Keyword Advertising: A $100 billion dollar opportunity

="">Interested in the new Presearch Keyword Ad Staking platform? Before you jump in, read on to learn more about the opportunity and some of the current challenges.

Keyword ads are found on almost every search engine

How big is the opportunity?

If someone tells you they are looking for something and you can tell them that you offer exactly what they are looking for at that moment, there’s a high likelihood that they will become your customer. This percentage of people who see your ads and then buy from you is known as your ‘conversion rate’.

Keyword ads convert very well because searchers indicate their ‘transactional intent’ or ‘need’ through the keyword that they enter into a search engine. This is known as ‘directional advertising’, because you are not trying to convince someone they have a need — they already know they have a need and are looking to be directed to someone who can service their need.

Google has built the most profitable online business in history — estimates are that keyword ads generate around $100 billion per year for Google — by introducing pay-per-click (PPC) keyword ads into their search results. It’s a proven model that works extremely well. Even the #2 keyword advertising company, Microsoft’s Bing, generates more than $7.5 billion in annual revenue from their ads. Based solely on its query volume, even much smaller, privacy-focused DuckDuckGo would appear to be on track to generate annual ad revenue approaching $1 billion.

Here are some interesting statistics related to search advertising:

  • 49% of people say they click on text ads
  • 95.3% of clicks go to the top 4 results
  • On average, 41% of clicks go to the top 3 paid ads
  • For high commercial intent searches (someone looking to buy a product) paid ads get 65% of all clicks
  • PPC visitors are 50% more likely to purchase something than organic visitors
  • The average cost per click is $2.32

*Source: https://www.bluecorona.com/blog/pay-per-click-statistics

How traditional keyword ads work

The top result is a paid ad. The bottom result is an unpaid ‘organic’ result.

The price paid to trigger an ad is determined by an auction process, where the advertiser willing to pay the most for a click on their ad (known as the cost per click) has their ad displayed first.

This process is hugely profitable for the search engine serving the ads, because it automatically extracts the most money possible from the market, and the companies with the best ability to profitably convert potential customers are able to pay the most, resulting in quality experiences for users.

Problems with legacy platforms

One of the big complaints advertisers have is the lack of transparency around the cost per click — it’s supposedly driven by an auction process, but only the search engine knows how much the bids are and who’s bidding, so it’s possible that search engines are artificially increasing amounts paid to capture the most possible from each keyword, rather than have it be driven by pure market forces.

Another huge issue for advertisers is fraud — either through ad network partners artificially inflating traffic or through competitors clicking on ads just to run up bills that negatively impact the advertiser.

Because search engines have a vested interest in allowing this to happen (they make more money), there’s skepticism about their efforts to combat fraud, and it’s generally acknowledged that click fraud is just a ‘cost of doing business’ for those advertising on search engines.

As Presearch matures, we may incorporate some of these same mechanisms into our model, albeit with more transparency and using PRE tokens in a way that benefits all members of the community.