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May 31, 2005

Ruminations on Google’s future as the über ad network

By Charlene Li

I’ve been thinking quite a bit about Google’s Site Targeting capabilities and wanted to put something out there for discussion. It strikes me that Google currently will offer only animated graphics as an option for the CPM-priced ads. That’s great for all of those brand marketers out there who want to name the CPM they are willing to pay. Not so great for those publishers who have their own direct sales forces pitching very high CPMs!

There’s no way these branded publishers (NYTimes.com, CNN.com, iVillage.com, to just name a few) will accept Google’s new ads on their premium pages when there is a shortage. But what about remnant inventory that goes pretty much unsold? Why not try it on the new Google ad network, especially if the “cost of sale”, which on a negotiated basis can be pretty attractive (let’s assume a revenue share back to Google of only 5-15%), it certainly starts to make sense. (Note: I wrote more about this in a Forrester brief about Google’s Site Targeting announcement

But let’s take it one step further – inevitably, Google will accept rich media ads, pushed onwards by eager marketers and equally revenue-hungry publishers. What’s next? Well, why not online video ads, the darling advertising format of the moment? And if Google has a large inventory of interesting, interactive video ads that run online, they could then approach cable companies eager to capitalize on their ITV and VOD investments.

What makes this even more interesting scenario is the ability for Google to apply its nascent video search capabilities to understand the television content that is being seen – and to show the best contextually relevant interactive video ad for that moment.

Google’s growth prospect isn’t limited only to the Web and the Internet – it is in possession of the largest ad network in the world, at over 200,000 marketers. And it is Google’s ability to tap into all facets of the advertising budgets of those marketers that will determine its success.

Now for the really BIG caveat – Yahoo! and MSN can do this too. Do a search and replace of “Google” in the above text with these two competitors and you’ve got an interesting competitive space in the future where the ability to tap into and coordinate a marketing budget across different online channels – and offline channels – becomes a strategic advantage. Yahoo! and MSN have one big advantage in their back pockets – they already have strong, strategic relationships with online brand advertisers.

So I’m looking forward to the next few months to seeing: 1) how Google fares with Site Targeting, especially in getting publishers to sign up; 2) how quickly Yahoo! and MSN will follow-up with similar initiatives.

Let me know your thoughts on this – can Google or any of these other players “jump” the channel line and extend their ad networks beyond the Internet?


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Oliver Thylmann

I wrote about the problem with Google Site Targeting and big publishers some time ago (http://blog.thylmann.net/2005/04/google_adsense_.html). As you say, the big ones out there have a sales force and they are selling their ad space for branding at a premium. If you believe a little bit in branding, than this is at least a little bit warranted. The Google CPM site targeted ads will very likely still be evaluated by the marketers based on performance as this is just how AdWords works and the mindset they are in.

What Google could have done is to allow a publisher to say at a $5 premium or a x3 multiple on branding ads for their site which the advertiser can then decide to pay. If this is done, then I see a chance for Google as the publisher can control what happens in terms of branding on their site. In the current state this is not the case and big publisher will just not let their inventory be sold like that. Advertisers could then just go to Google and buy ads there, for less. this means you can't even let your free inventory go out via Google as you will create a problem for your normal sales team.

The only option that this works out is if a site chooses to fire its entire sales staff because the real profit is higher with Google. I have the slight feeling that this will not be how it turns out though.

As for beyond the internet. Of course they will, and there are numerous ways to do it. The opportunities are immense.

Dave Chase

I agree with your points, Charlene. On a related note, this article made predictions for the ad market in 2010 that is quite close to what you are discussing http://www.imediaconnection.com/content/5086.asp. I posted this as an update to that article http://marketvelocity.blogspot.com/2005/05/2010-predictions-starting-to-happen.html -- it demonstrates how the movement of internet ad tools & techniques are moving to other mediums.

Mary Schmidt

I'd say that before we talk about Google jumping the channel line...the bigger issue is when and if Google "jumps the shark" in its existing market. I already ignore all flavors of Google ads. Ads - regardless of how "fun" they are (video, etc.) are still interruptions and we're overwhelmed by people screaming "buy us" "we're cool" "it's free" already. The fundamentals of marketing remain the same - you've got to get their attention, then their interest - THEN you've got to engage them. And, in the virtual market place you've got about two seconds of eyeball time before they click onward. Thus, the entire Advertising mindset and approach will have to change. (And, we'll just learn to ignore the ever fancier stuff too...remember in Minority Report - Tom Cruise, his blackmarket eyeballs and the various stores canned pitches "tailored" to his retina scan? Granted, he was on the run and not likely to stop and buy a new GAP shirt...but still...)


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Green Day Poster Girl

I completely agree with Poker. I NEVER even see Google Ads anymore. Google and other online ad agencies need to find creative ways to advertise INSIDE of content. Scripts Inc. just purchased Shopzilla with an ultimate end game of allowing people that watch their cable shows to be able to buy anything they see. New technology will increasingly make old ad styles obsolete but it seems advertisers are moving too slowly in adopting matching new ad technologies.


I don't think Google will grow that fast in site targeting in The Netherlands, as I see it, just because of the reasons you give in your article.
As we run the second largest site in NL, just behind Google, We are keen on selling our inventory for premiums, and control the content of the banners.
We won't diplay any competitive advertisers only complimentory.

BTW, the site is: marktplaats.nl an eBay company :)

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