Chi-Hua Chien explains how Google beat Yahoo in desktop search by focusing on value-per-click rather than volume. Google's higher yield per click and singular focus on search gave it a performance advantage that Yahoo, despite its broader media strengths, couldn't match.
So a little company called Google came along.
Yeah.
And they competed with you guys in search and by most accounts Google won.
Why? Does this tape get edited? Well, I'd like to say they won the search business on the PC. It's yet to see who wins the search business in the mobile environment and I think they and others are coming to grips with the fact that every time there is a form change, every time there is a device change, things change. And good companies are successful in those environments and great companies actually accelerate their growth in those environments. So, what Google did to Yahoo, it's now feeling from Apple and Facebook. And every 10 years, it seems like these great companies hit a bump in the road. So about that time Yahoo hit 10 years, Google is now hit 10 years and what happened was we were many things to many people and they were one great thing to everybody. And sometimes it's just what you believe in, it's how the question gets framed. So when I came to Yahoo, people were not interested in investing in search because there was no way to make money. And then along came GoTo, which became Overture, which ultimately we acquired. Google didn't care about making money, they cared about improving people's ability to search and they were originally going to be enterprise, you know this, enterprise search and Yahoo was actually using their search engine and then something happened. Somebody created a business model around search and then to get around patents, Google improved on Overture's business model. The logic we had was you bid the most, you come up first. So the logic was it was sort of self-policing. Why would you bid the most to come up first if you weren't the most relevant. And Google figured something out that said it's not who bids the most, it's how you generate the greatest amount of value off each click. So it's a combination of location and price and click-through and that allowed them, that enabled them to make more money on every click than we did, which allowed them to invest a lot more money in increased monetization engines. And then buy distribution, they could buy distribution at half the cost that we could or a third of the cost that we could. And so here we were as a public company trying to balance multiple businesses and they were focused on one and they were making more money on every click and they were able to run the table successfully in search. And they— it was fascinating, which is we were the number 2 search engine in Europe with a grand total of 11% market share. So a lot of the business side around the engineering of monetization really hurt us. Now the flip side is Yahoo is still doing incredibly well. It's got half a billion, 600 million users, something like that. It's one of the 3 or 4 sites that everybody uses. It does phenomenally well in brand advertising. It's got all the largest media sites, but the money was being made in performance-based search ads and the yield was ridiculous. You could— and the algorithms that they were able to write and we were able to write, frankly, understanding the network effect of these businesses, it's really a fascinating business model and if anybody ever asked the question of me that I always ask, which is why the hell do you have to learn math? Because everything you do in engineering and technology, it turns out it's all math. And so I need to go back to school.
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