Google Edges Closer to Overture Formula

Continuing its efforts to home in on Overture, upstart search engine Google is introducing cost-per-click (CPC) pricing to its AdWords program.

Mountain View, Calif.-based Google, a relative newcomer in the field of keyword-based advertising, previously offered only impression-based pricing for AdWords, which appear to the right of the search engine’s unpaid listings.

The move puts Google closer to competition with Pasadena, Calif.-based Overture, the leader in the paid search engine listings space, which has offered CPC pricing since its inception as GoTo.com.

Google did say that it would keep offering impression-based pricing as an option for AdWords advertisers, while its other ad product, Premium Listings, will remain cost-per-impression. (Premium Listings appear highlighted, above unpaid listings.)

Nevertheless, Google’s new CPC model represents a move to woo the same advertisers that are attracted to Overture’s formula. During the past few years, that formula has seen ballooning success, as questions have grown over the efficacy of mainstream brand advertising.

While branding ads generally are priced on an impression basis, CPC is seen by some firms as more alluring to advertisers especially concerned about quantifiable returns on investments — since clients pay only for immediate, keyword-qualified leads, rather than for difficult-to-measure benefits to brand appeal.

In addition to emulating its pricing model, Google is taking other steps to compete with Overture. In conjunction with its cost-per-click product, the company said it would offer a service called AdWords Discounter, which automatically lowers an advertiser’s price to within $0.05 of a competitor’s, if that competitor lowers their own.

That’s quite different from Overture’s modus operandi, in which the onus is on advertisers to monitor their keyword bids and adjust prices manually.

There’s also no delay between buying an AdWords ad and seeing it appear on Google — Overture, on the other hand, requires between hours and days to editorially approve listings.

Similar to Overture, Google ranks AdWords based in part on the amount that advertisers have agreed to pay, with the ads’ click-through rate determining their exact position on the page. Specifically, the top-paying cost-per-click advertisers have access to the first three positions for each keyword, with exact placement within the three positions determined based on number of clicks each ad receives.

Overture, meanwhile, ranks ads based purely on the amount an advertiser has agreed to pay per click — a fact that Google says means that its ads are more relevant than competitors’ wholly price-based rankings.

“AdWords Select brings the same quality and relevancy to Google’s sponsored links that our users have come to expect from our non-commercial search results,” said Omid Kordestani, Google’s senior vice president of worldwide sales and business development.

Google’s new AdWords changes represent the second major assault by the smaller firm on the market leader. Earlier this month, Google began syndicating AdWords to licensees of its search engine results, including ISP Earthlink. A substantial portion of Overture’s revenues, and its attractiveness to advertisers, come from its wide distribution of ads through syndication partners like AOL Time Warner and Yahoo.

Yahoo, through an ironic (and potentially short-lived) pair of agreements, relies on both Overture for keyword-based ads, and Google to power its search.