I was surprised to read that Google is considering paying Dell $1 billion to pre-install its toolbar in new Dell PCs. This represents a big jump from Google’s current customer acquisition budget, which I estimate at approximately zero.
Chances are, you and I first heard of Google and started
using it because of a press article or word of mouth. Google acquired us essentially for free.
Companies like ISPs and anti-virus software providers have
long considered the desktops of new PCs to be valuable real estate for reaching
consumers. Google is taking it one step
further, believing that if its toolbar is pre-installed, consumers will rarely bother
to delete or turn it off, sort of a lifetime customer retention program.
This is the same principle that banks use when urging you to take the time to set up online bill payment, or online retailers when entering your birthday and wish lists – stickiness lowers customer retention costs.
The $1 billion payment reportedly will cover 100 million PCs, giving Google a customer acquisition cost of $10 per customer. Google is hoping that because of the toolbar, these customers will make millions of incremental Google searches over the lifetimes of their PCs. Depending on how often they click on resulting ads, Google could quickly make back the $10 and it's all profit from there.
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