How does the money printing machine work? - Talk about Google's advertising system

How profitable does Google make?

According to the 2018 financial report,Google's revenue for the first three quarters has exceeded $97.6 billionThat's equivalent to $270 million a day, and even with that amount, it's growing at a high rate, with revenue up 21 percent in the third quarter and a 37 percent profit. Baidu just celebrated the completion of 100 billion yuan in revenue this year, and Google last year completed its own 100 billion dollars, but Google's unit is the U.S. dollar.Much of this is due to Google's strong advertising system.It is like a money printing machine that contributes to the world's top technology company.

Much of this is due to Google's extremely powerful advertising system, which, like a money-printing machine, continues to contribute to the world's top technology company.Today, advertising revenue accounts for 85% of Google's total revenue and is an absolute first source of revenueAnd Google is at the top of the U.S. advertising market with a 22% share, and today we'll take a look at Google's advertising system and analyze how the money printing machine works.

The history of Google's advertising system

We know that Google was founded in 1998, and in its first two years, Page and Brin focused on optimizing search technology, and Google didn't consider commercialization at all, so it wasn't until October 23, 2000, that Google first launched its own advertising products, and now we can see that press release in Google News. Google launches self-service advertising systemIn their first month of opening, they harvested 350 customers, the first of whom sold fresh lobsters.

The initial system was immature, in Redefining The Company: How Does Google Operate? At the beginning of the book, Google Chairman Eric Schmidt tells the story of the system improvement

Eric Schmidt,Served from 2001 to April 2011 Google CEO

On a Friday afternoon in May 2002, founder Page wandered around Google's website, typing "Kawasaki H1B" to see an ad for "How to get an American H-1B visa" and "French Cave Mural" to see an ad for "Buying French Cave Murals to XX." So he printed the results and posted them on the board in the company's rest room and went home.

To his surprise, on Monday, two days later, a search engineer named Jeff Dean sent out a complete problem analysis and solution that he did not belong to the advertising department, but he and five colleagues over the weekend analyzed in detail the causes of the cases and gaveThe solution with "relevance" as its core is the prototype of the famous "ad quality score" of Google's advertising also an important evolution in Theword's history.

At that time, Google's average daily search is 20 million, today, Google's average daily search has been more than 5 billion, Google ads have grown into a super system with annual revenue of more than $100 billion, here's a look at the super system's major milestones -

In May 2002, Google began to take full-scale bid rankingand started bidding for auctions using the "GSP" auction.

In March 2003, Google launched AdsenseAdSense is an ad traffic alliance, webmasters to join AdSense after the site's advertising space contracted to Google, Google is responsible for soliciting customers to deliver, after the revenue of the two sides, this model allows Google to break through its own traffic bottleneck, simply from the first card to the mother.

In April 2007, Google paid $3.1 billion for DoubleClick.DoubleClick is a full range of advertising technology services company, from advertising creativity, to delivery to monitoring, through this acquisition, Google to improve its advertising chain of service capabilities.

In November 2009, Google acquired Mobile App Provider AdmobAdmob can be understood as the mobile APP version of AdSense, which is responsible for contracting small app idle advertising space, Google is responsible for advertising sales and delivery, the two sides split, which also allows it to expand its advertising boundaries in the mobile era.

In May 2015, Google launched UAC (Universal App Series), tailored for APP advertisers a set of APP full-link solutions from delivery, optimization to conversion, which is an important move by Google in the field of APP promotion.

In May 2018, Google will make all its advertising product lines "Google Ads"To unify the overall image of Google's advertising, the company unified all its product lines into one brand, Google Advertising, on July 24, 2018, and launched a new brand, Logo.


Second, the basic principles of Google's advertising system

In fact, today's Internet advertising field of many trading models and important mechanisms, in a sense, Google's first large-scale use and definition.

Before Google, even mainstream online advertising, mostly focused on display- and pricing ads, which simply moved offline advertising online, and although Google was not the inventor of the "bid ranking" model (the inventor was Overture), Google was the first to use it on a large scale and set off a revolution in advertising. As a starting point, technology has become an important competitiveness of advertising,Advertising crosses from Big idea era to Big data

Many people think that with the development of Internet technology, the precision of advertising is constantly improving - search is more advanced than portal, social network is more advanced than search....

But that's not the case, and for Facebook, Weibo, WeChat, it's more about the long-term interests and characteristics of users from the personal dimension, but social media is very weak in terms of the current user's intentions.Real-time intent is critical to ad performanceYour search for a watch means that you have a great probability of buying a watch, it is very appropriate to push your watch ad, and social media is difficult to calculate how likely you have to buy a watch based on your gender, age, interests and so on...

So Google was at the top of the internet ad accuracy from the start, which is an inherent logic that Google now does not have a better user rating than Facebook.There is no better way to express a person's true intentions more accurately than a search.

As a top technology company, Google has gone to great lengths to bring in the top talent in the field in designing its business model, and in 2002, Google Chairman Eric Schmidt invited Mr. Van Ryan, dean of the School of Information at the University of California, Berkeley, to join Google as chief economist. Was Google, a startup with fewer than 200 people, single-person with an economist?

 Google Chief Economist Van Ryan Viran

In factOne of the most important jobs of this prominent economist was to design the auction mechanism for Google ads.Before joining Google, the legendary economics professor, who published "Information Rules: Strategic Guidance for the Internet Economy", devoted himself to the impact of online economic behavior, and since joining Google, he has pushed Google's overall transition to competitive advertising and, on the second, pioneering Google's use of GSP as a bidding mechanism.

GSP is a bidding mechanism that intuitively understands non-conformityThe highest bidder wins the auction, but it only needs to pay the second bidder, such as Aldi out of 10, Nike five, then Aldi wins the ad show, but it only pays 5 bucks, which seems counterintuitive, but it is an extremely rational design from a game theory point of view.

Today, many advertising platforms, including Baidu, use this mechanism, to learn more about my other article -From CCTV to Google: Talkabout the Mechanism Design of Auction Advertising

Google has also pioneered the promotion of CPC as a master-streaming bid, with advertisers simply bidding for clicks, and google has relied on its own technological advantages to introduce"Advertising Quality Score"This concept,The statistical dimensions of quality scores include the click-through rate of the advertisement, the advertising of the keywords, the quality of the landing page, the historical performance of the advertiser and many other dimensions for comprehensive evaluation.

Whether an ad can win depends on two factors, namely, if the quality of the ad is poor, even if the higher price, the ranking may be ranked last, of course, there are a lot of technical factors involved, such as to calculate the quality score of which you need to know the click-through rate, then before the delivery, click-through rate is not known, It is necessary to predict click-through rate, light click-through forecast this module, there will be a very large technical team to support, understand the common sense of ad click-through rate prediction, see my other article"The Machine Knows You're Going to Click on Ads - Talk About Ad CTR Estimates"

Designing and perfecting the advertising system is an extremely complex project, in a sense Google is indeed a gathering of "the smartest minds of this era to study how to make people click on advertising more", the founder of the single-minded Huang Qi, Xiao Hongshu CTO Xiaohu before are members of Google's advertising department, It is the continuous optimization of these top talent that makes the system so efficient.

According to Xiaohu, Google's comprehensive clicks are as high as 3%-4%, whileThe first click rate on the home page is usually as high as 30%-40%That's a particularly scary number.

Third, Google's design of the experience

In addition to the technology, data leadership, Google advertising on the user experience understanding is also very deep, many excellent advertising design mechanisms have become a follow-up company to follow the example,Advertising system is an extremely balanced and complex project, it must take care of at least three aspects of the interestsThe interests of advertisers, advertising platforms, the interests of users, need to form a delicate balance between these three parties.

Google's YouTube skip ads are a classic example, And I wrote a special article"Think of the fearful YouTube skips ads"A detailed analysis of Google's design

First it solves the user arrival problem with the skip button for the first 5 secondsSecond, it adds an effective direct to monitor the advantages and disadvantages of advertising, once again it only for real play pay to solve the problem of advertiser budget control, and finally through the underlying bidding mechanism to optimize the quality of advertising, this design is extremely subtle to solve the interests of advertisers, platform interests and the interests of users, really achieved a win.

There are many similar cases, such as as as an advertising platform, Google certainly does not want users to block ads, but in fact in Google's Chrome browser, ad blocking plug-ins such as Adblock are unobstructed, and Adblock has now accumulated 40 million users.So why does Google turn a blind eye to this type of ad blocking plug-in?

Ad plug-in Adblock

Google's logic is thatThose who install browser plug-ins are not interested enough in advertising, which is equivalent to installing a blockplug plug-in itself that allows Google to screen a human audienceThis, on the contrary, improves the effectiveness of ads before screening.

Google," guided by its "no evil" philosophy, will mark the ad in a clear location, so that users can clearly identify ads, and Google will have a sound negative feedback mechanism, when you click no longer display ads, will be clear the reason for the negative feedback - "inappropriate content," "repeated," "irrelevant" for users to choose, but also will clearly tell Google based on what information to you ads.

It is these friendly details that allow Google's advertising products to balance the interests of advertisers, users and platforms.


The challenges faced by Google Advertising

Google's large advertising system, will inevitably face many difficult challenges, and the process of facing these challenges is also the process of the maturity of Google's advertising system.

Like whatA thorny question for Google is how to avoid putting some brand-name patches in front of violent, racist, sexually suggestive videosWhile advertisers choose the type of video they run, Google will identify the type of video and then face YouTube, which plays up to 1 billion hours a day, and Google can't be 100% accurate even with industry-leading image and video machine learning algorithms.

On YouTube, the 400-hour video sprm. is uploaded every minute, with more than 3 million ad ideas running every day, making it extremely difficult to make 0 mistakes, but Google is trying to train it to identify the small differences in videos, such as some offensive words that appear in a hip-hop dance that may not be offensive. But appearing in other videos is different.

Similarly, there is always a relationship between advertising and privacy.Google also faces the question of how to handle user privacy properly, and when Google pushes ads to you, it always matches them based on information and behavior sits before, and even Google explicitly tells them in its ad interpretation of which information is being pushed on. As the government and the public become increasingly concerned about privacy issues, Google also faces a balance between precise advertising and privacy assurance.


V. What does Google rely on to laugh proudly in the mobile age?

Let's discuss an important question next, is the god horse that underpins Google's transition from the PC era to the mobile age?Why is Baidu, also a search giant, falling behind in the mobile age?

From the TRANSFORMATION process from PC to mobile, accompanied by the change of information structure, the PC era, Internet information in the form of a website, with a common HTTP protocol can be freely accessible, so the browser, search as the entrance, Google firmly mastered these two entrances, and in the mobile era,Information has become an island, behind the can not be interconnected countless APPs, this time the importance of search has dropped!

An important factor in Google's lead in the mobile age is its extraordinary vision - it bought YouTube in 2006 and Andy Rubin's Android in 2005, and now YouTube has become an important entertainment hub for Internet users around the world with Google's powerful technology, funding and recommendation algorithms. It is also the most important part of Google's display advertising, contributing a steady stream of revenue to Google.

And the strategic significance of Android is self-evident.The Android team, which spent only $50 million that year to buy less than 60 people, paid a lot for Google to consolidate its advantage in the mobile age, and with Android, an open system, the default search for all smartphones except Apple became Google, and Android didn't have to pay a penny. Analysts at Bernstein Research estimate that Google will pay Apple $3 billion a year to set the default search engine for all iPhones sold into Google.

Android's ecology has undoubtedly had a huge impact on Google's advertising revenue, and the Google Play Store has become the entry and default option for Android phones to install new apps.Google launches UAC (Universal App Series) on its advertising system, specifically for APP-type ads for full-process optimization, and the usual Adwords click-to-click billing is different, UAC supports by installation, use, pay and other dimensions to optimize the application ads.

The advantage of UAC is that it is Google's app-specific app promotion program, because Google has a natural advantage over Android Eco's data, combined with the relevant tools and advertisers' own optimization objectives, through machine learning to automatically help APP customers find suitable prospects, for app developers, Google advertising is already an extremely important option if it is to be promoted on Android Ecology.

In today's digital advertising market, APP ads have taken up an important share of spendingGoogle in this area rely on a visionary product strategy and continue to make rapid progress, on the contrary, the domestic Baidu is not so lucky, when the BAT's top Baidu in the mobile era to build few, in the product stop, there is no Android, Chrome, Similar moats such as Google Play are falling out of the competition.

Maybe you'll ask why Google can make so many successful products and Baidu can't?Maybe you should change the question - why did Google make so many products so few? The following image shows an incomplete count of Google's failed products.

Above is a minimalist overview of Google's advertising system, in order to help more Chinese APPS go overseas, Google China team prepared a series of overseas advertising methods, cases and tools, click below"Read the original text"Fill in the information to get Google's official first-hand information, to understand the APP out to sea all-round information.