Scientific Web Targeting
Yahoo started sometime around 1999-2000. At that time in Internet history, auctions were trying to become more robust. Many were already selling on Ebay, and with Yahoo's prices advertised considerably lower than that of Ebay, many turned to Yahoo's action market.
However, many also quickly found Yahoo's prices were lower because there were considerably less buyers available. Less buyers... less demand... Less demand, lower prices. A law of economics I teach kids in my class on a daily basis!
People computed quickly and left just as quickly because as sellers, you need to go where the buyers are. This synergy between buyers and sellers is known as Network Effect. Network effect defined: The value of a network is equal to the number of members, squared. That being the case, Yahoo, touting 1 million users, and Ebay touting 2, Ebay was four times as powerful. 4X more powerful is an obstacle extremely difficult, if not impossible, to surmount.
We all know eBay did become the Number One Aution Site. How many of us have sold that priceless piece we found in our collectibles there? I imagine most of us can't even name a number 2 auction site! And assuming eBay isn't going to blunder in the near future with some catastrophic error, no one will ever be able to mover them out of first position, no matter how much money is thrown at it.
With that in mind, let's apply the "Network Effect" to the rest of the Internet as compared to that of the off line world with those brick and mortar stores ... the ones with "friction." The Internet is virtually frictionless and that frictionless quality ironically brings us to a new kind of "friction" which is nearly effortless dominance of the number one Player over all others. All other players are at their mercy.. Just as if someone tried to revive Yahoo! Auctions, eBay would always be only one click away, thereby leaving Yahoo! Auctions motionless in Internet's cyber space.
Let's continue with an interesting story.
There was a System Seminar took place in 2002. It was a huge Internet Marketing Seminar. Jon Keel spoke on PPC ( Pay Per Click) marketing and was truly and inspiration to those attending. At the time, Overture was the dominant PPC service. The Overture Keyword tool was a revelation and he had everybody's attention.
He spoke only briefly about Google AdWords, but it was around that time, I heard Perry Marshall speak, and I went home and opened my own Google AdWords account. Talk about an amazing direct-response marketing tool! I was hooked. I knew this would open a whole knew world for my business, and my customer's businesses.
Perry asked at that conference, "is it possible for a pay-per-click engine to become a search monopoly sort of like eBay has a monopoly of online auctions?" There was no answer forthcoming! The rest is history.
In April 2002, Google was just another boxer in the boxing match between MSN, Yahoo, HotBot, Yahoo, Excite, Infoseek and a few others. With no clear winner in sight, they all began to move away from the "free" model, making SEO ( Search Engine Optimiation) easily attainable.
Many were asking the question..."if one ( you fill in the blank: Search Engine, Auction, Site, Map, ECommerce Site etc) is clearly just a tad better than the rest, what is going to keep EVERYBODY from clicking over to them and buying from them instead?"
Here's where the "tipping point" comes into view! What if they "tip" the scales...reinvest their profits and become unbeatable? Like eBay did?? The possibilities were endless.
And, what to our wondering eyes would appear?? AdWords, in 2003, hit critical mass! No longer 8 tiny reindeer but one large Google and everyone wanted to know from where this Rudolph had come! Google became a huge force into which the entire world imbibed.
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