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April 25, 2005

Marketers rejoice! Google offers site targeting for AdSense

By Charlene Li

Google announced tonight that it will be rolling out a limited beta test of site targeting within its AdSense for Content program, which is the contextual advertising offering. I suspected that Google would soon do this in a previous post, primarily so that they can tap into the $4 billion display market. With overall search advertising’s growth rate slowing, Google needs to tap into new revenue sources.

Here are the details of the offering from their draft press release:

1. Targeting -

Advertisers will now be able to select specific content sites across the Google Network where they would like their ads shown. Advertisers can target these sites easily and choose from thousands of sites. Enabling advertisers to target a specific ad to a specific site creates another way--in addition to keyword-based targeting--of letting advertisers connect with people who are likely to be interested in their product or service.

2. Bidding -

With site targeting, advertisers will set a maximum CPM-that is, the maximum price they're willing to pay for every thousand impressions their ad receives on a particular site. Their ads will compete for placement on a site with other CPM and CPC ads in Google's auction.

Google's approach is different from other CPM models, where advertisers must pay a fixed CPM. On AdWords, advertisers pay no more than the minimum price needed to run an ad on a site.

3. Ad Formats -

In addition to text-based ads, site targeting will include another ad format option, animated image ads. This is an enhancement to the image ads option we launched last year. Image ads are carefully evaluated before they are allowed to run on the content sites in the Google Network.

This means that marketers will be able to place and price separately contextually targeted ads that are more focused on branding than on direct response. In order for the graphical ads to appear, the CPM bid has to be higher than the effective CPM calculated from the other CPC ads that would run on that page. For example, a CPM bid of $5 would be equal to a CPC bid at 50 cents with a clickthrough rate of 10%.

Marketers have been clamoring for better control over their contextual campaigns, which to date have been linked to their CPC keyword ad campaigns that appear on search pages. That part of AdSense will not change – if you want to pay for contextual ads on a CPC basis, you still have to bid at the same level as you do for search ads. Site targeting also does not apply to search-based ads, such as those appearing on AOL or Ask Jeeves – you still have to buy them together as part of the ad buy. Contrast that to Yahoo!’s Content Match program where marketers can set different prices for contextual versus search ad. But a key benefit for marketers using site targeting will be detailed reporting on ad performance, enabling everything from click fraud tracking to detailed optimization of pricing and creative.

But site targeting also raises an interesting dilemma – if I were a publisher, where would I put those contextual links? If they appear at the top of the page, I could command a much higher CPM from brand advertisers, but also run the risk of having text links appear. More importantly, if I’m a publisher with an established base of brand advertisers, do I really want Google to act as an intermediary? Fortunately, Google allows publishers to opt-out of site targeting, and I expect that this will push some publishers to aggressively start pursuing private contextual ad networks that will preserve their exclusive relationship with these key marketers.

Danny Sullivan has more here.

Forrester will be publishing a brief outlining the implications of the announcement sometime on Monday – I’ll add the link when it goes live.

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