Question
Other companies can implement Google's auction formula for advertising by creating a similar bidding system. This system allows advertisers to set their own prices for ads, which are then auctioned off to the highest bidder. The key to this system is the detailed user intelligence that Google collects, which allows it to effectively target ads to the right audience. Companies would need to have a similar level of data collection and analysis to successfully implement this system. Additionally, they would need to build trust with their corporate customers, as Google has done, to ensure that they are willing to participate in this type of advertising model.
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Google's knowledge of our queries, emails, photos and other data helps it create intimately detailed user intelligence that powers its advertising. Its auction formula for advertising, where customers set prices, has earned the trust of corporate customers. In Q3 2016, Google had a 42% increase in paid clicks and grew its revenue by 23%, and yet, its revenue captured per click declined 11%. Google effectively improved its product by 42%, while making it cheaper for companies by 11% from the previous year and still growing revenues. Google's unparalleled efficiency in pushing prices down makes it hard for its competitors like Facebook to keep up.
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