Step 4: Pay Users (Frequent Searcher Programs)

The final step to destroying Google is the concept of paying users for their searches. This has recently been suggested by Microsoft, with much ridicule within the industry. Is it really such a silly idea, though? Let’s investigate.

The first company to try to do this was AllAdvantage. This was the multi-level-marketing company that your friend sent you an email about around 2000. The header was probably something like “get paid to surf!” You had to download a browser and watch ads as you surfed. For every hour you surfed, you got $.50 (and you got money if your friends surfed as well).

AllAdvantage got over $100 million of VC money from Softbank and managed to blow through it all in a matter of about 18 months. The company was derided as the “dumbest dot com” and the “bloated whale of Silicon Valley” by industry magazines. The company failed, however, not because of a bad idea, but because of bad execution.

What AllAdvantage was supposed to do was this: a user downloads their browser and provides AllAdvantage with detailed personal information (in order to get paid, you’d have to provide a mailing address, date of birth, sex, etc). AllAdvantage would also track what the user is searching for (every page of every site – not just pages on a specific site, as done via cookies). Based on this highly-specific user information, AllAdvantage could serve up the most targeted ads in the industry.

For example, if AllAdvantage knew that you were surfing for “trucks”, knew you were a man aged 35-45, in San Francisco, working as a plumber, they could serve an ad for a truck dealership five miles from your house. Heck, they could even serve an ad that showed the specific inventory of the truck dealership near you. If you were searching for Ford Explorers, they’d just serve that inventory. If you were searching for black Ford Explorers, they could do that too.

From an advertiser’s perspective, this could be a goldmine. Imagine if you were that truck dealer – you would pay a lot more to serve an ad to a user in your city, in your target demographic, who has been searching a specific truck that you have in your inventory, than you would for someone who simply types in “truck sales” or even “san francisco truck dealer.”

So, AllAdvantage figured that if they paid users $.50 an hour to surf, by collecting additional personal information, they could more than make up for this $.50 by making advertisers pay more for each ad. On top of this, the user would also have better user experience, because the ads would be targeted to him. The ads would basically be another form of useful content.

AllAdvantage went wrong because they started paying users before they actually had the technology to serve personalized ads. So, advertisers weren’t willing to pay an extra $.50 an hour to reach their users. Thus, losing $.45 an hour on every user didn’t quite work.

The second company to try to pay users was iWon.com. The concept behind iWon was that you would get the same quality search results as you would from a Google or Yahoo search, but that you would also get entered into drawings for cash and prizes every time you did a search.

Considering your odds of winning, the amount users got paid for every search probably worked out to about $.001. Users could get even more entries into a drawing by clicking on an advertisement. And if you actually signed up for a product or service from an advertiser, even more entries.

Thus, a model similar to MyPoints, or Frequent Flyer miles, the more you shop, the more rewards you get. Another name for such a model is incentivized traffic. From a business perspective, iWon worked. They captured millions of users, signed up lots of advertisers, and eventually sold their company for a lot of money to Infospace (I think).

So, one thing that we can conclude from AllAdvantage and iWon is this: incentivizing search traffic attracts users. Moreover, users are willing to give away personal information and deal with annoying pop-ups, interstitials, etc, in order to make just a few cents an hour.

Imagine the consequences of this for search. What if MSN announced that every user on MSN would get $.50 an hour for surfing. The user wouldn’t get any more money for clicking on an ad (for that would decrease the quality of the clicks) but the assumption would be that, over the course of an hour of surfing, the combined revenue from user clicks on ads and the additional revenue MSN could charge advertisers as a result of additional targeting would more than make up for the $.50.

In fact, I’m not sure how often users click on ads – let’s conservatively say once ever 10 minutes, or six times an hour. If the average CPC of a search ad is $.45, in an hour, MSN could make $2.70. If they could charge a 10% premium for additional targeting capabilities, make that $3.07 an hour. Subtract the $.50 and you end up with $2.57 an hour. Not too shabby.

As the old iWon TV ads used to say: “which would you prefer – $10,000 or nothing?” I bet – and perhaps MSN bets – that a lot of people would switch from Google to MSN for a measly $.50 an hour. And again, as with my suggestion that Yahoo gives away YPN for free to hurt AdSense, Google would be left with two choices: copy MSN, or see their traffic slowly drift away.

One final point on this idea: there is no question in my mind that a lot of consumers will be skeptical to say the least of agreeing to let MSN monitor their searching behavior. That may very well be true, but there will plenty who won’t care, and this idea could easily be adopted by Yahoo, Ask, or any other major search engine. As an aside, go to A9 -Amazon’s search engine – and you’ll notice that frequent searchers get a 1.7% discount on Amazon purchases!

So concludes this epic tale. To summarize: my four steps to defeating Google are as follows:

1. Yahoo should offer YPN (the AdSense competitor) with 100% revenue to the publisher. They should also provide detailed data on the advertiser’s revenue share;

2. Yahoo and MSN should improve their advertiser user interfaces. At a minimum to be as easy to use as Google’s UI.

3. Social networking search applications like del.icio.us and Flickr may democratize search, making massive algorithms and server farms irrelevant.

4. Offer users payment in exchange for surfing a search engine has worked in the past, and could be a great way for MSN or Yahoo to drive users away from Google.

1 Comment

  1. Steve December 29th, 2005

    Ah… AllAdvantage rears its ugly head. Interesting idea though. If I know Google, they won’t be satisfied with something as mundane as paying people for their information. They will simply continue to add services that allow them to enhance the behavioral profiles they can already build for authenticated users. They can already theoretically tie your search terms, RSS feed choices, blog text, e-mail text and Lord knows what else together to build a pretty good profile of you without asking. And if we know anything about Google, it’s that they are culturally much more attracted to the geeky and automated, vs. the obvious and manual. If your idea makes economic sense, we should then be on the lookout for MSN to pay for profiles, and Google to roll out the mother of all profiling algorithms to accomplish the same task (but feel smarter). It will be up to advertisers (and the privacy advocates) to figure out which works best.

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.