Google search ads find momentum

By Jefferson Graham, USA TODAY

MOUNTAIN VIEW, Calif. — Click. That's the sound of found money.
Another check is being electronically distributed by Google (GOOG) to a website owner or blogger, in return for hosting Google ads. The monthly stipends can range from hundreds of dollars to many thousands.

Folks who make their living from Internet search converged last week on Silicon Valley to attend the Search Engine Strategies conference and celebrate the rollicking "search economy" at a party at Google headquarters with massive food and karaoke contests.

The red-hot growth of online social networks such as MySpace and video clip sites — YouTube shows 100 million videos daily — is playing a major part in fueling the growth. Both sites run ads from Google.

The search-advertising market, with its little text ads published near search listings, is expected to grow to $26 billion in 2010 from $17.4 billion this year, says market tracker Forrester Research. Google accounts for the biggest chunk. The company reported $6.1 billion in revenue last year and nearly $5 billion in the first two quarters this year.

No wonder people are celebrating.

"I put up a website, add the Google ads and wait for the money to start flying in," says Marc Ostrofsky, president of iREIT.com, a major purchaser of website domains. The company owns 400,000 sites, including MutualFunds.com and Bands.com. Fueled by Google ads, the sites generate more than $10 million a year, he says.

Hitting the jackpot

Sponsors love search ads because they pay only if someone clicks on one. Folks like Ostrofsky who put the ads on their sites also get paid for the clicks. Google's AdSense network places ads all over the Web, targeting readers of a specific website or blog.

"The whole advent of blogging and social networks is that people can get their thoughts out there, and be paid for it," says Google Vice President Sheryl Sandberg. "We started off crawling the world's information for the Google index. Now, we fund the creation of that information."

David Miles Jr. has experienced lottery-style winnings by pairing his interest in MySpace with Google.

Miles, 20, and friend Kato Leonard, 21, created Freeweblayouts.net in 2005 to help MySpace members add graphic backgrounds to personal pages.

They added AdSense ads to the site to try to bring in a few bucks. From a first check of $60, Miles says, they now average $100,000 a month from Google. Just for offering graphics that he and Leonard make in Photoshop (ADBE).

"The more visitors we get, the more money Google sends us," says Miles. "And traffic is increasing all the time."

Kim Malone, Google's director of online sales and operations, calls their success "just astounding."

Google mostly has this corner of the market to itself. Yahoo (YHOO) started a similar service this year as a test, and small players such as Kanoodle and Miva Marketplace are out there, "but Google totally dominates," says Chris Winfield, president of 10e20, a search marketing firm.

Last week, old media titans Viacom (VIA) and 20th Century Fox (NWS) announced advertising alliances with Google. The reason: AdSense.

Google's $900 million deal with Fox's MySpace will place text ads on the growing online social network, now the sixth-most-visited website, according to measurement firm ComScore Media Metrix. The alliance with Viacom's MTV Networks goes a step further. It uses the AdSense model to place video ads on MTV and Nickelodeon clips that will appear on blogs and websites.

The Google-MTV alliance is positioned as a trial that will begin later this year. "If it works," says Google CEO Eric Schmidt, "it will offer a model for how advertising-supported video and multimedia is presented on the Web."

The explosion of "user-generated" content — sites such as MySpace where people bare their souls and invite friends to share their lives online with pictures, music and video clips — has had a profound impact on the AdSense network, says Malone.

She says the combination of high-trafficked community sites such as MySpace, YouTube, Hi5.com and BlackPlanet plus Google's AdSense has created a "whole new business model."

"They get such tremendous traffic and need ads," Malone says. "We provide that, and we both profit."

Content questioned

Not everyone is a fan of some of the get-rich-quick sites. Many are littered with ads and short on meaningful content — a trend known as "search spam."

"AdSense, in my opinion, is the worst thing to happen to the Internet," says John Scott, who runs the V7n.com online forum for search marketers. "Google is ... in essence, paying people to inundate the Web with literally billions of worthless pages."

Whatever its editorial worth, the AdSense business model clearly works for what blogger Jennifer Slegg describes as "hundreds of thousands" of website and blog publishers.

Slegg, who runs the JenSense AdSense tips blog, says the monthly AdSense bounty ranges from $100 to tens of thousands of dollars.

"The average is more like a few thousand a month," she says. "The ones who do really, really well, however, really work for it. It's not a windfall; they put in the hours."

Posted 8/13/2006 9:41 PM ET