You've gotta hand it to the Internet -- it's created numerous millionaires, a few billionaires, and a lot of new ideas about advertising. We've moved from simple banner ads that paid websites by the page view to irritating multimedia ads and pop-ups, and now to sponsored links.
I'm starting to wonder about that last one. The idea is beguiling -- take whatever Web searchers happen to be looking for, and exploit it to draw them to your website. In theory, at least, you'll be offering products and services to people who might actually be interested in them -- and isn't that the whole idea of advertising?
I'm not so sure.
All of the cool kids are certainly doing sponsored links these days. Yahoo! (NASDAQ:YHOO), Google (NASDAQ:GOOG), and New York Times' (NYSE:NYT) About.com website use them. Even the world-famous Motley Fool search tool offers sponsored links.
But now I'm starting to wonder why. I did a search today on the word "refine" -- mostly just so I could catch up on what Foolish takes we've done in the past on the refinery industry. What did I get? Well, eBay's (NASDAQ:EBAY) sponsored link says that I could "refine for less" at eBay. I knew eBay was looking to expand its business, but that's a bit far-fetched, don't you think?
Now, it's not always like that, of course. Search for "offshore drilling" on Google as I did, and you might get a bunch of links relating to offshore-drilling jobs or market forecasts. But when I did a search of "coal mining" on Yahoo!, I got an offer of new and used coal mines from eBay again. (Boy, are they into energy now, or what?)
Is there a lesson in this light-hearted take? Sure. First, some advertisers like eBay don't seem to be too picky about the sorts of sponsored links that they will attach their names to. Sure enough, I search for "plague," and Overstock.com (NASDAQ:OSTK) offers to sell me some for $14.39. (Full disclosure -- it links to a book with that title, but you wouldn't know that if you didn't click through and investigate.)
The more relevant lesson, though, is that the Internet is still relatively new, and people are still figuring out the best way to make a buck for themselves. I have no doubt that these search and advertising algorithms will get better month by month. As they do, everyone should benefit. Retailers will get more business, customers will get products they want, and the ad hosts will get a nice stream of advertising revenue.
In the meantime, though, I do wonder how effective and stable ad revenue based on such random chance can be. After all, how many of us are looking to buy a coal mine on eBay?
For more about search engines and online ads, click these non-sponsored Foolish links:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
