Impressions Count

  |  May 5, 2005   |  Comments

Google ushers in online advertising fuzziness -- which is not as bad as it may sound.

There's been no shortage of extraordinary industry news over the past two weeks. Not only did Google and Yahoo report enormous quarterly earnings to kick off the year, the Interactive Advertising Bureau (IAB) reported 2004 online ad spending was even bigger than it'd originally projected. AD:TECH San Francisco, something of an industry bellwether, was jammed with over 6,500 people and will move to the Moscone Center next year -- a far cry from the table-top displays at the first AD:TECH back in the late '90s.

In traditional media, the week was full of announcements and pronouncements about the health of the newspaper industry. The Audit Bureau of Circulations released its semi-annual circulation figures... and they were bad. Across the board, and with very few exceptions, newspaper publishers experienced the largest drops in reported circulation in 10 years. The decline appears to be accelerating.

The biggest news (in my mind) was Google's launch of site-based targeting in its ad network. The new offering permits advertisers to deliver graphical ads targeted to particular pages on specific sites. Most important, the ads will be sold on a CPM (define) basis, so advertisers pay not for clicks or conversions but for presenting ads to online audiences.

Can this be true?

In this age of accountability, when sophisticated analytics systems permit us to link ad delivery (impressions) to audience interactions (clicks) to e-commerce sales (conversions), and when CPC (define) search advertising attracts billions of dollars due to its performance-oriented pricing, why would the search advertising leader release a product that prices advertising the old fashioned way: on impressions?

Simply put, Google recognizes impressions count in online advertising.

Online advertisers can track clicks and related online sales with extraordinary precision. Brand advertisers, meanwhile, realize the overwhelming majority of online ad-influenced sales don't occur online. They happen off-.

As impressive as Google's numbers and its reach with advertisers are, the search engine hasn't cracked the large advertisers, particularly national brand advertisers. It owns the online direct sellers. Amazon.com, eBay, and IAC are enormous Google advertisers. What it doesn't own (yet) are advertisers who seek engagement with consumers. Google hasn't had a product to sell to advertisers who want to deliver effective messages to specific consumer types in specific content types. A site network and graphical ads are big steps in that direction.

Google can dramatically change the economics of online brand advertising. Here are some potential results:

  • Lower overhead. Google brought extraordinary scale and efficiency to search, search marketing, and text link advertising. This dramatically lowered overhead for advertisers and publishers alike to participate in the market. It made online advertising much more accessible. It'll likely do the same in online brand advertising.

  • More competition. Lower costs and more access mean more competition. Advertisers will compete with each other to deliver impressions in the best sections on the best sites. Large online publishers will find themselves competing with smaller and niche publishers. Pricing for all online brand advertising will be influenced, if not determined, by Google's auction. In some cases, this will mean much higher prices for certain inventory. In other cases, it will mean much lower rates.

  • Better consumer experience. Consumers will be the biggest winners, no matter what. They'll see more relevant ads.

  • More complexity for publishers. It will be hard for publishers to ignore the incremental revenue Google can generate. This will be balanced by other issues: sales channel conflict; ownership of advertiser relationships; and ownership of audience data. Competition will demand publishers replicate comparable service levels and cost structures to survive. How many publishers can manage a full sales, serving, inventory management, account management, and technical support operation for 10-20 percent of ad revenue? Almost none; yet that's what Google is reported to be offering publishers in its network. What's certain is publishers must learn to compete at those levels, whether they play with Google or not.

  • More online advertising fuzziness. Although much of our attention these days is on perfectly quantifiable, fully actionable advertising analytics, Google's move into brand advertising promises fuzziness will be part of online advertising. In a world where impressions count, where you don't know whether your message was seen, understood, or acted on, the fuzziness that's long been associated with advertising will carry significant weight. In the Google Network world, as many decisions are likely to be made on gut intuition, emotion, and competitive anxiety as on hard return-on-investment (ROI) analysis. Salesmanship will matter as much as the graphical user interface, bid management tools, and precise analytics.

Google probably just made the market better. Let's hold on tight and see where this takes us.

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ABOUT THE AUTHOR

Dave Morgan Dave Morgan founded TACODA Systems in July 2001 and serves as its CEO. TACODA is a pioneer and leading provider of behavioral-targeted online advertising solutions for driving quality branding relationships. TACODA delivers advertisers high quality, targeted audiences from premium sites, powering successful online advertising campaigns. TACODA-enabled Web sites, which number over 2,000, reach over 70 percent of the U.S. Internet audience monthly. Its roster of customers, mostly Fortune 1000 business, includes branded national, regional and vertical sites, and 75 percent of the top 20 U.S. newspaper companies. Customers include the New York Times Digital, Weather.com, iVillage, Gannett/USATODAY.com, The Tribune Company, Belo Interactive, BusinessWeek.com, About.com, Advance Publications' Advance Internet and Forbes.com. Virtually every top 50 online marketer has run campaigns on TACODA-enabled sites, including travel, automotive, packaged goods, consumer/health products and consumer electronics companies.

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