Inside the Googleplex

The Economist writes-

"It is rare for a company to dominate its industry while claiming not to be motivated by money. Google does. But it has yet to face a crisis."

This is the interesting part-

"Google's success still comes from one main source: the small text ads placed next to its search results and on other web pages. The advertisers pay only when consumers click on those ads. 'All that money comes 50 cents at a time,' says Hal Varian, Google's chief economist. For this success to continue, several things need to happen.

First, Google's share of web searches must remain stable. Thanks to its brand, this looks manageable. Google's share has steadily increased over the years. It was about 64% in America in July, according to Hitwise. That is almost three times the volume of its nearest rival, Yahoo!. In parts of Europe, India and Latin America, Google's share is even higher. Only in South Korea, Japan, China, Russia and the Czech Republic does it trail local incumbents.

Second, Google must maintain or improve the efficiency with which it puts ads next to searches. And here its dominance is most impressive. In a recent analysis by Alan Rimm-Kaufman, a marketing consultant, it took a whopping 73% of the budgets of companies that advertise on search engines (versus 21% and 6%, respectively, for Yahoo! and Microsoft). It charged more for each click, thanks to its bigger network of advertisers and more competitive online auctions. And it had far higher “click-through rates”, because it made these ads more relevant and useful, so that web users click on them more often."