When in Doubt, Google It

There's a problem, and MIVA (Nasdaq: MIVA  ) knows it. The company that once joined Yahoo!'s (Nasdaq: YHOO  ) Overture to become the second profitable pay-per-click search-marketing provider has now fallen on hard times. Despite some beefy global acquisitions, the company is now sporting red ink, and still stinging from its scandalous past as FindWhat.com. MIVA is cold. It's hungry. Brother, can you spare a mouse click?

The company's panhandling ways are finally paying off. Earlier this month, MIVA announced that it was turning to Google (Nasdaq: GOOG  ) to help beef up its paid-search business. In the past, MIVA had brazenly opted to sell its own ads at a pittance, then fill in the empty spaces with Yahoo! listings.

The shift to Google AdSense later this month should be significant. In its third quarter, MIVA generated $17.2 million in domestic media revenue on 240 million clickthroughs. That averages to a mere $0.07-per-click average. Google's contribution should be higher, without any of the bulky overhead. More importantly, Google's wide network of advertisers should populate MIVA's pages with more relevant ads. In other words, the number of clicks per page view is also likely to jump higher.

Is it humbling for MIVA to sheepishly hand over the keys to Google? Maybe. Is it good business? You'd better believe it.

More than MIVA
Other companies have turned to Google to help monetize their traffic more effectively. The most notable example is Time Warner's (NYSE: TWX  ) AOL.com. The public tends to view this as a one-way relationship, since Google paid $1 billion for a 5% stake in AOL.com. America Online has also accounted for as much as 10% of Google's total revenue in the past.

But let's see how having Google as a partner has had a favorable impact on AOL. The revival in online advertising at AOL despite the defection of subscribers in recent years can be attributed partly to Google.

It's as simple as that. Google's well-oiled paid-search platform may not be enough to fix a broken business model, but it's strong enough to improve one that's simply treading water.

Consider Answers.com (Nasdaq: ANSW  ) . In its original form as GuruNet, the company charged visitors for access to its database of reference material. It was a model doomed for extinction, especially with the growing popularity of free community-driven offerings such as Wikipedia and Yahoo! Answers.

In January 2005, Answers.com found religion -- or more precisely, Google. It decided to transform itself into a free site and populate its millions of high-ranking content pages with Google AdSense ads. The makeover has been remarkable.

Quarter

Revenue Per 1,000 Queries

Q1 2005

$1.32

Q2 2005

$2.20

Q3 2005

$3.07

Q4 2005

$4.18

Q1 2006

$4.67

Q2 2006

$5.95

Q3 2006

$6.45



Google isn't the only bullet in Answer's monetization revolver, yet it accounted for 70% of the company's revenue in the third quarter. The company won't turn a profit in 2006, but that's certainly not Google's fault. Content-rich companies that turn to Google owe it to themselves to keep their costs in check. Either way, the only analyst with a profit target on Answers.com expects the company to earn a healthy $0.40 a share here in 2007.

The new cottage-industry purveyor
A few years ago, eBay (Nasdaq: EBAY  ) was seen as the great entrepreneurial enabler. It may still be, but now you'll finding Internet marketers sidestepping the heavy lifting and listing fees by opting to create sites and hand over the billable ad space to Google's easily implemented program.

Bloggers can profess their love for free speech and lack of commercial interests, but how many blogs do you follow that don't have the "Ads by Google" text blocks slapped onto the side?

Yes, Google has been a force in sites big and small. This explains why Yahoo! has been trying hard to make its fledgling YPN publisher network take off. It would be a shock if Microsoft (Nasdaq: MSFT  ) didn't follow suit at some point this year.

Whether you're a Google partner or simply chasing its heels, everyone is watching Google these days. It has become the axis of cyberspace. The wired world truly does revolve around Google.

David Gardner has recommended Yahoo!, Time Warner, and eBay for his Stock Advisor subscribers. Microsoft is a selection of the Inside Value newsletter service.

Longtime Fool contributor Rick Munarriz doesn't necessarily set his watch to Google, but he does respect its place in the grander scope of things. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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