Adam Penenberg:
The average web surfer spends less than 5 percent of his time using a search engine, according to the Online Publishers Association’s Internet Activity Index. That means Google earns almost $3 billion a year from people who devote 95 percent of their time on the internet to doing something else.

Yet Google has been able to achieve dot-com nirvana by perfecting the art of targeted advertising. If I search for, say, “hemp fabrics,” I’m greeted by a list of 10 results framed by Sponsored Links at the top and down the side of the page. In essence, I get two types of results: those that are the most “relevant” (read: popular), which aren’t for sale, and those that advertisers bid on, which are.

Since a consumer who searches for a product or service is more likely to buy something, this type of advertising is far more powerful than the usual scattershot method of firing ads at us in the off chance one will catch our attention. It’s the main reason that paid search makes up more than half of Google’s annual revenue, which could hit $6 billion by the end of 2005.

Of course, Google has other ways of making money, namely via AdSense, which generates the other half of its revenues. Google serves up “contextual ads” tailored to whatever a web page is about. But these types of ads are inherently weaker than paid search ads. Just because I check out the weather online doesn’t mean I have any interest in ads for Doppler radars.

In fact, of the four distinct activities that people pursue online — content, communications, commerce and search — OPA estimates that the average webizen spends about 41 percent of his time checking e-mail and instant messages, 37 percent viewing news and entertainment sites and a little more than 17 percent shopping.

While search and shopping offer the biggest bang for an advertiser’s buck, onliners while away many more hours — 78 percent of their time to be exact — communicating and reading. Naturally, Google thought of that, too, embedding ads based on content in Gmail, but it’s questionable how effective they are. (Google News, still in beta four years after launch, has no ads, largely due to copyright issues.

This is where Roy Shkedi, an engineer and chief executive officer of New York behavioral-marketing firm AlmondNet, comes in. He has patented an idea that he believes could bring tightly targeted advertising to the remaining 80 percent of our time online when we are not searching or shopping.

In the same way that’s Jay Walker patented “name your own price” and Overture did paid search (it cost Google $300 million to settle the dispute), Shkedi has claimed as his own the idea of creating an ad network of web publishers that share readers and in the process reap commissions.

More here.