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Why Google Print Ads Didn’t Work… And Why Its Radio Ads Will! July 17, 2006

Posted by Bill in Google, Online Auction Tips, Search Marketing.

I have one word to say about why auctions work. That word is “scarcity.” Scarcity’s the only reason anyone would enter an auction, and scarcity’s the only thing that keeps people in auctions, even after bid prices keep moving up. And scarcity explains why Google Publication ads–its auction-based print ad network–hasn’t worked; and why its entrée into radio advertising will be a hit.
Auctions, after all, aren’t always so fun. In non-auction place markets, sellers deliberate meticulously before the slightest price change; they also need to keep their pricing competitive–and so sellers provide a dual reason why truly runaway price growth is uncommon.
But sellers are behind the scenes in auctions. And so auction prices typically skyrocket in a very short time. That’s never an enjoyable scenario for buyers; and so, if they can avoid it, rational shoppers choose not to play whenever they can. To enter into an auction, buyers need to have a real incentive.
That incentive is scarcity. If there’s something that people really want, and there’s no other way to get it than through an auction, then they’ll roll up their sleeves and bid. That’s why Sotheby’s–which has a monopoly or near-monopoly on everything it sells–is able to sell all of its merchandise via auction. It’s also why eBay positions itself as a place to find hard-to-find items, or hard-to-find deals: if you could find what you’re looking for just anywhere, you wouldn’t be sitting through an auction for it on eBay.
Based on the scarcity principle, it’s surprising that Google didn’t foresee the less-than-stellar performance of Google Publication Ads. Print ad space, after all, is quite plentiful; what’s more, print pubs can always add pages to meet increased advertising demand. In other words, more advertisers means less scarcity, not more. And since there’s no scarcity principle at play in the world of print, advertisers were bound to steer clear of print ad space auctions. (Based on the scarcity principle, Google could have created a highly successful auction marketplace for print, if it had stuck to auctioning off truly coveted real estate–like the inside back cover of magazines.)
The fact that Google overlooked the scarcity principle is particularly surprising when you consider the fact that its search auctions–its flagship enterprise–drive increased yield (CPC and effective CPM’s) because of the lack of supply. Searchers looking to buy the things people sell are highly valuable; and, since there’s a limited number of them in any case, they’re also scarce. Marketers understand this, and willingly pay high search-click costs to participate in Google’s search auction. If they want the high-quality search traffic, there’s no other choice.
But even Google’s entitled to an occasional mistake, and Google’s purchase of dMarc–one of the most venerated ad networks around–proves that they’re still the top pros. Radio ad units, after all, are highly limited stuff: there are only so many radio channels; there are only so many hours in the day; and there are even fewer hours during which radios air ads (the rest of the time they’re airing programming). Plus, the most valuable advertising times only happen twice daily–during morning and evening rush hour. Since radio advertising is rife with scarce, valuable opportunity, it’s a great framework for auction media–making it the perfect next arena for Google. (That same argument, by the way, also applies to television–and it will be interesting to see how long it takes before Google enters that business.)
And so with its new radio enterprise, Google’s found its new source of scarcity. Which is why I predict big things for Google radio advertising. And, to put my firm’s money where my mouth is, I’ve had Did-it set up its search auction management systems to manage radio ad auctions, as well.
For the record, there are those in the industry who aren’t so confident just yet. In an e-mail he sent me on the topic, Matt Spiegel, managing director of Resolution Media (an Omnicom Company) wrote: “Looking forward, I think this makes sense for Google and the industry. [But] my immediate question is whether the industry is really ready for this… almost all of Google’s relationships are with online/interactive departments–and these are not the same people who are responsible for, or know anything about, buying radio.” So depending on who you ask, it’s a great idea that’s before its time (Spiegel’s take), or just a great idea (my approach).
We’ll have to wait and see who’s right. In further columns within this space, I hope to share insights on how Google’s radio advertising is going for us–to see if the industry is, or is not, in fact ready for this…



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