The Rise of Search Engine Marketing
The origin story of pay-per-click advertising, from GoTo.com's 1998 auction model to Google AdWords' 2000 launch.
Search engine marketing as a paid discipline has a specific starting point, and it isn’t Google.
GoTo.com invents the pay-per-click auction
In February 1998, a company called GoTo.com, founded by entrepreneur Bill Gross, launches with an idea that seems almost too simple: let advertisers bid on search keywords, rank results by bid amount and only charge when someone clicks. It’s a sharp break from the banner-ad model that dominates the rest of the web, where advertisers pay for impressions regardless of whether anyone engages. GoTo.com’s model ties cost directly to a measurable action for the first time at scale.
The industry is skeptical at first
Putting paid listings directly in search results, ranked by who pays the most, strikes a lot of people in the industry as a compromise of search quality, blurring the line between what’s relevant and what’s simply paid for. GoTo.com pushes forward anyway, betting that advertisers will value the direct accountability of pay-per-click enough to make the model work regardless of the skepticism.
Google enters with a different bet
Google launches AdWords in October 2000, but takes a different initial approach: ads sold on a cost-per-thousand-impression basis, sold directly by a small sales team and kept visually distinct from Google’s organic results. It’s a smaller, more cautious program than GoTo.com’s, reflecting Google’s early positioning as an organic search company first.
GoTo.com becomes infrastructure
Through 2000 into 2001, GoTo.com works to become more than a standalone destination, pursuing syndication deals that let other portals and search engines run GoTo’s paid listings within their own results pages. The pay-per-click auction, originally a single site’s gimmick, starts becoming shared plumbing across the search industry.
Why this is happening now
None of this happens in a vacuum. Broader advertising budgets are under real pressure as the dot-com boom cools, and pay-per-click’s core promise, pay only for a measurable click instead of an assumed impression, is exactly the kind of accountability advertisers are starting to demand. A model that looked almost too simple in 1998 looks, by the start of 2001, like the direction the entire industry is being pulled toward, whether or not everyone is comfortable admitting it yet.
Search engine marketing didn’t arrive as a fully formed strategy handed down by a major company. It started as one company’s bet on a different pricing model, proved itself under real market pressure and is only now, a few years later, becoming something every serious advertiser has to have an opinion about.
More from 2001: browse the SEO archive or see everything published this year.
