The huge-scale real-time auctions that power the Google profit machine
wired.com
wired.com
If it were an auction, the highest bid would win every time. That is catastrophically untrue with AdWords -- quality score, account history, Google's desire for variety, and a few hundred types of secret sauce mean that lower bids routinely float over higher bids for the same keyword.
Contrary to what many people believe, Google also sets essentially a reserve price on their keywords -- if you manage to discover a credit card keyword that nobody has ever used before (highly unlikely, but roll with it), that is probably worth well in excess of a dollar per click to you. Will you get it for 5 cents? Nope. Google will establish the minimum somewhere close to neighboring keywords, and you'll end up paying over a buck to be the only add on the screen. (Real auctions have a word for when you're bidding against the house, but I'll try to be polite.)
Compare with eBay, a true auction:
Single bid at 5 cents, hidden reserve of $1 (eBay): no sale takes place.
Single bid at 5 cents, hidden reserve of $1 (Google): no sale takes place.
Single bid at 5 cents with maximum bid of $1, hidden reserve of $1 (eBay): no sale takes place.
Single bid at 5 cents with maximum bid of $1, hidden reserve of $1 (Google): sale takes place at $1. (I think almost nobody knows this happens.)
Two bids of 5 cents and $1 (eBay): the bid of $1 wins.
Two bids of 5 cents and $1 (Google): the side who Google says wins, wins, at a price which is somewhere between 0 cents and $1.
How about selling oil?
It all depends how you weight growth and total profit when you talk about "success." The growth curve of oil as a business took hundreds of years, whereas Google became a billion dollar business in a few years.
And there I stopped reading.
Very silly. Google's browser generates searches in the title bar for free which Google pays Firefox and the others for. Mail, Talk and the apps are vehicles for showing ads to people. The extra internet use is just not the primary purpose of these things. What confuses people, even Wired, who should know better, is that not everything Google does has an immediate payoff every time. They're willing to develop something, like maybe Android, which can make them money later, maybe.
Google likes the idea of putting your documents on the web because (a) it's a potential business, especially at the enterprise level; (b) they want more structured data on the web to mine; (c) they want a better way to profile you.
Android I don't know enough about, but it's more like an attempt to make phones work more like the PC -- an open-ish standard, rather than specialized, incompatible devices under the control of carriers. I assume Google feels they will do much better in that kind of market.