where behind them -- i.e. revenue was shrinking and they were dipping into their cash reserves to keep things rosy -- then investors would sell, sell, sell and drive down the stock price in a relatively short period of time.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#15I have been saying this for about a year now:
Facebook has an opportunity to disrupt Adwords. One of the major reasons Google's Adwords makes so much god damn money, is that they 1) have a HUGE reach and 2) have really good retargeting abilities.
Example: Go browse around on liquidweb.com...then go look at some sites running adsense. I can almost guarantee you'll start seeing liquidweb ads on those sites.
Now, why do you think Google launched +? The major reason was to grab market share in the social networking space, but also because it's a MASSIVE retargeting tool. Now they know what your interests are, and they also know who your friends are and what their interests are. That's some game over type of stuff when it comes to advertising.
Facebook has had this information for years. If they introduced an adsense/adwords platform, they could run a sitewide ad promoting it to webmasters (reaching SEVEN HUNDRED MILLION sets of eyes) and get an instant userbase. That could significantly shake up Google's monopoly on the web advertising space.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#16Diversification is usually a huge waste of money. It is hard for one company/culture to make money doing lots of things. Be glad they know their niche is ads and that they are doing everything they can to protect their castle (as a shareholder). Relentlessness will enable them to hold on to their position for longer than other companies would. However, all companies will eventually fall to competitors as t approaches…
> However, all companies will eventually fall to competitors as t approaches inf.
Depends. There are other ways for companies to fail, too.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#17AdWords is a natural monopoly, so it is unlikely that someone will ever create a successful competing keyword driven advertising network. In order to generate high prices for the search ads, Google needs to have multiple bidders competing against each other for each keyword. Advertisers will only bid if there is lots of inventory to buy (lots of searches on those keywords). 10% of the search market does not generate…
I don’t understand this argument. Why would advertisers only bid if there is enough search volume? For each venue you advertize on you have a fixed cost that is the cost of setting up and maintaining your ad campaign on that platform. So there is an incentive to use high search volume sites, but this hardly qualifying as a natural monopoly.
Or am I missing something?
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#18What happens when Adwords gets disrupted? Well, first, it will take a long time for the competitor to establish itself. Businesses don't change overnight. Second, even if the competitor manages to steal ALL of Google's income overnight, Google has billions in the bank. There will be years for them to find a way to recover, or, in the absolute worst case, years for you to reinvest.
Not only would they have to steal ALL of Google's income, they would have to steal ALL of Googles network. Highly unlikely at any point in the future.
Not to mention the google search product IMO is better than any other available.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#19Google will be in the transportation and shipping business by then.
Re: Ask HN: What will happen to Google when somebody disrupts AdWords?
#20AdWords is a natural monopoly, so it is unlikely that someone will ever create a successful competing keyword driven advertising network. In order to generate high prices for the search ads, Google needs to have multiple bidders competing against each other for each keyword. Advertisers will only bid if there is lots of inventory to buy (lots of searches on those keywords). 10% of the search market does not generate…
I don’t understand this argument. Why would advertisers only bid if there is enough search volume? For each venue you advertize on you have a fixed cost that is the cost of setting up and maintaining your ad campaign on that platform. So there is an incentive to use high search volume sites, but this hardly qualifying as a natural monopoly. Or am I missing something?
I don't think you are missing anything. There are advertisers who prefer other networks like Chitika, Adbrite, Clicksor etc because of the lower competition/lower click prices there (and not only).