Google to Sell Newspaper Ads

Stop the presses! Google extended its advertising model to that most mobile of media, the newspaper. It sounds crazy, especially in light of the reaction to certain advertising moves the search engine made earlier this year. But this latest maneuver just might be more successful.

Google started the program in the fall with a small-scale test that included the Chicago Tribune, the New York Times, the Washington Post, and about a dozen other newspapers. The full-scale test will allow 100 advertisers to run their ads in any of 50 participating metropolitan newspapers, including the Boston Globe, Seattle Times, Philadelphia Inquirer and a variety of papers belonging to the Gannett Company. Advertisers will use the AdWords interface to place their ads.

During this larger three-month test period, Google will forgo its commission on the ads. If the test is successful, Google may expand the program to all of its online advertising customers – and will no doubt begin taking a commission. Currently, its commission for its online ads is about 20 percent.

It’s actually a little more complicated than it sounds on the surface, and it works rather differently from the way a standard AdWords ad works. “This test is not an auction and we are not buying and reselling ad space,” explained Google spokesman Michael Mayzel. Advertisers can pick specific papers, and even specific sections of papers, in which they wish their advertisement to appear. Newspapers, in turn, set prices for ads, and can reject ads based on whether they have room or whether the ad meets the paper’s standards of taste.

So the system may not be an auction per se, and it boasts certain important differences from the standard AdWords system (mostly revolving around control), but “This is a system in which advertisers will be bidding for space in the newspapers the way they bid for ads on the Web,” insists Owen Youngman, vice president of development for the Chicago Tribune.

This isn’t Google’s first foray into offline advertising, or even the search engine’s first attempt to bring its advertising model to the print medium. Sharp-eyed analysts knew something was afoot when Google bought dMarc Broadcasting back in January. That company is involved in radio advertising, and Google recently announced that it would be testing radio ads. Even before Google’s announcement, it was anticipated that an AdWords-based program that would allow advertisers to bid on air time for radio commercials would increase the efficiency of the field.

In May of this year, Google revealed plans to distribute video ads from advertisers. At the time, some observers speculated that these video ads could eventually be extended to television, thus giving advertisers with small budgets access to a medium that has historically required far more money. Google’s recent purchase of YouTube, however, hints that the search engine may have something else in mind; with video taking off all over the Internet, a vast audience can be reached online before turning to TV. (Besides, there’s always TiVo to take into account; why would a viewer be less likely to zap an ad received at the station via Google than any other ad?).

But the program that most strongly parallels the recent launch into newspaper advertising was Google’s venture into magazine advertising. It let advertisers bid to have small ads placed in magazines at a discount from the publications’ traditional rates. The program was supposed to be helpful to small advertisers, who could place their ads in relevant publications, and to “esoteric” publications who may find ad placement a challenge. “They don’t tend to have as large a sales force, [and] if we make the ads really useful, then their publications become better,” explained Jonathan Rosenberg, Google’s senior vice president of product management, when discussing the initiative in a conference call. But offline print advertising “hasn’t taken off as fast as we would like,” he confessed.

So how is this different? For one thing, Google didn’t buy up space in lots of newspapers. The newspapers themselves control whether or not they’re going to use the ads, not Google. In fact, in a letter inviting advertisers to participate in the program, Google plainly states that it “cannot guarantee that your ad will run.” The program also gives advertisers more control than they normally have with AdWords. With the standard AdWords program, advertisers often can’t control the ultimate placement of their ads; with this program, they pick the paper and even the specific section. This helps with targeting ads to a particular demographic.

The benefits of the program for Google should be pretty obvious, so I’ll skip over those for the moment. So let’s take a look at the benefits of the program for the other two participants: advertisers and newspapers. To understand that, it helps to have a little background.

Newspapers have been suffering as the Internet has been becoming more and more popular. They have seen seriously declining subscription rates and newsstand sales. Where they’ve been hurt most, though, has been in the area of classified advertising. As with many websites, newspapers get their revenue from their advertising; splash ads that take up part or even all of a page may sell for a lot of money, but it’s the classified ads that make up a newspaper’s bread and butter. Sites such as Craig’s List, Monster.com, eBay, and others have been luring smaller advertisers away from the classified section and into online venues. Some companies don’t even advertise job openings in local papers anymore, but go directly to Monster.com or CareerBuilder, or simply advertise the opening on their own web page.

Faced with this kind of crisis, it behooves any newspaper that wants to stay alive to experiment with new formats in the hope of generating interest. Gannet, for example, said that it will begin looking to reader-created “citizen journalism” by mining online community discussions for articles as well as make other changes that will bring online and offline staffs closer together. The fact that the newspapers themselves control whether they will accept any ads from Google, and which ones, gives them the flexibility – and revenue – they need while they go about reinventing themselves for the digital era.

As for the advertisers, it gives them exposure to an advertising medium they may never have used before. Thus, it lets them reach a fresh audience. And it gives them a certain degree of control. Take EBags, an online handbag and luggage store that has not yet ventured into print advertising. Peter Cobb, co-founder and marketing director of the company, notes that choosing certain sections in certain papers may not be identical to targeting via keywords, but offers similar benefits. “You can target professional males in business and sports sections and women in living and style” sections, Cobb observed.

While advertisers and newspapers stand to benefit from the program if it is successful, there are certain risks. Perhaps the greatest risk I’ve seen mentioned is that, if it does succeed, it will make Google stronger, giving the company an even more dominant position. If you’re scratching your head wondering how this new service could make Google more dominant in the search engine market, you can be forgiven. This move isn’t really about search anymore; it’s about marketing.

Take it from Internet advertising analyst Greg Sterling. “Inevitably, the Internet will be used as a platform for buying advertising in all forms of media,” he notes. It’s hard to beat the Internet’s advantages when it comes to purchasing ad space: it’s fast, it’s flexible, most companies who would be interested in advertising have access to it (as do most companies that would be interested in carrying ads), and so on.

Indeed, according to Saul Hansell of the New York Times, that’s a factor in Google’s long term plans. “For Google, the test [of the newspaper advertising program] is an important step to the company’s audacious long-term goal: to build a single computer system through which advertisers can promote their products in any medium.” Such a system, once set up, could leave newspapers in the same position as many AdSense publishers: beholden to Google for ad income.

It seems unlikely that newspapers would allow this to happen, but in the long run they may not have much choice. “Every day in the newspaper we have a fair amount of space we set aside for ads that we are unable to fill,” Youngman pointed out. “Google says they can bring us thousands of small advertisers for space we would otherwise fill with house ads, and we say ‘Great.’”

But will it actually work, given Google’s stumbles with magazine ads? Google CEO Eric Schmidt made an observation back in June that should be kept in mind: “People forget, even inside our company, that the model that is working so very well for us today [online] took a couple of years to get really right. My guess is that for each of these new major media initiatives, we’ll have a few cycles of trying to find the right combination that really takes off.” It might not take off today or tomorrow, but you can expect to see Google keep trying until it gets it right.

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