The Cost-per-Click Advertising Model
Google found another way to generate ad revenue—the company's co-founders borrowed the cost-per-click system from Overture Services, Inc. Overture, created in 1998 under the name GoTo, offered advertisers the option to bid on how much they would be willing to pay to appear at the top of search results. Advertisers paid a fee each time someone clicked a link to their website.
Google combined this model with contextual ad display, wherein an ad appears only when a user's query matches keywords chosen by the advertiser within specified geographical areas. Google also decided to let advertisers decide how much they wanted to pay per click. Here, economists will recognize the principle of price differentiation formulated ...
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