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We’re Not a Technology Company Anymore, Toto December 14, 2006

Posted by Bill in Google, Search Marketing.
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            This morning’s Wall Street Journal had an article called “Google Tests New Ad Offerings–But Will Advertisers Follow?” by Kevin Delaney.  It serves as a chronicle of Google’s past, present, and planned future forays into offline, traditional media.  Will they work?  And will advertisers go along with them?  Not unless Google becomes a totally different company…

            What Google does well, better than anyone in fact, is PPC search advertising.  It is possible for a technology company to excel in PPC.  In fact, that may be the only way to do it.  PPC advertising is a numbers game; it’s more science than art.  It’s possible for advertisers to use an automated API to buy their keywords, write their simple ad copy, and track their results on a more granular level than any advertising media in history.  Granted, the tracking is not one hundred percent accurate, as searchers may click on ads multiple times from different computers before converting, or they may convert at a bricks and mortar store, but the tracking is accurate enough to allow advertisers to optimize their campaigns with minimal help from Google.  When it comes to PPC, Google is therefore able to focus almost entirely on their technology, while the keywords more or less sell themselves.  Google’s got the eyeballs, and it can guarantee advertisers that, if they’re smart, they will make money by buying keywords.

 

            In contrast, offline media does not sell itself.  It is sold via a personal relationship, with a big smile and lots of martinis, and often comes complete with plans that include useless remnant inventory.  If advertisers want a spot on American Idol, they often have to buy a billboard in the middle of nowhere that will get them a poor ROI.  Traditional ad networks can’t guarantee results the same way Google can in PPC, they can only offer rough estimates of reach, threaten demurrers with loss of market share to their competition, and, again, smile real big.  Unlike PPC advertising, it is not possible for a technology company to do well in this space.  You need to be a media company with a great sales team and lots of killer content.  It’s far more art than science; an automated API simply won’t be able to cut the mustard.


           
One thing Google mentions in Delaney’s article is that they can “track” response to traditional ads simply by examining the resulting search traffic.  That can theoretically enable advertisers to gauge the effectiveness of their ads, and thus optimize accordingly.  However, although it is a well known fact that traditional ads drive search behavior, there are far too many gaps between a traditional ad and search traffic for this measurement to be sufficiently accurate to sell itself.  Consumers may see the ad and go search on another search engine, or they may see another ad that the advertiser didn’t buy through Google and that ad may drive their search behavior.  Or perhaps they saw the ad and forgot about it for months until the advertisers’ products or services could benefit them, and only then do they turn to a search engine.  All the problems that exist in PPC but are too insignificant to tip the scales in the art/science balance are magnified in traditional media—magnified to the point where, even with tracking search behavior, art still trumps science.


           
So can Google become a media company?  Certain signs indicate that they are moving in that direction.  They now have a
New York office, a lot of lawyers, and are bulking up their sales team.  They certainly have killer content, and, especially with the purchase of YouTube, a burdensome load of remnant inventory.  Of course, right now, Google is so profitable that they don’t have to force advertisers to buy space on un-monetizable user-generated videos.  However, when PPC advertising’s growth slows (as it inevitably will) and Google’s revenue starts to fluctuate along with the rest of the economy, they may be forced to sell some of their junk in order to stay afloat and meet Wall Street’s demanding expectations.  So yes, Google can become a media company, but don’t expect it to revolutionize traditional media in the same way that it revolutionized online media.  If Google is successful, it won’t be the Google we know and love.  The new media baron will be the same as the old media baron.

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