Google gives its twist on pay-per-click

Google Inc has brought its unique flavor to the pay-per-performance search/ad model, yesterday outlining how it plans to tackle the market currently dominated by Overture Services Inc.

The search engine firm has changed its AdWords keyword-based service to make it more attractive to advertisers. AdWords Select has two major differences that the company claims will save advertisers money and increase the relevance of ads delivered to its users.

First, Google has created an automatic discounting system, where advertisers' per-clickthrough fees are automatically reduced so ads maintain their ranking without the advertiser being overcharged. For example, if three advertisers bid maximums of $0.50, $0.60 and $0.61 for the top position, the $0.60 bidder would automatically have its fee reduced to $0.51 and the $0.61 bidder's bid would be reduced to $0.52.

Second, the numbers of clickthroughs an ad gets helps determine its relevance.

If, in the above example, the $0.50 bidder had twice as many clickthroughs as the $0.52 bidder, the $0.50 bidder would be ranked as though they had bid $1, but would only be charged $0.50. This has the effect that new advertisers will have to bid high to outrank rivals that have been on the system longer.

Google will offer the service to the third party portals that buy its regular web search engine service. EarthLink Inc and Lycos Canada are already using it, a spokesperson confirmed. The company hit the news recently when it made the EarthLink deal, over fears from Overture investors that Google's presence in the market is diluting Overture's influence.

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