The search giant insisted the move was only a test. But what terrifies Madison Avenue is the idea that Google, which is already seen as a disintermediating force allowing marketers to buy their own online advertising and work out their own messaging, could feasibly become a direct-to-marketer, one-stop-shop offering advertisers print as well as online inventory.
And why stop there? "They pick up print first, and maybe they'll go after the Super Bowl eventually," said Gary Stein, senior analyst, online market-research firm Jupiter Research.
Even media sellers appeared concerned, several expressing confusion about Google's intent. Of course media sellers would have the option to turn down Google's offers, but it is always regarded as risky to turn down business a competitor may take.
Some of the print ads in question appear in Ziff-Davis' PC Magazine and Maximum PC, published by Future Networks USA, and are fractions of full pages purchased by Google on behalf of its AdWords clients. (AdWords is Google's contextual advertising program through which sponsored links appear on publisher's Web sites that are relevant to those links. For example a florist's sponsored link might appear on a tuxedo rental company's Web site.)
There are five ads in PC Magazine appearing in the Sept. 6 issue, which is on the newsstands. Six more ads are slated for the Sept. 20 issue. The AdSense clients paid a flat fee to participate, and each ad has a direct-response call to action in the form of a URL and a toll-free telephone number. One of the advertisers, Michael Keen, president of Inksite.com, which sells toner ink and cartridges, said Google offered him a special toll-free number through which Google would track response. Mr. Keen declined.
But that tracking ability, which almost turns Google into an offline media-measurement device, is what may appeal to marketers. Google can implement a cost-per-call ad model for the toll-free phone number, as well as its existing cost-per-click system. "When the [magazine reader] responds, it's kind of like pay-per-click," said David Hallerman, senior analyst at online market research firm eMarketer. "It's Google's extending its brand to new mediums."
That's the kind of accountability marketers love-and that threatens the agencies. After all, Google's search-bidding technology is set up in such a way that marketers can place their bids automatically. "I understand why people are nervous," said Renny Gleeson, managing director, New York office of Carat Interactive. "If Google can aggregate enough media, theoretically a well-informed, educated client can take care of their media buying themselves through an interface."
For PC Magazine, the arrangement ushers in the small and medium-size business advertisers that are otherwise priced out. "It's a whole new revenue stream," said Jason Young, president, Internet and consumer publishing at Ziff Davis Media. He said the test is slated through 2005.
Google is mum on specific plans and long-term strategy. It said in a statement, "This limited test is part of Google's continuing effort to develop new ways to provide effective and useful advertising to advertisers, publishers and users."
But analysts have long said Google, which went public last year and whose revenue rivals the nation's largest TV-centric media companies, would need to diversify beyond search to remain vital. Search has enjoyed spectacular growth in recent years, and is expected to make up 40% of the anticipated $12.9 billion in online ad revenue in 2005, but will slow to 24% growth in 2006, according to online market-research firm eMarketer. "Expanding into other media, using the same pay-per-response model offline is a brilliant idea," Mr. Hallerman said. "It gives Google more reach."