Google, online ads and the economy
It’s no secret that Google is an advertising company. An online advertising company to be specific. Sure it has other things going, it’s hosted apps are doing pretty well and it’s struggling to find it’s hook into offline advertising - but as of now they don’t add up to a revenue stream that actually matters to the company.
I guess people worry that with the economy the way it is the G’s in big trouble. With its stock at $439 this morning well off its $747 high, it seems people are really worried. And then you read stuff like this adage article where it says that GM is going to move 50% of it’s advertising budget online over the next 3 years. To get to some numbers, according to the piece GM spent $197 million in 2007 - its ad budget is $3 billion.
Obviously, it’s not like they’re about to cut a check for $1.5 billion to Google, but my guess is that a lot of companies are going to be making similar shifts in their budget. It is happening already and seems like the process will accelerate in an economic downturn as online advertising is cheaper and much more measurable/actionable than it’s offline counterparts. And G always gets a good cut of that online ad money!
Add into Google’s equation their purchase of DoubleClick, recently approved. They didn’t buy them because of their people, they’re getting ready to fire a significant portion of them, it seems. My guess is that they didn’t buy them because of the technology, either. They have their recently announced Google Ad Manager - one of my clients has been using them for quite awhile now. It is great and it’s free.
My guess is that they bought DoubleClick for the clients - to basically jump start their entry into the display ad business because they saw the trend of more ad dollars coming in and wanted to get in on that action on as many fronts as possible. With AdSense already ruling the world how awesome will it be for your display ad solution to automatically fill your remnant space with AdSense ads, no extra work required? Why bother selling cheap ads or off loading extra inventory to some other network when you can go directly to the tap and pour yourself a nice cool pint of AdSense money?
Remember when G birthed Google Analytics into the world? How every website ever immediately started using it? While a significantly smaller portion of the world needs a display ad service than needed an analytics tool, there are innumerable small companies that do need them and have had fairly unsatisfying tools so far to get display ads for a reasonable price for the amount of money their ads make - what with the big boys (double click, 24/7, etc…) charging prices in the thousands. G Ad Manager will definitely grab that long tail of those sites, but I suspect that even fat head advertisers will want to get in on the action. It will be curious to see how Google differentiates DoubleClick from GAM or if they eventually merge into Devastator.
At any rate, I’m just saying… while everyone’s going to get hurt in the recession, it seems to me that Google’s relative position is really, really strengthening and their size will make them be hurt less and come out stronger on the other end.
March 20th, 2008 at 3:02 am
Search advertising is a strange business where is isn’t just one middle man but two. On one end are the web sites who provides the “inventory” of eyes. On the other end are the people looking to buy some of that inventory to put their ads on. In between are two middle men. One handles the needs of the publishers and one handles the advertisers. Google’s purchase of Doubleclick could be interpreted as them removing one of the middle man and letting them get closer to the customer.
March 20th, 2008 at 8:08 am
Hsin, exactly - Google wants a strong entry into the display ads market. It definitely makes sense and given the recent talks that ad networks could be the new big thing, they clearly need a strong stake in the game. I was curious, though, that given that they had Google Ad Manager in the mix which seems like an excellent contender with a killer feature (Google AdSense integration) that no one could ever match that they would spend the money and the bureaucratic focus on buying DoubleClick. I guess it jump starts them with a large client base at the same time as preventing someone else from acquiring them. Still, I would have liked to have seen what would have happened if they had just unleashed GAM on the world w/out buying DC. :)