After Goto came out with Cost Per Click search ranking and Heavy Hammer introduced geo-targeted advertising the two technologies were combined to create the new landscape of online advertising that actually worked well for small and medium sized businesses.
So why didnt Google buy Overture instead of letting Yahoo get the highly profitable company and technology? Here is a quick timeline of the events:
1998 Goto offered CPC for the first time and performance based advertising was born.
2000 Google launched Adwords but Googles revenue was dwarfed by Goto, so buying them was not even possible. Google didn’t go public till 2004.
2001 Goto became Overture and started syndicating their advertisers across the internet.
2003 Goto was bought by Yahoo for $1.63 billion.
2004 Google goes public.
So, the long story short is that Google didn’t have the money in 2003 to buy Overture. And based upon the history of Google if they had the money they still would not have paid for the rights to use the technology. Google was sued by Overture before Yahoo acquired it and the out of court settlement was that Yahoo wound up with 2.7 million shares of what would become the biggest thing to hit the internet….until Facebook.
Truth be told the Overture technology was inferior to what Google was building into what would become Adwords. Overture was a pure pay to play scenario, where Google uses a much more complicated system to determine relevance and geo-targeting of the ads seen by the user.
From the beginning Google was not happy with the prospect of making money through advertising. So its ironic that they did it better than anyone else. Now Yahoo is copying Google and the cycle remains in tact where like the newspaper industry before them the bigger you get the harder it is to change.
Even more puzzling is the fact that Google had started selling advertising space using a CPM system before they offered Cost-Per-Click performance based ads. It reminds me of Chrysler in the 80’s putting turbo chargers and racing stripes on crappy little cars with bad breaks. Turns out Lee Iaocca was a little smarter than me as Chrysler came out of the ashes with those horrid little cars. So maybe Google is a little smarter than me too