I'm Feeling Lucky_ The Confessions of Google Employee Number 59 - Douglas Edwards [160]
No, AOL rejoined, Overture would clean up their system and make it more relevant. It wasn't in AOL's interest to admit that Google worked better, even after they came to believe it was true. "I think intellectually they agreed," Alan speculated, "but they wouldn't agree as part of the negotiation. They would always maintain that our system was worse. Their face to us was, 'never give an inch.'"
Overture didn't sit idly by while we tried to steal their biggest customer. They struck back using one of the most powerful tools at their disposal: Google AdWords. Omid was in a meeting with the AOL team demonstrating our superior product when ads began showing up on searches saying "AOL sucks." The ads clearly hadn't been screened, so it was obvious to AOL that Google didn't have sufficient editorial controls in place. Omid excused himself and frantically called home to have the ads taken down.
AOL said, "This is a problem."
"It was a good move on Overture's part," admits Alan. "I would have done the same thing." The result was that the four members of Sheryl Sandberg's AdWords support team began hand-screening every single ad that was submitted. And AOL asked for a better understanding of Google's approval process.
"Here are Overture's policies," AOL said, dropping a phonebook-sized document on the table with a thud. "These are their editorial policies for what is allowed and what is not. Let's see yours."
"Fine. We'll show you ours," Alan replied. "Let's set up an appointment and do it right." We had no policy manual. But we would have one by the meeting the following Monday. Five minutes after that exchange, Omid was on the phone to Sheryl. "Overture has a binder," he told her. "We have to have a binder! We have to have a binder!"
Sheryl and AdWords staffer Emily White spent the weekend pulling one together. While they were at it, they pulled together an editorial team. AOL wanted to know how many people Google had dedicated to reviewing ads and approving them. By enlisting everyone in advertising operations who had ever looked at an ad, Sheryl stretched four to fifteen. "We didn't lie to them," she asserted, "but we included everyone we possibly could."
And Alan struck back by pointing out the weakness in Overture's system. He had the AOL negotiators search for "flight" to see the ads that came up. The top position wasn't occupied by American Airlines or Travelocity or Expedia. It was owned by a Midwest flight school for wannabe pilots that was willing to bid high for placement, knowing that thousands of people would see the ad but ignore it. These "squatters" paid only if someone clicked, so the exposure cost them nothing, but for Overture and AOL, it meant that the top position on a popular keyword generated almost no revenue. Google's more relevant ads would perform better.
Alan also showed AOL that we were willing to sweeten the pot at our own expense. Before Google entered the syndication market, Overture had owned a near monopoly. They set the terms for partners on revenue splits. For small partners the split might have been fifty-fifty, but for a large partner like AOL it would have been more generous. AOL might have been taking seventy percent of the revenue when someone clicked an Overture-supplied ad on their site. Already, though, as George Mannes had postulated in his article, Overture's margins were slipping downhill. Our negotiating team gave them a helpful shove. We were willing to offer AOL eighty percent, a number we could afford because we kept all of the revenue for ads on Google.com.
AOL noted our strategic goals and our generous gesture and demanded ninety-one percent. "We're going to make your network," AOL told Alan's