As a business sector, the world of search is changing. Last week I wrote a piece about how Google has less decision making power than users might think as the company finds itself in a business environment that is being molded by factors outside their corporate control. The bottom line in any enterprise, regardless of the social mission associated with that enterprise is survival. In the business world, survival necessitates making money. Saying one needs to make money is a lot easier than actually making that money. Being a leader in any field does not necessarily equate to turning a profit as evidenced by the dead or dying brands Lycos, Alta Vista and Infoseek. Each of these search tools provided their users with good, relevant information but none of them could survive on their own. Each has been gobbled up by a bigger player and eventually killed or put on the "death-watch" list.

Over the years, there have been a number of ways search engine businesses have sought to meet the bottom line. One way was through the sale of banner advertising slots. Another is through submission fees to directories such as the $299 Yahoo continues to charge to be listed in their all-but-unused directory. A third method of making money was to distribute search results to other search tools by providing access to the central search database. This method is what made Google the most dominant player in the industry over the past two years and what made Inktomi so interesting to Yahoo last year. There are inherent problems in each of these three revenue generators, the greatest of which is that not one of them can generate enough revenue to keep a search engine company in the black in the current business environment.

A feature of the current business environment is the mass acceptance of the Web as a business and social information tool. Much like television became the defining medium of the four decades following WWII, the Internet has become the defining medium of the 90's and 2K's and the growth of the search industry is being driven by advertising. The only tried and true business model for search engines is to treat webmasters as advertisers and somehow charge them for the privilege of a listing. This is being done mainly in three ways, Paid-Placement, Contextual Distribution, and Paid-Inclusion. In the case of Yahoo, a combination of the paid-placement and paid-inclusion is being tested but free listings are still possible to achieve. Paid advertisements are the revenue generators but search engine users continue to prefer the regular, "Organic" listings.

Organic Listings are the loss-leaders of the search engine industry. Although all the smaller search tools require payment for inclusion in their databases, both Google and Yahoo continue to provide listings for any website for free. Organic listings are seen below the "Featured or Sponsored sites" and are the results generally clicked on first. While it is very difficult to manipulate these listings, a good SEO can usually get their client's site placed in the Top10 with a concentrated campaign. Repeated surveys of search engine users confirm that Organic listings are the most trusted listings. While search engine users trust these listings, and a good SEO can generally get placement in an advantageous spot, many website owners choose a campaign based on organic listings and paid advertising in order to guarantee they will be found easily and quickly by searchers.

Paid-Inclusion is the simplest of the three revenue generators. This term means a webmaster pays the search tool to be included in its database of searched-sites. The most relevant example of a paid-inclusion search tool is Ask Jeeves/Teoma which charges $30 for the first page submitted and $18 for subsequent pages. Paying for inclusion does not guarantee your listing will be ranked well but it does provide extra attention from search-spiders. None of the other remaining MAJOR players have a pure paid-inclusion model though Yahoo's Directory still charges $299 for a review and possible inclusion in the Directory. Very few people actually use Yahoo's Directory for search as Yahoo now has its own search engine.

Paid-Placement, (aka: Pay-per-Click), is a bit more difficult to explain as there are several forms of this model in use. There are two programs most people are familiar with, Yahoo's Overture and Google's Adwords. Each program has its unique twist on paid-placement but both work on a basic auction format in which advertisers are invited to bid for clicks from specific keywords or phrases. For instance, every time someone searches the keyword phrase "Search Engine Placement" and clicks the first link, it costs the bidder top bidder $8.01 each time someone clicks their link. The second place bidder is paying $8.00 per click and the third is bidding $7.99. A similar bidding system is used at AdWords though Google adds a number of other factors into deciding which site gets placed where including frequency of click-throughs, maximum daily spend indicated, etc... There are several other paid-placement search tools out there including, Enhance, Find What, Kanoodle, and Brainfox.
The real power behind a paid-placement campaign is in the distribution of the advertisement over several other sources. Most paid-placement search tools have distribution deals with other search entities. Viewers can generally see these listings at the top of search engine results pages under headings such as "Sponsored sites" or "Featured sites". This leads into the newest revenue generator for the most aggressive search tools, Contextual Distribution.

Contextual Distribution, (aka: Contextual Advertising) is the distribution of paid-ads to other search tools, websites and media outlets based on keywords found in the text of these sources.

Google's AdWords/AdSense program is the most successful of the Contextual Distribution models. Through AdSense, webmasters can sign-up with Google to have relevant AdWords advertisements displayed on their sites. The advertisements appear based on keywords and phrases found in the text the ad is placed beside. Hundreds of online newspapers such as the New York Times (subscription required) and Canada's Globe and Mail display Google AdWords advertisements as they would normal print advertisements. Webmasters are given the option of indicating approximately 200 URL's they would not like to see displayed on their websites, allowing for the culling of competitors' advertising. Google AdWords appear at sites such as, AOL, Netscape, Ask Jeeves, The NY Times, Seattle Times, Toronto Star, National Geographic, and literally tens of thousands of other sites. AdWords has just introduced a new feature that allows advertisers to purchase much larger ads, some as large as banners ads.

Yahoo's Overture also offers a form of contextual distribution through its Content Match system. Content Match works much the same way AdWords does however the distribution is slightly smaller than Google's. Early in their history, Overture started to corner the distribution market at other major search engines including, Alta Vista, Excite, MSN, Sympatico, and Yahoo but it also provides advertising opportunities at major news outlets such as CNN and Knight Ridder News.

It should be noted that most paid-placement programs contain some form of contextual distribution though Google and Yahoo/Overture tend to have the biggest outlets in North America already under their banners. This fact may change in the future as the search engine world is evolving very quickly and most partnerships and alliances are drawn up to cover 12 - 18 month periods.

Since the placement of advertisements is factored using an algorithmic formula, sometimes even though a part of the context of the story might fit the advertiser's product, the advertisement may not belong beside that exact story. A morbid example of this happened about a year ago in the NYTimes when the paper ran a story about a series of murders in New York. The murderer hid victims' body parts in suitcases around the city. Beside the story was an advertisement for the world's best known maker of luggage and suitcases.

Yahoo SiteMatch
Yahoo is trying to combine paid-inclusion with a bid-per-click system through their SiteMatch program. There is a great deal of information to explain about SiteMatch. A full article on SiteMatch can be found here. As of today, we are holding off paying for inclusion at Yahoo because Yahoo's spider, (SLURP) continues to find sites by following links from other sites much like Google's spider (GOOGLE-BOT) does. Thus far, we've had great success with client sites at the "new" Yahoo and until this experience changes, we will continue to recommend against the paid fees.

Strategies for mixing Paid and Organic Listings
It is often advantageous to mix and match paid and organic listings for a number of reasons. The most important facet of online advertising is visibility. With over 10Billion websites online and almost 7Billion in the databases of Google and Yahoo, having your site seen amongst the crowd is extremely important. By working with a professional SEO, you can develop a strategy that maximizes the power of contextual distribution while working towards achieving Top10 placements. While waiting for the placements to arrive, it is likely wise to advertise with both Google and Yahoo/Overture in order to get immediate exposure, especially in the Featured or Sponsored Sites sections found at the top of most search engine results pages. Another excellent feature of both Yahoo/Overture and Google AdWords is the allowance to select specific landing pages so you can direct traffic to an internal page as opposed to the INDEX page which is most likely to get listings in the Organic results.

It generally takes 4 - 6 weeks to see the full effect of a good SEO campaign in Yahoo and Google's Organic listings. That 4 - 6 weeks is a good time to take advantage of paid-advertising options and the massive distribution they offer.