Google’s stock price hit $600 last week as the company continues to hit on all cylinders - search marketing dollars rolling in; acquisitions like DoubleClick and YouTube; a possible bid on UHF spectrum (here and here); etc. What can slow them down as they take over the world of media and advertising? Will they bring the same ad effectiveness to other media that they brought to search?
I have one idea, and it’s just an idea, but what if the thing that slows Google down is advertising itself, specifically the problems inherent with interruption media. As way of brief explanation for anyone who needs it, interruption media advertising is advertising based on the idea that a consumer is given entertainment, information, etc. and that is then interrupted to serve an ad to the audience, whether it’s a print ad in the middle of your Cat Fancy magazine article, a banner ad along the top of a CNN.com story or a TV spot during Grey’s Anatomy.
Google’s entire business model is predicated on serving the right ad at the right time to the right person. They historically have done this in two primary ways, Adwords and Adsense. The Adwords program serves ads, typically text, along your search engine results while Adsense serves ads on content pages of participating web sites. In super simple terms, Google gets paid when an ad is clicked on. Adwords always gets higher click-through rates than Adsense, and therefore generates more revenue for Google, for one simple reason – relevancy.
I managed pay-per-click (PPC) search marketing (Adwords and Adsense) for Harley-Davidson and I am a big fan, especially of Adwords. It is an incredible program, a modern day Yellow Pages. If you were a plumber in Milwaukee what better place to put your ad dollars than in the Yellow Pages where you know people who need a plumber will go. They are actively seeking out the product/service you provide. Search marketing works the same way and its full potential has still not been reached. This tactic contrasts with the plumber running TV spots, where you count on interrupting potential customers’ programming, hope they stick around to pay attention, hope they need your services, hope they remember you and then hope they call. That’s a lot of hope.
There is a huge difference between needing a plumber and therefore trying to find one in the search engine (Adwords) versus reading about, say, replacing storm windows on a DIY site and having an Adsense plumber ad show up. Even if you might need a plumber, it’s not as relevant. You’re not in active “plumber-seeking” mode. Your mind is on storm window work.
To serve more ads while capturing more data Google gives all their innovative products away – Gmail, Picasa, Google Docs, search and so on. Even the rumored Google phone would supposedly be “free” with ads served up. And this is a brilliant business model.
But with Google’s foray into radio ads, print ads, TV (subscription required) and online video and display ads, they’re getting even further away from the realm of the Adwords search ad model for the less effective, less impactful, less relevant world of interruption advertising. Now, Google captures so much data on us that they are going to get better and better at delivering the right interruption-media ad to you but, even with the best algorithms in the world, that ad you see is still interruption-based and therefore less relevant, so the success won’t ever be near the level of search. And since Google advertising is about pay-by-accountability/measurement of audience impact, that means measurements like click-through rates will be lower, which means revenue will be lower. And that doesn’t take into account the privacy backlash that could result from the ever-growing accumulation of personal data on users.
Am I worried about Google faltering any time soon? Uh, no.
Would I short their stock anytime soon? Nope.
Am I saying they should not get into the world of interruption media? Of course not, there’s lots of money there.
But would I count on their big move into interruption media ensuring revenue growth at the same pace that search advertising created for them? Not at all.
Would I tell advertisers not to use Google new offerings? No, in fact it’s more accountable than a lot of the junk out there.
But will it be as effective? Not a chance.
I’m not a computer scientist, don’t know algorithms and can’t guess at what super-brilliant ideas Google’s working on next. But I do know advertising and know that interruption media is less effective. If search dollars slow in a few years I don’t expect an interruption media strategy to pick up the slack completely.
What do you think, am I way off?
You're not way off, I think you're dead on. Relevancy in ADs is the key. I think (as a non-professional marketer) that the future is continium advertising, ads that extend the experience of the audience. Let's take your storm window example a little further. Let's say I'm watching a DIY video on YouTube about putting in storm windows. I am not in plumber mode, but I am in storm window mode. Now I don't want an ad popping up on the side or in the middle of the screen...that interupts my experience and I get annoyed. But what if I could click on the storm window in the video and it takes me (or pops up in a new window) to the storm window maker's website...or a competitors website depending on who bought the advertising rights for the windows in the video. Now you've gone from interupting the experience to extending it, aka adding value to my experience and you just increased the chance of me buying your storm window because you'd made it so easy for me. It's an uber-hypertext link...like when I clicked the Google Phone link in your post, it relevantly extended my experience of your post and what I was thinking about. Now let's say I notice that the host of this storm window segment has on a really cool pair of boots...perfect opportunity for a boot advertisment because my mind natural went there... I click on the boot and it takes me to the boot maker where I can buy the boot...it's websurfing 2.0 where I am continously window shopping and when the impulse strikes me, I can immediately and easily act on it. If I'm plumber, where am I going to spend my $100 dollar advertising money? On an interuption pop up or on being the "click" on all the pipes and faucets on all the videos on YouTube? Image/object recognition algorithims are already being worked on, Google takes that, the personnal data it already has, YouTube, etc and it could make a bazillion selling companies the opportunity to capitilaze on extending the experience. It could take product placement and impulse buying to a whole new level. The pieces are all there, just need someone to finish connecting the dots
Posted by: Sam | October 19, 2007 at 12:38 PM
I like your definition of Google AdWords as "a modern day yellow pages". I also agree that Google's phenomenal success in search is not translating into comparable success in advertising. Most of what I've seen from Google relating to ads is naive and simplistic. The web is providing an extraordinary platform for the extension of traditional media into this new electronic platform. Pairing websites with offline media---Time magazine with Time.com, CBS with cbs.com---seems to me to offer more likely models for the next generation of web advertising paradigms, an evolution of the media vs. the revolution that search represented for direct response advertisers.
Posted by: Gene DeWitt | October 20, 2007 at 02:26 PM
Yes, Google Adwords is today's equivelant of the old standard yellow pages, only a heck of a lot better. Google must be doing something right, today they announced a 30% increase in their revenew for the past quarter. Primarily from Adwords searches. I still think that Adwords PPC is still one of the fastest ways to increase traffic and increase your business. It's not easy to learn, but is well worth the time and effort.
Posted by: Allen Lundy | April 18, 2008 at 09:08 PM