Site Goes Beyond Pay-Per-Click Ads
People scoffed nearly a decade ago when Bill Gross proposed an online search engine that ranked results based on how much advertisers were willing to pay to have their links tied to specific requests.
But the concept developed into a revolutionary idea that turned Internet search engines into massive moneymaking machines.
Now Gross hopes to shake things up again with Snap.com, which is providing another commercial twist on search engines while promising to deliver more useful results than industry leaders Google Inc. and Yahoo Inc.
“We feel there is so much more innovation that can take place in search,” Gross said Monday. “It’s hard to say that little Snap will ever beat Google, but I think we can become a viable alternative.”
As Snap gears up to shift out of test phase, the search engine’s parent company, Pasadena-based Perfect Market Technologies Inc., has raised $10 million in a venture capital round led by Mayfield, a Menlo Park, Calif., firm. Gross and Snap Chief Executive Tom McGovern intend to use some of that money to spread the word about a system that he believes can deliver better value for advertisers.
Google, Yahoo and other search engines make money by distributing sponsored Web links that are tied to a search query or the content displayed on a page.
Advertisers pay commissions whenever the commercial links are clicked on, even if the traffic doesn’t result in a sale.
Gross pioneered this “pay-per-click” approach at GoTo.com, which later changed its name to Overture Services before Yahoo bought it for $1.7 billion in 2003.
Google introduced its own pay-per-click model, known as AdWords, in 2002.
As it has emerged into a highly effective marketing tool, the pay-per-click system has spawned more mischief too. Looking for a competitive advantage, some advertisers have repeatedly clicked on a rival’s link in an attempt to drain their marketing budgets. Other rogue websites belonging to the ad networks maliciously click on commercial links to generate more commissions for themselves.
The estimates on the prevalence of so-called click fraud vary widely. Critics of the system say 10% to 20% of the clicks are bogus -- done by a person or automated program with no intention of buying something. Others say incidents of fraud are vastly overblown.
Gross is among those who believe click fraud is a big problem. He aims to change things with a “cost per action” system that charges ad commission only when a purchase is completed.
“I believe the commercial side of search will evolve toward cost-per-action in the next five to 10 years,” Gross said.
Snap faces a long haul ahead. Mountain View, Calif.-based Google handled 1.8 billion U.S. search requests last month, giving it a 36.9% share of the market, according to Comscore Networks. Sunnyvale, Calif.-based Yahoo ranked second, with 1.5 billion U.S. searches, or 30.4% of the market.
As of Monday, Snap had processed just 16.4 million search requests since its site debuted nine months ago.
