Version 5/1/06
These notes are from the book: The Search: John Batelle
Class Support Material: Hackers, Hits and Chats

A Billion Dollars, One Nickel at a Time

Bill Gross, CEO of Idealab., the original performance-based search engine was incubated at Idealab. Other Idealab companies included FreePC, CitySearch,, and eToys. became which was ultimately purchased by Yahoo!

The problem Goto / Overture resolved ?

Search engines at the time were being overwhelmed by spam. Gross wanted to find a solution that created a better set of relevant results. Adding a pricing component (he presumed) would achieve this. From the book P 104:

Without an economic price associated with the listings, he reasoned, spam would overrun the system. Force the friction of pricing into the equation, and the markets would start to behave rationally.

Arbitrage opportunity, purchasing traffic at 5 cents a click (undifferentiated traffic) and reselling it, for more focused search (intentional traffic), at a higher rate.

Undifferentiated traffic versus intentional traffic.

Conundrum: how to build critical mass of traffic and advertisers. Sell for a cent and let the demand push the price up. Pay for performance only. As Gross stated: "The more I [thought about it], the more I realized that the true value of the internet was in its accountability, performance guarantees had to be the model for paying for media."

Traditional marketing problem:

This was a revolution indeed; a timeworn maxim of the advertising business, attributed to John Wanamaker, a department store owner, declares that you know you're wasting half your advertising budget; you just don't know which half.

Syndication versus destination site:
Name change to overture and concerns with channel conflict.

Discussions with google did not work, google launched Google AdWords.

Overture is bought by Yahoo!

Gross' motivation to continue: Google, and he now has Snap.