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Monetizing Internet Traffic...

.. is hard. I've had trouble explaining (and even understanding!) how Internet traffic is monetizied (a word, which if you believe answers.com, seems to be incorrectly used by almost everyone:)).

This explanation of the categorization and monetization of Internet search traffic at the Lightspeed Venture Partners Blog, is the most coherent and clear explanation I've read in a while. Excerpt below. Numbers based on Netscape.com data.

"In fact, around 20% of searches are “navigational” in nature - users looking for a particular website. Another 50% of searches are “informational” in nature (e.g. “capital of Taiwan”, “top social networks”) and the remaining 30% are “transactional” in nature (e.g. “cheap flights to Orlando”, “flat screen TV”.......It is relatively difficult to monetize navigational and informational searches. "

Comments

Andrew said…
i concur. this explains why google and others have done well in monetizing search, but it's provided more difficult in the content network: transactional activity occurs a lot while searching, but less often while "browsing" (on the content network).
Vin said…
Interesting read on the classification of searches. Thought I’d add in a few more thoughts.

First, depending on the nature of the search engine, the types of searches that come in are likely to be self-selected. So, an engine like Google, that has a mission to “organize the world’s information”, will decidedly get less transactional searches than one like Kayak (that searches airline tickets). For this reason, it is hard to change the mix of searches to more transactional – there is ample evidence of this as Google has repeatedly tried to dominate other verticals, but people chose YouTube over Google Video to find videos, chose dedicated comparison shopping sites over Froogle to find deals, chose Technorati over Google to search through blogs, and so on.

Second, while it may make more sense for an entrepreneur starting a brand new search engine to base it on a more transactional vertical than one that is informational, it may be more important for existing sites (Google included) to handle all kinds of searches that currently come in and try to monetize each type differently. For example, while the pay-per-click model is attractive for purely transactional searches, Google could instate an affiliate model (revenue share –or- pay-per-thousand-impressions) for navigational and informational searches. This will be a lower-risk option for many vendors compared to the pay-per-click model. At the same time, Google could actively acquire more search engines that are transactional rather than informational.

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