Money in interaction

Digg announced back in June that it was going to try and prioritise its ads based on whether people liked them or not and it seems that Techcrunch seem to have unearthed one of the fist screen shots of the trial.

It must be said this is something Google nailed back in 2002 or so when it moved from a CPM (cost per thousand) sales model to a CPC (cost per click) model. Many people think Google sells clicks (albeit clicks that do stuff). The reality is that that is just the way the business trades. Google realised years ago it doesn’t have clicks to sell, it has searches. It just so happened that selling clicks was the best way to monetise the searches.

In blunt terms paid for rankings are based on the costs per click you are willing to pay x the average click through you get.

£1 CPC @ 1% click though would mean for every thousand searches you would generate Google £10, if however someone else was playing only £0.70 but got a 2% click though rate – that makes Google £14 for every thousand searches, lets call that a CPM. They get priority and are seen as more valuable advertiser. Genius really.

So – we now now know that:
1. Google sells on a click but values on a search
2. Ad interaction makes Google more money
3. Ad interaction creates efficiencies for an advertiser

This opens up all sorts of questions about what makes some click? A more favourable brand? Someone having a more favourable view of that brand at that moment in time? Could it be?!?!?

So Digg’s new model look good. As usual though, you get the top of the mountain and realise there are Google footprints up there already.

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