Google: The ad dominator‾

Catherine Holahan
19 Apr 2007

Is Google gearing up to dominate the entire advertising business‾ Consider that this month alone, the search engine giant announced three major deals, promising to extend its reach in advertising for radio, television, and the Web. On Apr. 16, Google (GOOG) announced a deal with Clear Channel (CCU) to serve 30-second audio ads across the company's 675 AM/FM radio stations. The deal comes on the heels of a $3.1 billion agreement to acquire DoubleClick, a leader in online ad placement and tracking, and just weeks after Google signed a contract to deliver TV ads to EchoStar Communications' Dish Network (DISH).

The new partnerships include some big players in their respective fields. All irony aside, it's understandable that even giants such as Microsoft (MSFT) and AT&T (T) would seek to rein in Google's influence by raising antitrust questions about the DoubleClick deal. After all, Google already controls about two-thirds of the roughly $7.7 billion expected to be spent on online search advertising this year. If it gained a similar share of the $3.75 billion market for online display advertising"”the multimedia ads found in a fixed spot on a Web page"”many Internet advertisers would find themselves forced to deal with Google, whether they liked it or not.

It's simply hyperbole, as some critics charge, to characterize Google's recent deals as the beginning of a hostile takeover of the ad world. David Hallerman, a senior analyst at eMarketer, says the talk stems from general 'FOG'"”'Fear of Google.' It's an apt term considering much of the FOG originates from confusion over how much control Google really has in the advertising world.

Getting into a premium market

To date, Google has had one gargantuan advertising success. It developed an online auction platform enabling businesses, even those with little marketing experience, to easily bid for space to serve tiny text ads related to information Web surfers wanted at a particular moment. Most of these ads"”which exist primarily to drive traffic to Web pages and, ultimately, generate sales"”run on Google's own search results pages. The others run on partner sites, including those owned by Google's publisher network, News Corp.'s (NWS) MySpace, and Time Warner's (TWX) AOL. In the case of bigger sites, Google's search ads are often located on the side of the page, out of the way from the prime real estate given to display and video ads that publishers often sell themselves or through ad networks.

DoubleClick, with its history of serving and tracking ads from big-name advertisers on large Web properties, gives Google an opportunity to get into this premium market. Google could, in theory, leverage its technology to sell display ads on sites with which DoubleClick has a relationship. For example, if it is serving ads on AOL and knows what display inventory is available, it could ask AOL to allow its network of advertisers to bid on that inventory (see, 4/14/07, 'Google's DoubleClick Strategic Move').

The key here is Google would have to ask. DoubleClick's main business isn't auctioning off advertising. If say, AOL had a relationship with Nike (NKE), DoubleClick would track the performance of that ad"”how many times it was clicked on, how many times it was served, what sites people who clicked on the ad had recently visited. But it would not pair up Nike and AOL. DoubleClick does have a fledgling ad exchange that matches up advertisers and publishers.

However, publishers do not put their inventory up for auction just by being a DoubleClick customer (see, 4/3/07, 'Google vs.

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