The latest episode of Freakonomics podcast titled Is Google Getting Worse? (Update) covered a topic (sponsored search) that I thought I was familiar with, but after listening, found myself to be pondering with new thoughts. To begin with, the guest list of this episode is already unimaginably fantastic:
SOURCES
- Marissa Mayer, co-founder of Sunshine; former C.E.O. of Yahoo! and vice president at Google.
- Ryan McDevitt; professor of economics at Duke University.
- Tim Hwang, media researcher and author; former Google employee.
- Elizabeth Reid, vice president of Search at Google.
- Aravind Srinivas, C.E.O. and co-founder of Perplexity.
- Jeremy Stoppelman, C.E.O. and co-founder of Yelp.
And it mentioned several interesting new facts. Particularly, the process of how PageRank was integrated as Google Search’s core algorithm. I used to took it as granted, but well, idea don’t just grow on chips:
A search query produced a long list of sites, in seemingly random order, and you would have to page through hundreds or thousands of links to find what you needed. Sergey Brin and Larry Page thought they could do better. In 1996 — when they were grad students at Stanford — they created a search engine built upon a clever algorithm called PageRank. As in Larry Page but also as in ranking your search results by page. Theoretically, the most useful result would be at the top of the first page of results. Think about a newspaper, if you can remember back that far: the important stories of the day were on the front page, A1; the less-important stuff was tucked inside. That’s what PageRank was going for. And how did it do that? Brin and Page had applied an insight from the world of academic research, where the most important research papers are the ones that are most often cited in the bibliographies of other papers. The web didn’t have bibliographic citations, but it did have links. So when PageRank looked at a given web page, it would see how many other pages linked to it. The most important pages, they theorized, would have lots of links pointing to them from other pages — and then the algorithm looked at how important those pages were, based on incoming links. Their mission, they said, was “to organize the world’s information and make it universally accessible and useful.”
And a research about AAA-plumber and misplaced incentive for consumer’s attention: back then, you call housing service by looking up on a yellow page book, and when one opens a yellow page there are people whose names are
“A-AAAA Sewer And Drains. AAAA Scots Plumbing. It’s just, like, ridiculous names.”
Why did all these plumbers have such ridiculous names? Well, in a format like the Yellow Pages — whose listings were alphabetical — those plumbers’ listings would appear at the top of the plumbing category.
Today the AAAs on Yellow Pages becomes the sponsored search on Google. McDevitt argues, the same logic applies: firms that do everything they can do grab a customer’s attention are not competing on quality. And here a part of the conversation in the podcast that is really interesting:
McDEVITT: Now you’re blanketing Google with a bunch of listings. You are blanketing Google Maps with a bunch of listings. You’re trying to win the first ad slot on Google just like you try to get the biggest ad in the Yellow Pages. All these behaviors are consistent with the story — you’re trying to attract uninformed consumers who aren’t going to search a lot.
DUBNER: So if I’m reading this correctly, your research showed that plumbing firms that advertise on Google have 13 times as many complaints as firms that don’t. First of all, am I misreading that? Thirteen times is the actual magnitude?
McDEVITT: That was the right number back in 2007, ’08, when I was pulling the data. So it’s a big difference. And again, the logic is the ones that are trying to attract these one-off customers who are searching quickly, those are the ones that you can rip off.
DUBNER: I’ve seen other research on position auctions for Google advertising — this is from Susan Athey and Glen Ellison, I believe — which says that position auctions actually make search more efficient, and they sort firms from high- to low-quality. Do you agree with that?
McDEVITT: You know, it’s a theory paper and as a theory paper, a beautiful paper. It depends a lot on the assumptions in the setting. And so they did not have plumbers in mind when they wrote that paper. What’s different in the setting of plumbers is the costs are very different, the profits are going to be very different if you’re not providing the service in a legitimate way, if you’re a fly-by-night plumbing firm, you know, those are the ones are going to be most profitable and get the most value from winning the auction.
The podcast is mindblowingly eye-opening, there are plenty of fresh thoughts and juicy facts to learn from. It offers a deeper glimpse into the industry and alternative perspectives from industry leaders and insiders. Just go and listen, I’ll recommend it with five stars.