An insight of how advertising on internet evolved

Internet advertisement can be observed right back from 1994 when these advertisements were sold on the no. of impressions basis. Advertisers used to submit the whole sum of money to show their ads a fixed number of times, usually for one thousand showing. Different advertisers were negotiated differently based on their requirements

Overture, in 1997 introduced a new model of selling internet advertising based on a particular keyword. The auction design by overture included submitting a keyword to the website and paying the fixed amount on pay per click basis i.e. each times the link or that particular keyword is clicked on a particular website the user gets redirected here and the website has to pay in return. The choice of keyword came into the hands of advertisers and they could now make an ad according to their needs and desire. More relevant keywords were provided by the advertisers so that the users get directed to the website instantly. The problem of selling an advertisement for per thousand basis and advertiser could now get the advertisement on a per click basis. Every time a user clicks the ad, advertiser’s account gets billed automatically. The links to advertisers on a website are arranged on the basis of there amount paid as a bid to obtain that position. They are usually arranged in ascending order with the highest bid maker at the utmost position and respectively.

It resulted in easy of use and a transparency in the mechanism. It also required a low cost at the entry level by not paying the sum as a whole for per thousand basis. The transparency by Overture quickly led it to one of the fastest growing and popular advertising provider for major search engines including Yahoo and MSN.

Then came the more transparent way of internet advertisement, popularly known as the Generalized Second Price auction. An illustration to understand the transparency and functioning of Generalized Second Price auction is given below.

Suppose the bid of advertiser at position x pays an amount equal to the bid of the advertiser at position (x+1) and a minimum increment (typically $ 0.01). Thus an advertiser at the first position of the bidding process will have to pay an amount equal to what has been paid by the advertiser at the second position plus a minimum increment. It results in the transparency of the bidding process to higher levels. It also reduced the chances of game playing in the bidding and advertising process. Yahoo/ Overture soon realized this importance of the generalized second price auction and instantly acquired it. This type of auction was initialized by Google in 2002 which Yahoo and MSN acquired soon.

With the continuous advancements in internet marketing more and more new methods for efficient and transparent marketing can be expected in the near future. Internet users in the coming years are going to increase alarmingly and investing for advertisement in this filed could be a potential field which could ripe more fruit full results

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