Eric Schmidt: Why PPC Works

“You’ve got to be kidding! People actually click on this stuff?” This was Google chief executive Eric Schmidt’s thoughts when shown Google AdWords for the first time four years ago. Schmidt made the confession during a conference of the Association of National Advertiser’s in Phoenix. (See article). Prima facie it does seem pretty crazy that PPC ads actually work – why click on ads when you’ve got the natural search results just there? But the key distinction between PPC and traditional forms of advertising – as Schmidt pointed out – is that it is the consumers themselves, the surfers, who decide which ads are shown where. As Schmidt put it, “ads actually do have value if you can figure out the right ones to show.”

And with the ranking system for AdWords ads that Google uses, the most relevant ads will tend to come out on top, making it better for both the consumer and the advertiser. Schmidt said that while advertising is increasing on the Internet, it is dropping back, or reaching a plateau in magazines and newspapers. This makes sense when you consider the tiny cost to advertisers for online ads as opposed to advertising in traditional media. Especially when you combine this with the ability to target your audience so specifically, and monitor your conversion rates so accurately.

At the same conference Schmidt also said Google had discovered how long it would take to index the entire world’s information and make it searchable: 300 years. Just 300! The secrets to the universe and everything – 5 million terabytes of information – in only 300 years. I’m just wondering whether Dr Karl Kruszelnicki couldn’t do it faster, just by writing down everything that’s in his head.