Some marketers and publishers suggest the latest move is a radical departure from Google's core business, morphing the search company into an advertising network with potentially broad appeal for brand advertisers.
Called Site Targeting, the new program, which Google said will be commercially available in "weeks not months," seems designed to attract more business from Google's existing blue-chip advertisers.
Currently Google has two advertising programs: AdSense, which automatically delivers text and image ads on Web sites with relevant editorial content; and AdWords, which provides keyword ad links on Google's search result pages. Google posted record revenue of nearly $1.26 billion for the first quarter, up 93% year over year; all but 1% of that revenue came from advertising.
More control of where and when
According to Google, Site Targeting gives advertisers more control over where and when their advertising messages appear, what they look like and how they are priced. The program allows advertisers to buy bannerlike, animated image ads on a cost-per-thousand basis rather than Google's usual cost-per-click model. They will also be able to set a maximum CPM they are willing to pay on each site. And unlike AdSense, marketers using Site Targeting will be able to specify which Web sites run their ads and for how long they appear.
"The advertiser wants to have more flexibility, wants to reach segments in massive scale, and they've been asking for more creativity," said Patrick Keane, head of sales strategy at Google. "Right now they are used to text and static images."
Keane said the enhancements to AdWords will benefit b-to-b advertisers, supporting the longer consider cycle for b-to-b purchases. "The real hardcore b-to-b marketers will have the opportunity to touch customers across the Web with more than just text," he said.
CPM pricing puts search advertising on par with other media, making it easier to buy and manage. Site-specific targeting, meanwhile, more closely reflects a traditional advertising model.
"It's very good news for us," said Fred Neil, VP-strategic marketing at CDW Corp., an IT products retailer. "We're highly targeted and segmented in our business approach. By going out and buying keywords, we can't differentiate between consumer and business traffic. This would give me the ability to target small business and enterprise businesses as opposed to consumer traffic," he said.
An agency executive involved in the Google tests is bullish about the changes. "We think it's a potentially great benefit for our clients," said Rishad Tobaccowala, chief innovation officer for Publicis Groupe Media. "It gives the advertiser a larger palette of options, and we always like more options."
A turning point?
"They're staking out their territory as an advertising company," said Gary Stein, senior analyst at Jupiter Research. "They are now officially an advertising technology company as opposed to a technology company. This is what advertisers have been asking for."
But not everyone approves. "I think it could be disastrous for Google," said Kevin Johnson, senior VP-product development and marketing at Digital Impact, an e-mail marketing company. "They're selling their soul." Johnson said the new program has nothing to do with search, the platform on which Google built its brand and reputation.
But Stein doesn't agree. "If they opened up a Google used car lot then yes, maybe," Stein said. "If they were seen as sacrificing their brand equity, then that could be disastrous, but I think the Google brand is extremely resilient and it is evolving as all brands do," he said. "It's a pretty reasonable evolution of that company."
Why does Google want to become an advertising network? "Their network already exists," Stein said. "DoubleClick has not been a network for a number of years now. But the ad network business model is a good one."
With search currently the fastest-growing medium, it's no wonder Google would want to grab a greater share of spending from brand-driven advertisers that spent $141.1 billion advertising online and off in 2004, according to TNS Media Intelligence.
The new program will be a win for publishers, too, Keane said. "It'll allow them to get at the large, brand-driven advertisers," he said.
"It's going to be an attractive, viable, easy way to generate online revenue that we could not do in another way," said Rex Hammock, CEO of Hammock Publishing, a small b-to-b publisher that has used Google's AdWords. He said he will certainly look closely at the latest program, once Google launches it.
However, Hammock said that the long-term implications-particularly for large publishers-could be less positive. That's because, as Google becomes an advertising sales representative, it could usurp publishers' power, he said.
"In a matter of months, Google will be the 800-pound gorilla of yet another form of online advertising," Hammock said. "It will work for a lot of publishers, but there are some major publishers that will feel queasy going into that relationship." These media companies will be ceding to Google a significant part of their advertising business, he said.