ZiXXo, Ingenio and Snap.com - The Holy Grail of Advertising?
Bill Gross, an internet entrepreneur, deserves more credit than anybody else for Pay-Per-Click (PPC) advertising. In 1996, Mr. Gross started Idealab, a business incubator for the inventions of pioneering technology companies. One of the companies to come out of his incubator was GoTo.com, later renamed Overture, which pioneered the market for “paid search” or “pay-per-click” advertisements.
In 2001, Mr. Gross ran into with Sergey Brin and Larry Page, the creators of Google, a search engine that was just then becoming popular, but still had no way of making money. He offered them a partnership or merger, but the idea was rebuffed. The young co-founders were purist at the time and they didn’t want to dilute the integrity of their search results with commercialism. In less than a year, however, Messrs Brin and Page changed their minds and launched AdWords, which was remarkably similar to Overture's idea of putting advertising links next to relevant search results and charging only for clicks (but with the added twist that advertisers could bid for keywords in an online auction). Four years after their chance encounter, AdWords generated $6.1 billion in revenues for Google.
Today, some companies are exploring other methods of charging advertisers for consumers' actions. ZiXXo (www.zixxo.com), a start-up in California, is revolutionising the U.S. coupon market. 335 billion coupons were printed and distributed in America in 2005, but only 4.5 billion were redeemed – a waste rate of almost 99%. In contrast, ZiXXo issues all its coupons online and only charges an advertiser (50 cents per coupon) when a consumer prints one out, thus expressing an intent to redeem it.
While ZiXXo breaks new ground with “pay-per-print” advertising, Ingenio (www.ingenio.com), another Californian firm, is pushing “pay-per-call”. Ingenio places free telephone numbers on local-search pages and charges advertisers only when they receive a live call from a consumer. This is especially popular among accountants, lawyers, plumbers and other service providers who find it easier to close a deal on the telephone.
Meanwhile, Mr. Gross is once again hoping to shake up the advertising industry in a way that would make Joseph Schumpeter proud. He is busy pursuing the “Holy Grail” of advertising – or what is known as cost-per-action (CPA) or cost-per-sale. His new Idealab company is called Snap.com (www.snap.com), a small, U.S. based search engine. Snap.com visually previews websites in the listings of its search results to significantly reduce bounce rates (when a visitor leaves a website without viewing any other pages). More importantly, a theme park or an airline that advertises on Snap’s search results, for example, would not pay when a consumer clicks on its link, but only when he or she buys a ticket from the website. For every business with an e-commerce website, there will never be a more risk-free, efficient and ROI (return on investment) driven form of advertising than CPA.
