Google redefined the advertising business. They’ve had a prolific impact on both the Internet and the advertising world. They remodeled the look of ads and in just a few short years Google is on track to become the fourth largest ad seller behind Viacom, News Corp. and Disney. Is Google heading for TV too?
Editor’s Note: Where do you think the future of Google’s ad revenues should go? Would you buy contextual ads on television? Tells about at WebProWorld.
Keep in mind these companies are massive multimedia empires. Viacom owns a slew of TV channels including CBS, MTV and many others. News Corp owns the complete line of Fox channels and Walt Disney; besides having the movie empire, owns the ABC network and the ESPN network. These are all high volume channels. Google is certainly in their league and Google has certainly become big business. They got there with tons of those one line contextual ads too.
The New York Times (NYT) published an in-depth article recently about Google’s massive advertising empire and direction it heads next. They point out Google should hit revenues in 2005 of $6.1 billion and they quote Goldman Sachs analyst Anthony Noto projecting Google to hit $9.5 billion in ad revenues for 2006.
Google is in the process of developing Google base. This program appears to be an online classified system for people to buy and sell just about anything. This could bring Google into competition with eBay and a number of other similar sites but that’s not all.
Google is now considering television advertising. In many ways, The contextual ads Google built their fortunes on have been incredibly effective for the Internet. Google has worked hard to ensure ad relevance for their network. Relevance has been the key to just about everything Google does in both its ads and its search.
TV ads are a whole other beast. TV ads have always been about the warm fuzzy feeling so to speak. They are built to get a reaction, not an intellectual response. The current model of TV ads can’t be totally discounted either. The marketers who study the metrics know what makes people tick when they watch television.
Google CEO Eric Schmidt isn’t shying away from the challenge though. He told the NYT, “If we can figure out a way to improve the quality of ads on television with ads that have real value for end-users, we should do it.” While he is watching television, for example, “Why do I see women’s clothing ads?” he said. “Why don’t I see just men’s clothing ads?”
In many ways, this seems like good old targeted marketing. The question is how tightly can the focus be narrowed. When one is watching a political news show like say “Hardball” or “This Week,” what types of ads would get put into those slots? It’s one thing to advertise satirical t-shirts in AdSense, it’s entirely another to command top dollar for TV ads, placed in key programs. But at the same time, it may stop peanut butter ads during Monday Night Football.
There’s lots of speculation about how they will achieve this. Some that includes Google’s own TV venue, maybe a satellite service of some kind or some variation on the DVR model. The only thing Google needs to get into the television market is a way in. Most of the major ad seller competitors own just about all the networks and cable channels with a few exceptions. While Google does have a partner ship with Comcast, they may need something more.
This may be one reason for the attempted extension of Google’s relationship with Time Warner and AOL. It could give them a way in to the TV market. Time Warner owns a cable distribution network as well a ton of television channels with both premium networks like HBO and others like CNN, TNT and many others. It’s doubtful that Time Warner would give up such strong revenues for themselves.
There’s no question, Google has become one of the big boys, at least in the ad market. The contextual ad model has put them squarely on the map and given them competitive power in a number of venues. As they continue to look for ways to build the company and improve revenues, they move into territory with firmly entrenched powers and they move in with a new approach.
John Stith is a staff writer for Murdok covering technology and business.
