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The doomsday of Google and Facebook has arrived?

As we learnt in class, click-trough rate is an important factor when determining the value of an ad slot. Usually the higher click-through rate an ad slot has, the higher value it should be. Based on enormous number of user, web companies, such as Google and Facebook, create millions of profits per day simply by selling ad slots on their websites.

However, things in the real world are not always as simple as the textbook proposition. Many other potential factors determine the value of an ad slot simultaneously, for example, the “quality” of ad slots. The quality stands for the fact that clicking an ad slot does not necessarily guarantee that people are interested in this ad; the clicking action could be done due to misclick or some other reasons.  Therefore, how to distinguish the “intentional” click and the rest becomes very important in terms of analyzing the quality of an ad slot.

According to an article written by Marcus Wohlsen, “Facebook knows who your friends are. Google knows what you’re interested in finding on the Internet. Amazon knows what you’ve bought, and has a pretty good idea of what you might want to buy next.” [1]

So if a company wants to put its advertisement online, which companys’ ad slot should it choose, Google, Facebook or Amazon? The answer seems very clear. In addition, according to comScore, “The company’s sites are viewed by more than 100 million different people in the U.S. every month, which ranks Amazon sixth behind just Google, Microsoft, Yahoo, Facebook, and AOL on the list of most-visited sites.”[1] Amazon has one of the largest databases of what people have purchased in the past and what they are buying in their online shopping cart right now. It will not be hard for Amazon to come up with an effective algorithm that can sort people into different groups and maximum the quality of each ad slot by showing it only to specific groups of consumers who want to buy such a thing. So when people click an ad, they are more likely to buy the merchandise behind that link, which guarantee the effectiveness of an ad slot.

On the other hand, Google, Facebook and many other similar companies almost merely rely on selling ad slots. If another giant company can provide better quality ad solts with similar price, will Google, Facebook and other ad-slots “dealers” survive?

The answer is undetermined. Amazon, although it has been a powerhouse in the field of electronic business for a long time, it is still an infant in the ad-selling market. In the main time, Google, Facebook and millions of other companies are improving their ad-sorting algorithm to attract more companies to purchase their ad slots. Therefore, we cannot tell what the result is. But through the healthy competitions among those companies, ordinary consumer will benefit from it. People will more likely to find what we want to purchase, and companies can pay less to purchase an ad slot.




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October 2012