A few hour ago I talked to a friend who'd just purchased the T-Mobile G1 phone this morning in Atlanta. He was pleased with it so far and said he was impressed to see Bank of America available on day one through Google's Android Market.

Apparently, BofA was the only app in the Finance section this morning (see inset). However, that will change rapidly as the store opens to other developers next week. Thanks to Alan Martin for the screenshots.

The bank's Android app looks like the other mobile versions. It includes online banking access and an ATM/branch locator that uses built-in location-based-services (see pictures below).

I also read several blog reports of successful downloads  of the BofA app. However, when visiting the Android market website, the BofA app is not shown amongst the 40-some programs currently available. Apparently, the public Market website is different than the App Market accessible through the phone. I guess I'll have to hit the T-Mobile store tomorrow to see for myself.

Congratulations again to BofA for again beating its U.S. competitors in mobile deployment. It now has a three-peat in recent smartphone application launches:

• First iPhone application in Apple directory (non-native) in Nov. 2007
• First bank with iPhone native app via App Store in July
• First bank with Google Android app in App Market

For more info on the market, see our Online Banking Report on Mobile Banking.

At WBR's Net.Finance conference yesterday, Jon Kaplan, head of Google's Financial Services Group, showcased ways to work with Google that were NOT related to search. He showed some cool and free ways to showcase your brand on Google Earth, Google Gadgets, Google Calendar, and more. We'll look at those in future posts, but by far the most entertaining example is Intuit's refreshingly creative TurboTax Rap promotion.

The company sponsored a contest that ended on the traditional U.S. tax day, April 15, that offered a top prize of $25,000 to the best YouTube video featuring TurboTax. Intuit also gave the first runner-up $5,000 and the third place video $1,000. And anyone who uploaded a video entry received a free copy of TurboTax. Intuit hired 1980's rapper Vanilla Ice to do the intro and announce the winner.  

To promote the contest, Intuit created a special-purpose website (see screenshot below) and built a YouTube page (see below). The winning entry, showcased on Intuit's YouTube page, has more than 250,000 views. That's enough to put it on YouTube's most-viewed page (currently, it's number 13 on this week's most viewed), which really turbocharges the viewership. In comparison, the two runner-ups have less than 9,000 views.

This is brilliant work by Intuit. Although it was a costly promotion, it was still less than a major print buy and more importantly, it introduced the TurboTax brand to a whole new group of younger customers who'll be buying tax software for many decades. It will be interesting to see if Intuit makes this an annual event.

YouTube page  <youtube.com/thetaxrap>

Website home <turbotax.intuit.com/taxrap>

On Tuesday, Google began publishing usage information for its popular gadgets here. That's Google's name for widgets that can be imbedded on personal start pages including, but not limited to, the personalized version of Google's homepage at <google.com/ig> or PC desktops running Google desktop. 

For example, I have three Google gadgets running on my XP laptop, a snow globe displaying the crummy Seattle weather conditions and forecast, a Weatherbug widget showing the conditions where I'd rather be, and a calculator (click on inset for a closeup). 

Listed below are the most-popular gadgets last week (note 1) and their approximate pageviews (note 2). The only one related to financial services was a currency converter, which surprisingly was the 19th most popular gadget, with an estimated 2.8 million views last week. In addition, two other currency converters had another 1.1 million page views, bringing the category to just shy of 4 million. Use this list to generate ideas on non-financial content that could be added to your website to increase its appeal.

In the Finance category, only 10 English-language gadgets had more than 100,000 pageviews. After currency conversion, the two biggest were a stock tracker with 900,000 and a loan calculator with 500,000 (see Table 2, below).

Analysis
The growing popularity of gadgets and widgets provides an opportunity for financial institutions to develop branded gadgets for various functions, such as monitoring rates, calculating exchange rates, and tracking stock and commodity indexes (for more info, see note 1). We looked at several widgets last year including the Mortgagebot-produced mortgage rate tracker and the Mac-only bill pay tracking widget from billQ (see previous coverage here). 

Most of the gadgets at Google were developed by outsiders. In its instructions to developers, the company claims you could write a gadget in five minutes (see instructions here). Even if it took five days, the payoff could be impressive. For example, the only financial brand with a Google gadget is Quicken Loans <quickenloans.com> which posted an attractive rate tracker and payment calculator (see inset). Although its gadget had only 7,000 pageviews last week, that's still 350,000 annualized. An impressive return for a trivial programming expense.

Table 1: Most popular Google Gadgets across all categories

More than 100 million
131 million >>> Date & Time (only "default" gadget on Google's personalized start page)

More than 10 million
39 million >>>> Driving directions
27 million >>>> Daily horoscopes
27 million >>>> Wikipedia
14 million >>>> Word of the day
13 million >>>> Dictionary.com

More than 5 million
9.5 million >>> Search YouTube
8.9 million >>> Current moon phase
8.1 million >>> PacMan v2.0
6.2 million >>> NASA image of the day
5.5 million >>> Babelfish

More than 2 million
4.9 million >>> Google Maps
4.5 million >>> Free Sudoku puzzles
3.6 million >>> Art of the Day
3.4 million >>> Bible verse of the day
3.2 million >>> DIGG viewer (posted by Digg.com)
3.0 million >>> Simple calc
2.9 million >>> World clocks 
2.8 million >>> Currency converter
2.7 million >>> IP address lookup
2.6 million >>> Hangman (word game)
2.4 million >>> National Geographic photo of the day
2.4 million >>> Calendar
2.2 million >>> My webcam
2.1 million >>> Famous optical illusions
2.1 million >>> Countdown

More than 1 million
1.9 million >>> Crossword of the day
1.9 million >>> Free text messages
1.7 million >>> Interesting photos of the day
1.6 million >>> A joke a day
1.6 million >>> To do
1.6 million >>> Local NWS radar
1.5 million >>> Google docs and spreadsheets
1.5 million >>> This day in history
1.4 million >>> Mighty optical illusions
1.4 million >>> Romantic quote of the day
1.4 million >>> Your daily horoscope
1.3 million >>> Local gas prices
1.3 million >>> Search eBay
1.3 million >>> Spellcheck
1.2 million >>> Brain teasers
1.2 million >>> US Traffic info
1.2 million >>> My Google groups
1.1 million >>> Weather by Weather.com
1.1 million >>> My IP
1.1 million >>> Today in history
1.1 million >>> Terror alert level
1.1 million >>> Braingle - daily brain teaser
1.0 million >>> Frogger
1.0 million >>> Yahoo mail

Table 2: Most popular Google gadgets in the Finance category

2.8 million >>> Currency converter (pixelmedia.nl)
910,000 >>> Stock portfolio
800,000 >>> Currency converter (donalobrien.net)
500,000 >>> Loan calculator
300,000 >>> Stockchart
270,000 >>> Currency converter (ac-markets.com)
210,000 >>> Crude oil watch
160,000 >>> Bombay stock exchange
120,000 >>> Mortgage rate watch
110,000 >>> Live gold

-----------------------------
Source: Online Banking Report search at Google, 1 March 2007

Notes:

1. We looked at traffic levels of the first 264 gadgets listed under "popular" at Google's gadget directory: http://www.google.com/ig/directory?synd=open&source=gpvl&num=24&cat=finance

2. Google's explanation of the pageview count:

Gadget pageview statistics are approximate only-- for precise statistics, we recommend the use of Google Analytics inside your gadgets. Gadget pageviews represent the number of times that the gadget was rendered, including Google Personalized Homepage, Google Pages, Blogger, Google Desktop, and across thousands of independent pages around the web.

3. For more information on the broader subject of delivering financial services direct to the user's desktop, see our Online Banking Report #85, Grabbing Desktop Mindshare, which is a bit outdated, published in 2002, but still worth a look.

Today, The Wall Street Journal looks at Yahoo's latest efforts in mobile search where it holds a substantial lead over its online nemesis Google. According to figures from Telephia, Yahoo has a 7% penetration of U.S. mobile subscribers vs. 3% for Google. In addition, MSN has a 4% penetration and AOL 3% (see article here).

Yahoo will be encouraging users to download a search application to their phones, see  <mobile.yahoo.com/search>. Advertising revenues will be shared with wireless carriers. Mobile search results are more "managed" than website results in attempt to better display a single answer to the search so phone users can avoid surfing to other websites for answers.

Why is this important for online banking? Most consumers, especially the 35-and-older crowd, will get their first taste of a mobile phone app through search. Once users begin to to get comfortable with Googling or Yahooing from their mobile, it won't be long before other ecommerce apps become popular, and mobile banking will be at the front of the next wave.

And early mobile banking users are likely to share one key attribute that sets them apart from online banking users, a willingness to pay fees for service. Most mobile applications such as sports scores, mapping services, or games currently carry small monthly fees. Whether or not banks choose to charge directly for mobile banking is yet to be seen, but we believe there is an excellent potential for profitable fees from at least a portion of the mobile user base (see previous post here).

Yesterday, we posted a lengthy discussion of Google's new universal checkout system, Google Checkout. We are extremely bullish on its future and will follow the developments closely. Just like Google's AdWords first gained traction with small businesses (including Online Banking Report, an AdWords user since early 2002), we expect small merchants to embrace Checkout quickly to realize two huge benefits:

• Lower card processing fees: A certain amount of card processing can be virtually FREE, as long as the merchant can use the AdWords credits; even after that, Google's fees are one-third lower than PayPal, which is considered a relatively cost-effective program for small merchants
• Less shopping cart abandonment: Consumers abandon their online carts for a variety of reasons, but one of the leading causes at smaller merchants is concern about entering personal info and credit card numbers

It will take much longer for larger merchants to come on board since they must cede an important part of the customer relationship to Google, such as the customer's email address.

Financial institution opportunities
All this begs the question: What does this have to do with my financial institution? I'm glad you asked. Here are five ways a bank could leverage Google Checkout (in order from easiest to most difficult):

1. Educate customers on Google Checkout with encouragement to enter your credit and/or debit numbers into the wallet: While Google allows multiple cards, most users won't realize that initially since it asks for only one during the sign-up process, so the first one entered has a huge advantage. This would make a great subject for your periodic email newsletter, a feature for your website, and so on.
2. Incent customers to enter your card number: As we mentioned yesterday, Citibank has made a significant investment by buying the pole position in the sign-up process. Assuming one million of its cardholders take advantage of the $5 credit, that's a $5 million expense, even without considering what they paid Google for the exposure. You might want to consider a similar program, although an iPod sweepstakes could be just as effective and less expensive.
3. Educate small merchants on the program: If you don't offer your own merchant processing, you should tell your business customers about this new way to save on card processing and potentially increase online sales.
4. Use it to fund new deposits during your online application: If you accept credit cards to fund new checking accounts, you could offer Google Checkout as a funding option. Provided you can use the AdWords credits, it could be a way to virtually eliminate the cost of interchange on these deposits. In fact, Google may have to erect some barriers here. Again, assuming you are a big AdWords spender, you could offer customers the option of making ongoing deposits via credit card, as long as the total deposited was no higher than your normal AdWords buy. For example, if you spend $10,000 per month in AdWords/AdSense, you could offset up to $100,000 in card-funded deposits.
5. Create a front-end to Google Checkout within your online banking area: Using account aggregation technology that saves the user's Google username and password on your server, you could make it easier for users to access their Google accounts. You could even go into full aggregation mode, by automatically downloading Checkout activity and displaying it within your online banking area.

Did I miss anything here? Email me (click on my initials below), if you have other brainstorms or comments.

--JB

Has Google found its iPod? Not the music player, but an end-to-end ecommerce system that is safe, convenient, and above all, drop-dead simple to use. Something that does for online commerce what Apple did for digital music. That's a tall order, but we believe the search giant may have just such a hit on its hands with Google Checkout.

For more than a year, there has been a great deal of speculation about Google’s entry into the payments arena. After months of quiet testing with carefully selected beta merchant partners such as Starbucks and Buy.com, Google Checkout was officially released June 29 <checkout.google.com>. Although the reaction in online blogs was mixed, we think it's a winner. The only question is whether it's a home run or a grand slam (or World Cup equivalents, one goal or four).

Google Checkout (previously known as Google Payments or Gbuy) is an online-payments tool integrated with the user's Google account. On the surface, it's similar to PayPal, but the true strength and potential threat is its close ties to Google’s already industry-dominant search function.

At this point, Checkout's functionality is more limited than PayPal's. There is no stored value, no subscription payments, no eBay integration, no non-credit card options, no integrated debit card, or money market account. For the end-user, it's closer to a virtual wallet than a PayPal substitute. However, it goes way beyond what the ewallets of the late 1990s offered, taking control of the entire checkout process, a potentially disruptive technology in online retailing.

How it works
Searches that match a Google Checkout advertiser include a shopping cart icon embedded within the AdWords text box (see Google search on "Starbucks store" above). Users can buy products from these merchants in a few clicks without having to enter any additional information (see Google Checkout icon in lower left of the Starbucks shopping cart shown at right). This eliminates the dreaded merchant-account set-up process that causes massive shopping card abandonment problems, especially at relatively unknown merchants where privacy fears are greater.

First-time users are prompted to enter their credit card, billing, and shipping information, which Google stores in its servers (see screenshot left). Subsequent purchases can be made with a simple Google username and password. Users can store additional payment and/or shipping options at any time. Complete purchase histories can then be monitored from their Google account.

Currently, just 100 merchants are participating (see places to buy), but given the potential merchant savings, expect that to change quickly. Twenty-four of the 100 Checkout users offer a $10 discount on purchases of $20 or more (see DayDeals screenshot below).

Like PayPal, Google shields the buyer’s credit card number and other personal information beyond what is necessary for shipping purposes. However, Google also provides the option of keeping the user's email address confidential, a spam-limiting function not available via PayPal.

When a user selects the confidential option (see screenshot below), Google forwards the seller's confirmation message to the end-user.

Sellers are paid directly through their own Google Checkout account. Google has significantly undercut PayPal on pricing, at least for smaller merchants. Google's fee is 2% of the sales amount plus a flat $0.20 transaction fee compared to PayPal’s typical 2.9% plus $0.30 (PayPal has a sliding scale with higher-volume, $100k/mo and above, merchants paying 1.9% plus $0.30).

In addition, Google advertisers earn credits against their processing fees. For every dollar spent on Adwords, sellers can process $10 worth of sales with no processing charges other than the $0.20 transaction fee. It amounts to a 20% discount on AdWords spending, provided there is sufficient Google Checkout volume (i.e., at least 10 times the amount spent in AdWords).

Finally, sellers can create their own Buy Now buttons at the Google site, then drag and drop the HTML code into their websites. This allows small business sellers who are not currently ecommerce-enabled to immediately begin accepting Google Checkout.

Google is expected to provide additional data as the service matures. Having a hand in the process from product search all the way through to the purchase will allow Google to keep tabs on which ads actually result in a sale. This could mean changes to Adwords pricing or structure.

Analysis
The pitch to consumers is appealing. In addition to the privacy shields, Google promises to mediate disputes, and gives users a central place to track purchases. But the biggest consumer benefit: a common user interface for checkout, something that previous ewallets never provided. As you can see in the screenshot below, after shopping the merchant site, the contents of the cart are transferred to Google. At that point, Google takes over, offering the end-user the following options:

• Change shipping method with all costs itemized
• Add a coupon code
• Change credit card
• Change shipping address
• Shield email address from merchant
• SIgn up for promotional messages from merchant
• Links to the user's Google account
• Concise summary of the billing info, including exactly how the charge will appear on the user's credit card statement
• Concise summary of the merchant's return policy

Will consumers give up more personal information to the largest data repository on earth? Initial polls seem to suggest so. In addition, you can bet that merchants will create incentives to move credit card and/or PayPal volume to Google to save as much as 3% on card processing. For a retailer with a 10% margin, that's a potential 30% lift.

You might be thinking that free credit card processing is a short-term loss leader that will end as soon as a critical mass of merchants adopts Google's system. We don't think so. Put yourself in the shoes of a Google advertiser. You now know that you'll earn a 20% discount on your AdWords buy. Will you let that drop to the bottom line, or might you use some of that windfall to goose your bids on Google a bit? If it's an efficient market, eventually much, if not all, of the "free" card processing will flow back to Google in the form of higher bids. And since not all merchants will qualify for the 20% discount, Google might actually increase its total take due to the "discount." Brilliant.   

Citibank's role
The program should have little impact on retail banks, since at this point Google Checkout must use a bank-issued credit or signature debit card to participate. However, Citibank is paying Google to be the "preferred card" on both the Google sign-in page (click on inset above for closeup) and the credit card registration page (click on inset right). The credit card giant is hoping the $5 (or 1000 Thank-you points), will entice users to enter their Citi card into the Google wallet. The $5 bonus offer ends Aug. 1.

Retail banks might want to consider supporting the payment service with a secure gateway to various online payment alternatives so users can manage their PayPal, Google, and other accounts directly from a secure online banking area.

If you are a credit card processor, however, this could eventually pose a threat to your market share and/or margins. Even without factoring in the AdWord's credit, Google's highly publicized 2% discount rate, along with a lack of monthly fees, is a bargain, especially for small businesses. However, given the reluctance of businesses to change banking relationships, it will be years before the impact is felt.

--JB

Google just staked its first claim in financial services, opening Google Finance <finance.google.com> today. It comes as no surprise that the search giant would look to grab a share of the considerable traffic to consumer finance sites (see chart below).

Naturally, the Google effort is well designed and fast. The site uses interactive, Flash-based price charts, news feeds from Google news, and company and officer information from a number of sources. The site allows users to set up a personalized portfolio, and it links to blog postings and even to postings from Google's moderated forums (click on inset below for a closeup).

The only surprise is the lack of advertising. Not only are there no banners or postage-stamp ads, but also no buried "sponsored links" to be found. We don't expect it to stay advertising free, but for now, it's a good place to refer customers to check stock quotes, track target companies, or set up an online portfolio.

Consumer finance traffic
Unique visitors in Feb. 2006
  Yahoo Finance>>>12 million
  MSN Money>>>11 million
  CNNMoney>>>8.5 million
  AOL Money & Finance>>>8.3 million
  WSJ/MarketWatch>>>8.3 million
  Forbes>>>6.7 million
  Reuters>>>6.6 million
  Entrepreneur>>>5.5 million
  ConsumerInfo.com>>>4.0 million
  BankRate.com>>>3.5 million

Source: Nielsen/NetRatings, 3/06

-JB

Since the dawn of the online credit bureau era (1997/1998), online credit report marketing has been dominated by the specialists: Experian, Equifax, TransUnion, ConsumerInfo.com (now owned by Experian), Fair Isaac, Intersections, and others.

Now, financial institutions are becoming more involved. For example, Citibank's AdWords spot pitching its Credit Monitoring Service showed up fourth overall (and second in the right-hand column) in a search today for "credit report monitoring" on Google (click on inset right for a closer view). With 84 advertisers vying for space on the first page or two of results, that's expensive real estate.

Citi's $9.95/mo service (after one free month) is powered by Intersections <intersections.com> and includes info from all three credit bureaus, daily alerts based on Equifax info, $20,000 in identity theft insurance, and other benefits (see screenshot below for a full listing).

Another surprise advertiser in the category is Wal-Mart whose ad appears in the sixth position along the right side of the search results (see inset above). The retail giant's $7.46/mo service is co-branded with TransUnion's TrueCredit (click here for screenshot).

Analysis
We are big fans of credit report monitoring, having personally used it for more than a decade. And while the service does deliver significant value, we think the single $9.95/mo price point is too high for the mass market. Granted, ten bucks is better than the $14.95/mo charged by TransUnion's TrueCredit for a similar service (see inset for an email received today). But the $120/yr is simply too much for information that can be extracted relatively easily by consumers themselves.

Better would be a multi-tiered offering: Regular/Gold/Platinum that starts at under $5/mo and peaks at $9.95/mo for an individual, $14.95/mo for a family. That way, more customers would receive the benefits of proactive monitoring while the truly paranoid could use the pricier options for added peace of mind.

Another puzzling aspect of Citi's service: it's impossible to find it through the home page. It not only lacks its own link in the product menus, but also comes up blank in searching on "credit report monitoring" or even "credit reports." You shouldn't have to use Google to find such an important service, especially at a bank that's spent tens of millions promoting itself as a safe haven against identity theft.

For more information on credit-report monitoring, see Online Banking Report #83/84. For more on pricing, see OBR #109.

--JB

As we searched Google today for debit card info, we noticed E*Trade on top of the paid search results with an AdWords listing entitled Platinum Visa Debit Card (it was the first "banner" on the top of the search results).

Interestingly, clicking on the link takes you not to a single-product pitch for a debit card, but to the broker's E*Trade Complete product which combines brokerage, banking, and lending into a single offering (click on inset for landing page screenshot).

Note: The graphic image appearing in the middle of E*Trade's landing page features a check, debit card, and security token overlaid on a screenshot of its online banking area.

Analysis
Showcasing its Complete product on debit card searches shows good mastery of search engine marketing by E*Trade. The online giant figures the type of person searching on debit cards will be intrigued by the total control promised by the package account. The out-of-scale security token also adds a reassuring touch to the image (see inset). 

-- JB

Now that Google has begun identifying search engine users by their IP addresses, advertising via Google has become a whole lot more lucrative for community banks and credit unions.

Financial institutions now have the ability to target their keyword ads via city, state, or MSA.

See OBR 95 for a full report on search engine marketing.

Overture

Overture, the IdeaLab venture that pioneered the pay-per-click auction process originally under the name GoTo.com, also reaches a significant number of Internet users: 80% of the total according to the company. The majority of the volume is through MSN, AOL, Yahoo, and others that display its paid listings for a cut of the revenue. Overture.com itself attracts 6 million unique search users each month.

Overture PPC ads displayed on Yahoo.

Overture’s 100,000 advertisers have their listings displayed at Overture.com before any non-paying websites. Some banking terms have more than 200 paid listings. However on partner sites, such as Yahoo (screenshot above), only the top three or four advertisers are displayed on each page, leading to intense bidding for top slots.

For example, in early May the top four bidders for “home equity loan(s)”¹ were all paying about $4/click. Converting one of every 100 visitors would result in an acquisition cost of $400/loan.

Other financial services terms had even higher bids, especially anything to do with debt or credit. For example, the top four bidders for “debt management” were willing to pay more than $9/click (Table 5, right).

More targeted search terms such as “home equity loan(s) Seattle” had much lower bids, in this case just an average of $0.11 per click for the top-four spots.  However, geographic targeting doesn’t always result in lower CPCs. In the case of “mortgages yourstate” average costs for the top-4 bidders were 15% higher than for the unmodified “mortgage”.  

¹On Overture, but not Google, singular and plural versions are covered by a single bid, e.g., mortgage and mortgages return the same search results.

Table 1

10 Most Expensive Financial Keywords

average pay-per-click cost on Overture, May 2003

Source: Overture, 5/29/03

Yahoo, MSN, AOL

Advertising placed through Google and Overture will get you placed on AOL, Yahoo, and MSN. However, all major search engines except Overture limit the number of paid ads to eight or fewer per page of search results.

Table 2

PPC Listings Displayed at Major Search Engines

includes pay-per-click sponsors only

Source: Online Banking Report, 5/03

*Not all keywords display Overture paid ads.

LookSmart

For less than the monthly cost of a typical Starbucks habit,  you can run a small advertisement on Google, the most popular search engine in the world. The company says that it displays results on 200 million searches per day through its own very popular website and distribution partners such as Yahoo, AOL, and Earthlink. The advertising program is called AdWords and we first recommended it in Feb. 2001 .

Two years later, the program is even better, and we continue to heartily recommend it for financial institutions of all sizes, but especially for smaller credit unions and community banks with small to non-existent online advertising budgets. We’ve used the program ourselves for more than two years and can attest to its ease of use. Although we don’t track actual sales results closely, we are pleased with the traffic generated.

AdWords is billed as self-service, and it is. Ten minutes after reading this paragraph you could have an ad running on Google. Then, whenever someone typed “yourtown” and “bank,” your ad would show right next to the search results.

AdWords spots appear on the right side of the search results and are clearly labeled as Sponsored Links. The first four or five appear “above the fold” depending on the size of your monitor and the screen resolution selected. A maximum of eight ads are shown on each page of search results.

How it Works

1.       Set up an account at <adwords.google.com>. Advertising costs will be billed monthly to a credit card.

2.       Type your ad copy into the template provided. You have 25 characters (including spaces) for your title, two 35-character lines for ad copy, and 35 more for the displayed URL.* A total of just 130 characters to be approved by marketing, legal, and compliance, a significant cost savings.

*You also have 1024 hidden characters for hyperlink

3.       Choose the keywords or phrases to trigger the display of your ad. Google allows very precise word/phrase selection so you aren’t buying impressions on “blood bank” searches. The company also provides tools to choose and estimate costs on appropriate keywords.

4.       Decide what you want to bid for placement of each keyword (you can either choose different bid amounts for each keyword, or use the same maximum bid amount for each). Note: It’s an auction environment similar to eBay. You specify a maximum cost per click (CPC) and Google automatically raises your bid to $0.01 above the next highest bidder.

However, the formula for ad position is not as straightforward as an eBay auction. The top bidder may not be shown first. Google uses a proprietary formula that weighs relevance, as determined by actual click-through history, when determining ad position.

Since Google is paid per click, it maximizes revenues by placing top-rated ads in the best slots. For example, if Citibank pays $0.25 per click to advertise under “online banking” and Joe’s Bank pays $5.00 per click, Citibank will likely get the top spot. Why? Citibank’s 1,000 clicks per day will generate $250 for Google, while the sole curiosity-seeker clicking on Joe’s Bank will only put $5 in Google’s coffers. Most other search engines, including Overture, use a pure auction environment, with placement determined solely by bid amount.

5.       Decide if you want to limit your ad to certain languages and/or countries.

6.       View an estimate of how much your campaign will cost each day/week/month.

7.       Enter the maximum amount you’re willing to spend per day and across the entire campaign (you can always add more; Google sends an email when you are within 10% of your budget maximum).

That’s it. No graphics, no copywriters, no media buyers, no monthly minimums, and no set-up costs. You’ll pay a minimum of $0.05 per click, but for common words you’ll be up against national competitors, so for hot areas such as mortgages, expect to pay as much as $1 or more per click.

We recently tested an AdWords buy for “mortgage” . For a top-placing ad (position 1 or 2), Google estimated costs of $2.71 per click for an 1,100 clicks per day; a total cost of $90,000 per month. And that’s just for one keyword. However, if you limited your ads to targeted niches, such as “mortgages New Jersey” (see below) you would still pay around $3 per click, but you might only get a few clicks per day, resulting in advertising costs of $200 to 300 per month.

The top Google AdWords ad on
 “mortgages New Jersey” (June 9, 2003).

Another side benefit: instant feedback on which keywords, headlines, and URL combinations attract the most click-throughs. You can change ads very simply just by choosing “edit” in the control center and typing new text. You can also use Wordtracker.com or Overture to research search-term popularity.  You can also mix and match using our keyword selection tool.

For more information

We highly recommend 21 Ways to Maximize ROI on Google’s AdWords Select, a 124-page ebook by Andrew Goodman of Page Zero Media. The $49 publication can be downloaded at www.page-media.com .

One of the more promising new developments for companies with extensive Web offerings are custom toolbars, now relatively easy to build with Internet Explorer 5+ extensions. Several top Internet companies have already deployed toolbars including Google, eBay, Yahoo, and Ask Jeeves. Many more are in the planning stages. Also, numerous companies have deployed the toolbars internally to better navigate company intranets.

Our first practical experience with a custom toolbar began last year when we downloaded Google’s version (above). Since then we’ve used it thousands of times and have found it to be a great time saver. Instead of going to its Web site, you simply enter your search term directly into the Google search box embedded in the browser. The toolbar also has a number of other features that we rarely use, such as page rank and site info. It’s currently available in 15 languages, with more in the works.

Ebay is the newest entrant, officially launching its toolbar a month ago following a six-month beta. It was officially launched July 11, but it’s still not widely promoted on the site http://pages.ebay.com/ebay_toolbar . Ebay spokesperson Kevin Purseglove declined to provide usage figures but told us that initial feedback was very positive and the company was thinking about promotional ideas to get the word out. With 43 million users, eBay is rolling out the service slowly so as not to overwhelm its resources.

Like Google, the key feature is the embedded search box. But for power users, that’s just the beginning; you can elect to receive popup alerts whenever a flagged auction is about to end. Users needn’t even be online to receive alerts, they are triggered by the auction end-time. Assuming its acquisition goes through, it shouldn’t be long before PayPal is incorporated into eBay’s toolbar.

The eBay toolbar is the result of a yearlong project by @Hoc  (pronounced at hoc), the Burlingame, CA-based company that has also built toolbars for Wired Magazine, Dreyfus Brokerage, HSBC’s Bourse, Multex Investors and a couple dozen others.

Privately held @Hoc  www.athoc.com  was founded in mid-1999. At that time a number of other companies were building proprietary toolbars they hoped would attract end users and ultimately advertisers to pay the freight. By the time @Hoc launched its product in mid-2001, those efforts had gone by the wayside, victims of the Internet advertising downturn. @Hoc has survived by focusing on private-branded toolbars for company intranets.

Initially the company targeted financial services, experiencing an early win with Dreyfus Brokerage Services. But the Dreyfus toolbar is gone, a casualty of its acquisition by Brown & Company. Other promising discussions with banks such as Wells Fargo, Bank of America, and Bank One were scuttled post-911.

@Hoc believes the best opportunities in banking are on the commercial and small business side. Co-founder Ly Tran sees little need for a consumer-oriented banking toolbar. While we agree the B2B application makes sense, we think a consumer toolbar is just as useful, especially if combined with popular search applications such as Google .

One limitation of customer toolbars and buttons is that most users do not want to hassle with changing browser settings. And for those that attempt to make changes, your tech support lines may be overloaded with questions from novice users. A less labor-intensive, but more expensive, approach to keep your name on the desktop is to ride on the coattails of the Web’s sixth most popular site, WeatherBug. This turnkey program requires little user involvement, reducing confusion and tech