Secrets From the School of Googlenomics

Witness the birth of Google, the business giant:

Veach and Kamangar argued that all the ad slots should be auctioned off. In search, Google had already used scale, power, and clever algorithms to change the way people accessed information. By turning over its sales process entirely to an auction-based system, the company could similarly upend the world of advertising, removing human guesswork from the equation.

The move was risky. Going ahead with the phaseout… meant giving up campaigns that were selling for hundreds of thousands of dollars, for the unproven possibility that the auction process would generate even bigger sums. “We were going to erase a huge part of the company’s revenue,” says Tim Armstrong, then head of direct sales in the US… “Ninety-nine percent of companies would have said, ‘Hold on, don’t make that change.’ But we had Larry, Sergey, and Eric saying, ‘Let’s go for it.’”

via Secret of Googlenomics: Data-Fueled Recipe Brews Profitability.

This is an amazing, must read article. On it’s face, it is about the chief economist at Google, but it is really about how Google (and other itnernet busienses) are combining technology and economics to create better (more efficient and profitable) business models.