If anything, users' patience with the early incarnations of online ads was a testament to just how badly people wanted the Internet: they were willing to put up with even the most annoying ads in order to benefit from the free content running alongside it.
Of course, whether you're talking about the online or the offline world, advertising does best when it reaches the right consumer. And so it was inevitable that online advertising would become more sophisticated and relevant as the Internet's own popularity and complexity grew.
In 2000, Google launched AdWords, which matches users' interests - through the keywords they search - with relevant ads. But if you were to compare the AdWords of 2000 with the AdWords of today, you'd see a dramatically different product.
Nearly a decade ago, there were only three ad spots per page and they were paid for on a cost per thousand impressions: US$15 earned the top spot, US$12 the middle, and US$10 the bottom. That's a far cry from today, where years of user and advertiser feedback, engineering innovations and experimentation have led to a dynamic, live auction, where ads are paid for on a cost-per-click basis, and our innovative Quality Score ensures the voice of the user plays a decisive role in deciding which ads get to the top.
Today, the most valuable ads aren't the ones that advertisers are willing to pay the most for. Instead, they're the ones that the users are most interested in.
The strength of our present-day search marketing is twofold. First, it delivers a precise message at the exact time a consumer is searching for a related product. Second, it allows advertisers to analyse metrics which tell exactly how many times ads have been seen, how many times they were clicked on and how much each click was worth.
We think AdWords in particular has been so successful because it strikes a good balance between helping advertisers reach millions of people, while ensuring that the advertising information that people see is useful and relevant - not distracting.
Since AdWords's initial launch, the Internet has been revolutionised. Web pages, which used to be only a jumble of text now offer a sleek, multisensory multimedia and interactive experience of text display and video. More than half of all Internet users in the last month have watched an online video clip. Consumers expect a dialogue. Worldwide, 184 million people blog and about a third of them post opinions about products and brands.
At the same time, the web has fragmented: while spots on three publishers five years ago reached the majority of web users, those three sites today would reach only about a quarter of the 'net's traffic.
In short, we need to apply the lessons we've learnt from search advertising to help advertisers better reach their target consumer through new and creative ways. That is why Google decided to launch "interest-based advertising", which enables marketers to better connect with people based on their interests and their previous activity online.
Much of the online advertising has not kept up with the evolution of the web. While search ads have become measurable, display continues to lag behind its more sophisticated online brother. Our new interest-based ads represent an effort to catch up.
From now on, advertising on YouTube and on our Content Network partner sites will associate users with an interest category - say sports, gardening, cars, or pets - based on the types of sites they have visited and the pages they have viewed. For example, if you love to travel and visit lots of travel sites, we could show you more travel-related ads.
In addition, advertisers will be able to tailor ads based on your previous interactions with them, such as visits to their websites. So, if you visit an online sports store, you may later be shown ads on other websites promoting that store's summer sale.
Starting earlier this week, we have begun beta-testing these interest-based ads with a group of white-listed advertisers in the US and Europe. We aim to make it widely available to all advertisers across the world in the coming months; meanwhile, all advertisers can take advantage of our YouTube advertising platform.
The more relevant an ad, the more valuable it is, both for users who find this type of information more useful and less obtrusive, and for advertisers and publishers, because relevant ads generate higher returns.
Admittedly, this kind of tailored advertising raises questions about privacy.
Google is not the first company to grapple with these issues: many companies, including many high profile media outlets, are already engaged in interest-based advertising. We weren't comfortable launching such a product unless we were sure we had all the right privacy protection mechanisms in place - from providing transparency to users about how their web search visits are used, to creating an Ads Preferences Manager tool that enables users to control what is targeted to them, or to turn off the service completely.
Our new interest-based advertising is designed to deliver the same benefit as sponsored links have done for the past eight years: more relevant ads with new levels of transparency and choice for users, increase returns for advertisers and improved revenues for publishers. We are proud to marry the scientific application that worked so well with search to the creativity of display advertising.
