Google 2007 Annual Report Download - page 25

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The Technology Behind Google’s Advertising Programs
Our AdWords and AdSense programs serve millions of relevant, targeted ads each day based on search terms people
enter or content they view on the web. The key elements of our advertising technology include:
Google AdWords Auction System. The Google AdWords auction system lets advertisers automatically deliver relevant,
targeted advertising. Every search query we process involves the automated execution of an auction, resulting in our
advertising system often processing hundreds of millions of auctions per day. To determine whether an ad is relevant to a
particular query, this system weighs an advertiser’s willingness to pay for prominence in the ad listings (the cost-per-click
or cost-per-impression bid) and interest from users in the ad as measured by the click-through rate and other factors. Our
Quality-based Bidding system also assigns minimum bids to advertiser keywords based on the Quality Scores of those
keywords—the higher the Quality Score, the lower the minimum bid. The Quality Score is determined by an advertiser’s
keyword click-through rate, the relevance of the ad text, historical keyword performance, the quality of the ad’s landing
page and other relevancy factors. This prevents advertisers with irrelevant ads from “squatting” in top positions to gain
exposure, and rewards more relevant, well-targeted ads that are clicked on frequently. Because we are paid only when users
click on ads, the AdWords ranking system aligns our interests with those of our advertisers and our users. The more
relevant and useful the ad, the better for our users, for our advertisers and for us.
The AdWords auction system also incorporates the AdWords Discounter, which automatically lowers the amount
advertisers actually pay to the minimum needed to maintain their ad position. Consider a situation where there are three
advertisers—Pat, Betty and Joe—each bidding on the same keyword for ads that will be displayed on Google.com. These
advertisers have ads with equal click-through rates and bid $1.00 per click, $0.60 per click and $0.50 per click, respectively.
With our AdWords discounter, Pat would occupy the first ad position and pay only $0.61 per click, Betty would occupy
the second ad position and pay only $0.51 per click, and Joe would occupy the third ad position and pay the minimum bid
of $0.01 per click. The AdWords discounter saves money for advertisers by minimizing the price they pay per click, while
relieving them of the need to constantly monitor and adjust their CPCs. Advertisers can also experience greater discounts
through the application of our smart pricing technology, which can reduce the price of clicks for ads served across the
Google Network based on the expected value of the click to the advertiser.
AdSense Contextual Advertising Technology. Our AdSense technology employs techniques that consider factors such
as keyword analysis, word frequency and the overall link structure of the web to analyze the content of individual web
pages and to match ads to them almost instantaneously. With this ad targeting technology, we can automatically serve
contextually relevant ads. To do this, Google Network members embed a small amount of custom HTML code on web
pages that generates a request to Google’s AdSense service whenever a user views the web page. Upon receiving a request,
our software examines the content of web pages and performs a matching process that identifies advertisements that we
believe are relevant to the content of the specific web page. The relevant ads are then returned to the web pages in
response to the request. We employ similar techniques for matching advertisements to other forms of textual content,
such as email messages and Google Groups postings. For example, our technology can serve ads offering tickets to fans of
a specific sports team on a news story about that team.
Google Enterprise
We provide our search technology for use within enterprises through the Google Search Appliance and Google Mini.
These search appliances are a software and hardware solution that companies can implement to extend Google’s search
performance to their internal or external information. They leverage our search technology to identify the most relevant
pages on public web sites and across the corporate network, making it easy for people to find the information they need.
We also provide hosted applications for businesses, schools, and nonprofit organizations through Google Apps.
Google Mini. The Google Mini is targeted at small-and medium-sized businesses who want to let employees and
customers search designated documents, intranets and web sites.
Google Search Appliance. The Google Search Appliance is similar to the Google Mini except that it can handle more
documents and offers more advanced features. Some advanced features of the Google Search Appliance include
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