MEDIAWORKS: Why should big agencies work with Google?
TIM ARMSTRONG: There are two very specific things that they get. One is just tremendous amounts of information from us. The notion here is they can get information that will help them make better decisions, both on the creative and on the media placement side. And testing things with hundreds of millions of users across the globe is a tremendous asset for the agency community. Google's tools and technologies allow agencies to not just make sure that their clients are getting to the large properties across the Web, but are able to actually scale into every individual place where media placements can happen.
MW: There's no advertising on Google Video, why?
MR. ARMSTRONG: The launch of video search was really more user-driven than it was commercially-driven. Our current monetization strategy focuses on selling videos individually so the user can go in and buy pieces of video that they find interesting or get them for free. We will test different ways to monetize it. One of those would be advertising.
MW: How long before you approach advertisers?
MR. ARMSTRONG: It's hard to pinpoint the moment when a product comes out of beta and becomes a full-fledged product. I don't think there's a current timeline.
MW: How are your pay-per-view efforts working out in the video store?
MR. ARMSTRONG: We're not releasing numbers on individual downloads and the success of the e-commerce program. That being said, we've seen some exciting areas, such as the National Basketball Association's making live games available 24 hours later. When Kobe Bryant had his 81-point game, people who maybe normally wouldn't have been able to see clips from that came and watched. There's interest in very specific types of video content, whether it be entertainment or an area that's growing quickly, like the how-to section of video. Those are areas where people are downloading and buying.
MW: Any sense of how long it would be before you'd be approaching advertisers to buy against the video content?
MR. ARMSTRONG: That's something at Google that comes from the secret sauce of how we try to build the user products. There's a certain point at which the product comes out of beta and becomes a full-fledged product and it's hard to pin that point down because typically there's a lot of aspects that go into when a product comes out of beta. So I don't think there's a current timeline on that right now. So we are looking forward to testing certain things right now, but there's no current timeline.
MW: You've tested print and radio ads with Google as a broker. Is TV next?
MR. ARMSTRONG: TV is a very natural progression for Google, but we don't have any current plans in TV right now.
MW: Would you talk about the testing you are doing with dMark, the company that Google acquired that offers the ability to insert ads into radio airplay through an online interface?
MR. ARMSTRONG: DMark is a company that we were interested in and spent a lot of time with over the course of 2005. The main interest for us was bringing the same type of metrics and accountability and reporting to the radio space that Google has really tried to pioneer on the Web environment. If you were to think about a product that Google might build for the radio environment, dMark would be it. It's a company that had built a product which allows for real-time reporting on ads. It allows for dynamic insertion of advertisements and, eventually, a higher level of optimization for those ads. So that was one of the major attractions -- the accountability, measurement and optimization.
The other area that we felt was important is the ability for the radio stations themselves to better use their inventory, for a radio station to provide their users great ads and be able to make money from those advertisements. DMark gives the radio industry itself a more highly customizable way to make sure they are getting the proper yields out of the stations themselves. So overall, we see the long-term integration here in a seamless way, where our current online advertisers will be able to use the dMark radio network and be able to have cross-accountability for ads through not only the Web, but also through radio.
MW: Are you testing that with advertisers?
MR. ARMSTRONG: The deal isn't closed yet between the two companies so we will be working on that after the deal closes, and we'll be talking to advertisers about that in the coming month or two.
MW: So you'll be doing with radio what you are already testing with print ads?
MR. ARMSTRONG: The print test is a little bit different in terms of it's more of a research-and-development project right now. Specifically, the dMark program was further along than the current print program is. But the print program itself ... we had an exciting day with our first print auction for space with 22 publishers. The notion again here is that advertisers over the course of time and the publishers themselves in the print space will have the same type of experience that the radio people have had with dMark, which is the advertisers have more diversity of choice, more accountability, more measurability for the advertisers. The publishers will have better yield management and the publishing industry in general already takes a lot of third-party-type monetization help from outside people. So if you are the publisher of a magazine today, you typically have your sales force and then you have your third-party partner who might give you revenue. Google fits squarely into that current model in the magazine space.
One of the other things we're hoping to do on the user front, both in radio and in print, is to create the ability to connect users with more types of diverse ads that are more relevant over time. In these different areas that we've been discussing -- radio and print -- we want to do the same thing that we've done online. We feel there could be a win for the advertiser, a win for the publisher and an outcome which is great for the users of the world, which is more relevant advertising.
MW: There's a theory at Google that a company could advertise every product they make at the same time. Is that affordable?
MR. ARMSTRONG: What we discuss at Google is the notion of being able to see all of a company's assets, all of their products and services and being agnostic to the medium you're advertising in -- whether it's Web, radio or print. Let's say Acme Corp., a major retailer of electronics, only advertises a small subset of their products and services to the general public -- let's say 200 out of the 3 million products they produce -- because of scale constraints of the analog media world. Acme is going to get to a very small sub-segment of the people who may be interested in going to their stores or online properties. In the digital world, Acme would be able to put out all 3 million products. Every asset a company has is valuable. If you can advertise all these products in a scaleable, profitable way, advertising turns into a profit center.
MW: You've said that Google will push more branding ads in the contextual advertising space. How will that work?
MR. ARMSTRONG: If you were a company like a Coca-Cola and were going to launch a summer solstice-type promotion, [we offer the ability] to take an agnostic look across the Web, not a site-specific look, or even a content-genre look, but to actually say where are there specific pieces of content or related content that relates to summer solstice. Coke can build their own targeting network, on a global basis, specifically around the content they are interested in.
MW: To what extent will the business development deal with AOL provide opportunities for media buyers?
MR. ARMSTRONG: There's three specific areas to the Time Warner-AOL deal with Google. Our main interest in doing the relationship was to help AOL take the very powerful and rich content that they had in the AOL environment and help them move it to the Web. What it means for media buyers is the ability to probably reach more people in the former AOL environment now that AOL content will be linked across the Web and Google is going to help that. So purely as a media buyer, there's probably opportunities to do enhanced relationships with AOL.
The second piece of it is the ability for AOL to be more of a principal in the search market. Media buyers, through an AOL sales rep, will be able to buy not only branded ads, but go through the search environment in terms of advertising, as well, and run on AOL with a Google-powered platform. That's been a great relationship we've had with them and this will give them an opportunity to let them sell search ads, which we think is fantastic.
The third area is really more access to the Google content network. And, the Google content network itself is made up of thousands and thousands of properties, which are really important because our own sales team sells into those. The AOL sales force will be able to sell brand ads across our content network and our display advertising.
MW: Your content network encompasses what exactly?
MR. ARMSTRONG: About half the traffic on the Web comes from outside of the top 9,000 properties. There's literally millions of properties that constitute half, or over half, of the traffic to the Internet. Google's content network is a program that Google as a company has taken our technology and understanding of indexing content and applied it to the advertising business where Google's advertisements runs across a large sub-segment of those sort of unreachable sites in a lot of cases. The ability in the AOL deal, and the ability normally with dealing with Google's ad program, is the ability for customers to do very, very local-level targeting across sites that probably have been out of scale and out of reach in the past. And the ability within the Google content network is the ability to get very high-scale, and very specific targeting criteria. Last year we launched the ability to do display ads or branding ads within that environment, and the AOL deal will be an enhancement to that offering and will give AOL customers more access to that network. And it will allow our publishers in that network to have more access to more types of Google and AOL ads.
MW: What's next for Google Earth?
MR. ARMSTRONG: Google Earth specifically has opened itself out and not from an advertiser standpoint, but from a user mash-up point of view. Advertisers are programming directly into Google. So if you happen to be a Fortune 500 real estate company, you can actually put all your listings into Google Earth. And although that's not paid advertising, the ability to use a Google product to show the world your available inventory, we think that's great for users. We think that's great for Google Maps. Google Earth is something that has no specific plan right now for monetization and may never have that. But it's something that the ad community should be interested in because it's a wonderful opportunity.
MW: Where will Google be in five years?
MR. ARMSTRONG: Well hopefully Google in five years will be on a lot of people's minds -- just from a user experience. Our premise about the ad business specifically is that the ad business is not a zero-sum game, meaning that there is going to be a lot of people who are successful across the business, and hopefully Google will be one of those companies. More importantly than where Google is in five years is that hopefully the ad industry will be much healthier than it is today and much larger. When you combine the notions of a digital user and the digital versions of a company's assets, and the ability to do digital targeting, you are potentially looking at a company that could be much larger in scale in five years than it is today.