Re: GoTo Policy Change

From: Mike Golby <mikeg_at_laragh.co.za>
Date: Fri 06 Apr 2001 10:46:17 -0600

KYLE YAMNITZ <Kyle_at_EdScope.com> WROTE:

>GoTo should have just accepted that they aren't going to
>get 5 cents or better on every single keyword, which is
>what they are now trying to do. Some keywords will never
>be bought at all, i.e. "big compact cars" :) Some
>keywords may be bought at a penny b/c they are relevant
>to a company, but not a company's primary business (yet
>they could at least like to be listed). Those keywords
>will now never be bought (at 5 cents)...


Kyle, is it not possible that GoTo have considered and
accepted these things? In researching their soon-to-be-
launched business model, they must have considered several
factors. They have, after all is said and done, survived
to 2001.

One that consumers all too often forget is that success
is often born of a scorn for conventional wisdom. In your
experience, what happens when demand decreases? Do prices
come down? Very seldom. Like most successful businesses,
GoTo are flouting the laws of supply and demand. Like
every other business not laying off staff, GoTo want to
maximize competitive advantage and profit and they're
going to squeeze this one for all it's worth. How do they
do this? The surest route from dotcom to dotbomb is to put
all your eggs in one basket. By touting themselves (and
being touted by others) only as a pay-for-performance engine,
they sell themselves short to marketers and partners and
they alienate the very people they're supposed to serve,
the end user. So, how do they retain the shred of
credibility they enjoy as a search engine, sell results,
con searchers, *and* make more money?

First, they lop off penny bidders who, when found on
partner sites, cost GoTo a lot more in distributed income
than they're worth. Remember, if only 15% of penny bidders
up their ante to $0.05, GoTo lose very little in income
but they lose a lot of overhead. What's more, those
$0.05 bidders are going to be serious spenders whose
presence on partner sites is going to be far more valuable
to GoTo and their partners than a host of small spenders.
Like it or not, the figures show that GoTo are becoming
increasingly popular. More companies with more money are
likely to sign up with the Big Yellow.

Secondly, they boost their search ratings by lifting
credible Inktomi and self-sourced sites from under a welter
of Mom-and-Pop stores cluttering what should be
"keyword-for-free" results pages. The 'Mom-and-Pop'
description is somewhat misleading. How many decent Inktomi
(and dmoz?) links are washed to page 2 or 3 by duplicitous
web masters and marketers using pay-for-performance as a
form of cloaking? If anything, it is these lowrent sites
that have detracted from GoTo's credibility, have
alienated serious searchers, and have spoilt the party
for $0.01 bidders who were on to a deservedly good thing.
I will certainly be happy when I regain my firt-page
positions without having to pay for them.

It's very possible that GoTo will remain viable as a serious
search engine. Presently, there are very few large engines
of significance and, while GoTo has shed its popularity as
fast as Google has gained itself a cult following, they're
still in the ratings. They're there because they provide
a unique service in a market dominated by large players
offering unique services. Looking ahead, it's quite
conceivable that GoTo will move from being one of the few
dotcoms to exceed 1Q earnings to being one of the
exceptionally few who've turned an industry wide disaster
to their advantage. This will not be due to luck - it will
be a result of sound planning, good timing, and a knowledge
of what our potential consumers want. Like everything though,
we'll just have to wait and see whether this particular bird
is going to fly :-).

Mike Golby
Laragh Courseware
Web: http://www.laragh.com
e-mail: mikeg_at_laragh.com
"e-Learning Matters"



Received on Fri Apr 06 2001 - 11:46:17 CDT