The Humans Behind the Google Money Machine

Snippets from the article

MOUNTAIN VIEW, Calif. " If Google were the United States government, the data that streams onto Nicholas Fox’s laptop every day would be classified as top secret.

Mr. Fox is among a small group of Google employees who keep a watchful eye on the vital signs of one of the most successful and profitable businesses on the Internet. The number of searches and clicks, the rate at which users click on ads, the revenue this generates " everything is tracked hour by hour, compared with the data from a week earlier and charted.

"You can see very, very quickly if anything is amiss," said Mr. Fox, director of business product management at Google.
------------------------

raffic was growing rapidly, as was the average price that advertisers were paying for clicks. But Mr. Fox and others realized that measuring the average cost-per-click was not good enough. Users might be clicking on more high-priced ads and fewer lower-priced ads. That would cause the average cost-per-click to rise, but it would say little about the health of the overall system.

So Mr. Varian and Diane Tang, principal engineer in the ads quality group, helped devise what they call a basket of keywords. Much like the consumer price index, a basket of goods and services that economists use to track inflation, the measure is made up of a broad sample of keywords and is weighted to make it statistically accurate. This internal benchmark helps Google get a clearer picture of its performance.

As measurements improved, Mr. Fox’s team unleashed a stream of experiments meant to optimize the ad system. They evaluated changes to things like the clickable area and background color of ads, and the criteria for placing ads above search results rather than beside them.

------------------

These factors contribute to an ad’s “quality score.” The higher that score, the less the advertiser has to bid to secure top billing. For example, an advertiser who offers to pay $1 per click to attract those searching for “vacation rentals in Colorado” may receive more prominent placement than another who bids $1.50 for the same query but has a lower quality score. An advertiser with a very low quality score may have to bid so much for placement as to make it uneconomical.

Quality scores work as an incentive to advertisers to improve their ads, which benefits users and, in turn, benefits Google, Mr. Fox said.

More