The auction model for ads basically ruins internet searches in transactional categories. If you want to win at the "italian restaurant" search game, you have to bid the highest for the ad, which means you must have the highest margin. The best way to win is to open a restaurant with ridiculously high margins (over priced wine and cheap ingredients). Want the "cheapest car insurance"? Google is zero help. It sends you…
I am happy to see other people finally pointing this one out. I will refine your hypothesis a little. a) It isn't companies with the highest margin who win, but the ones which are able and willing to devote the greatest percentage of revenue to performance driven advertising. If the company has a slim margin to begin with, they will never even be able to start in the "race." b) Education is a better example than car…
According to the DoE, 4-year for-profit colleges spend 2.9x more on administrative expenses (albeit including student services and academic support) than instruction. Unfortunately I can't find a better breakdown of this category, but I'd assume this is mostly leadgen.