Page 29 - Electronic Commerce

Chapter 1

Yahoo!. Most industry observers at that time believed that any new search engine Web site would
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find it very difficult to compete against these established operations.

Search engines of the late 1990s provided results based on the number of times a search term

appeared on Web pages. Pages that included the greatest number of occurrences of a user’s search

term would be more highly ranked and would thus appear near the top of the search results list. By

1998, two Stanford University students, Lawrence Page and Sergey Brin, had been working on a

search engine research project for two years. Page and Brin believed that a search ranking based

on the relationships between Web sites would give users better and more useful results. They devel-

oped search algorithms based on the number of links a particular Web page had to and from other

highly relevant pages. In 1998, they started Google (Note: This typeface indicates a corresponding

link to a related Web page in the book’s Web Links. Google’s URL is http://www.google.com) in a

friend’s garage with about $1.1 million of seed money invested by a group of Stanford graduates and

local businesspersons.

Most industry observers agree that Google’s page ranking system, which has been continually

improved since its introduction, consistently provides users with more relevant results than other

search engines. Internet users flocked to Google, which became one of the most popular sites on

the Internet. The site’s popularity allowed Google to charge increasingly higher rates for advertising

space on its Web pages. Marketing staff at Google noticed that another search engine, Goto.com

(now owned by Yahoo! and operated as Yahoo! Search Marketing), was selling ad space on Web

sites by allowing advertisers to bid on the price of keywords and then charging based on the num-

ber of users who clicked the ads. For example, a car dealer could bid on the price of the keyword

“car.” If the car dealer were the high bidder at 12 cents, then the car dealer would pay for the ad at

a rate of 12 cents times the number of site visitors who clicked the ad. Google adopted this

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