All we hear about Google's love for the scientific method, the superiority of their relevancy algorithms, them creating the best thing for advertisers, etc. has prettymuch been reduced to fluff.
Google is much more aggressive at forcing searchers down a set path, has a broader ad feature set, has more (~ 3x) search marketshare, and yet Microsoft is able to compete. And they have done this against a competitor which keeps making incremental changes to build additional yield.
The Arbitrage Game
How was Microsoft able to increase their yield so much? If you go back 5 years, at the time Yahoo! powered a greater share of search traffic then than Microsoft does now, and their ads were powering both MSN and Yahoo! Search. How did Microsoft catch up with Google when Yahoo! failed to compete?
One word: arbitrage.
I have long railed on Yahoo! for screwing advertisers with fraudulent traffic sources. Arbitragers destroyed the value of Yahoo! clicks & it wasn't until 2010 that Yahoo! allowed you to opt out of the fraudulent traffic.
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