Pay-per-click internet auctions: overture and google

In February 2003, both buyers and sellers of online advertising were challenged by the success of a new way of placing and paying for adverts. It was based on an auction system, whereby higher paying advertisers gained greater access to potential customers searching the Internet for specific words. But it raised issues with which the industry was inexperienced: How should advertisers choose how much to bid for a specific term? How should auctioneers construct auctions in order to maximise revenues? Should search providers sell advertising space through existing auctions, or start their own markets? Internet Pay-Per-Click (PPC) advertising had become a significant market, turning over an estimated $1.1bn per year, and growing at 13% per quarter in spite of extremely harsh economic conditions. An estimated two thirds of the market was accounted for by Overture1, “the 800lb gorilla of the PPC market”, which was beginning to vertically integrate into the search engine market with its acquisition of web search stalwarts Altavista2 and AllTheWeb3.