Microsoft Corporation (MSFT), Google Inc (GOOG): Gaming the Search Engines Is Good for the Web’s Leaders

Page 1 of 2

The rise of the search engine spawned a whole industry interested in beating the system. Companies spend billions of dollars on “search engine optimization” to improve their rankings on Google Inc (NASDAQ:GOOG). Higher rankings mean more visibility – and hopefully more profits.

Google Inc (GOOG)

Unfortunately for the search engines, not a single penny spent on SEO flows to the top-line. Money spent gaming the system isn’t money that will flow to Google Inc (NASDAQ:GOOG) or Microsoft Corporation (NASDAQ:MSFT)‘s Bing, but it isn’t money lost, either.

Why SEO is great for search engines

Search engines make money by displaying advertisements around the organic search results. Some keywords fetch only a few cents per click; some, like local searches for a lawyer or plumber can cost $20 or more. This is why SEO is so alluring. If a company can rank number 1 in search with a modest investment in SEO, it can avoid high-cost advertising in search results.

Some see this as “lost money” for Google Inc (NASDAQ:GOOG) and Bing, but SEO might just be one of the search engine’s biggest assets.

The first weakness of the argument is that not every company can rank number 1. Not every firm will make it to the front page with SEO. When one company out-optimizes another, the loser may turn to advertising to stay on the front page.

But it goes deeper than that. Thanks to the rise of search engine optimization, Internet marketers around the world optimize their sites for modern search engines. Google Inc (NASDAQ:GOOG)’s Matt Cutts is one of the most watched people on the Internet. His words are taken as gospel, and webmasters make SEO strategy decisions based on his every blog post or Tweet.

Thus, the Internet is essentially sculpted for search. Marketers make the job of the search engine easier by optimizing their pages to fit Google’s algorithms. Over time, the quality of web search only goes up, and the current leader, Google, taps into a lifelong user base. It’s just another facet of the industry that gives Google a wide moat that protects it from competitive threats.

Finally, SEO is the best advertising for Google Inc (NASDAQ:GOOG) and Bing. Businesses that appear in the search results and receive new customers from organic results quickly realize that a bigger search budget might be in their future. If organic results are bringing customers, so too should the inorganic, paid advertising that Google and Bing offer.

Why profits in search are only going higher

One would expect that over time the search engine will lose its critical importance for online shopping as customers find their preferred online store. Rather than Google a product before purchase, shoppers will turn directly to Amazon to read reviews and make a purchase. Google is combating this lost revenue with new “Shopping” ads that reward Google Inc (NASDAQ:GOOG) with ad revenue on every click through.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!