Late-night TV and product spoofs

This Tech Talk column originally appeared in The Exponent (University of Alabama in Huntsville), Vol. 33, No. 22 (February 28, 2002). Digitized issue: UAH LOUIS archive. Reproduced here courtesy of that archive.

Even though the quality of Saturday Night Live has diminished severely over the years, one feature of the comedy program is still as great as ever: the spoofed commercials. One of the best spoofs was for a company that provided a dubious service to the market: “We make change. That’s what we do.” A seemingly astute passerby in the commercial asked how they make money, and an employee played by David Spade gave a simple reply: “Volume.”

The spoof was ridiculously funny when it debuted several years ago, but life found another way to repeat ari. During the heyday of The Bubble, business plans for dot-com startups more or less said, “We give stuff away over the web and have a professional masseuse on staff to pamper our employees. How do we make money? Volume.” Now that the myth of the New Economy is long dead, dot-coms—well, except eBay, which seems to have been in the black from the outset—are finally getting around to the slightly important tasks of making money and rewarding investors. Of course, also pushing the issue is the glaring absence of megazillions in advertiser subsidies since the Clinton recession started eroding bottom lines.

The situation is tough, especially because the web consumer is spoiled from years of free stuff supported by cash burn rates so high they required advances in large number theory to compute. (Anyone who buys into the junk economics notion of “predatory pricing” need only recall the dot-coms to see that “predatory pricing” is suicide, not an avenue to monopoly. ) Companies such as Yahoo that depend on advertising—one of the few models that has seen successful in the inverted dot com “it’s all about volume” world—have been crushed over the past couple of years. I joked with a client over email, “Capitalism is hard; if it were easy, we’d call it communism.”

Super search engine Google has proposed an interesting new solution called AdWords Select™ to the making money with a free service problem. As the name suggests, AdWords Select is an advertising program that allows advertisers to show ads when certain words are present in the query.

The interesting part is that Google takes into account an ad’s effectiveness (i.e., click-through rate) along with the amount of money the advertiser is willing to pay for click-throughs when ranking ads. In other words, if someone is willing to pay twice as much as you, but your ad is twice as popular, then you’re on even footing with your competitor. Jockeying for position among advertisers takes place in an ongoing in which bidders (as with eBay) can specify a maximum price but only have to pay a cent more for click-throughs than the next lower competitor is willing to pay.

The concept sounds cool and is perfectly in line with Google’s image. I don’t mind the ads because they aren’t annoying or intrusive. The terms of service forbid ad links from opening in new windows or linking to whack-a-mole sites—pages that spawn pop-up ads. More importantly, the ads are clearly delineated from the real search results. Omid Kordestani, a Google senior VP, said, “We take our editorial integrity very seriously, like a newspaper does.” Even in spite of all this, you have to like a search engine that allows you to search in Klingon (http://www.google.com/intl/xx-klingon/).