Google already makes many in the old media field tremble with fear. Book publishers and news agencies are suing the company for copyright infringement, even as some online news sites carry the search engine’s ads. But Google’s latest moves should really send a shiver down old media’s collective spine.
You see, Google didn’t invent search-fueled online advertising, but it did popularize it. In doing so, it created the biggest revolution in advertising in literally decades. Billions of advertising dollars now flow to search-based online advertising. Unfortunately for old media, these dollars don’t represent expanded advertising budgets so much as money being diverted away from other advertising venues…such as radio, television, and everything else we think of as old media. Old media has at least one thing in common with Google: it meets its budgets not by users paying for its content, but by advertisers paying to use its space. So the new advertising model hurts old media where it lives.
The key to the new advertising model is that the online ads run near search results, when people are looking for what the advertiser is offering. Plus, thanks to technology that tracks this information, advertisers only pay when someone actually views the ad, or even when someone clicks on it. This may seem like old hat to SEOs now, but this kind of accountability is literally impossible with older media. John Heilemann, writing about a related topic recently, observed that “Madison Avenue [is] in a state of panic over Google’s reinvention of advertising as a science driven by algorithms instead of an art propelled by (ahem) ‘creativity.’”
They’re right to be afraid. Anyone who has been watching knows that Google will not limit itself to the online world—which would be bad enough for an industry dependent on advertising. The search engine is already working to extend its advertising model into old media’s turf. That’s a cause for fear, but also for opportunity. Because, ironically enough, if old media companies are prepared to think outside the box, these ventures could actually save them.
Google actually began venturing into print media advertising last fall when it purchased a bunch of full page ads in PC Magazine. The search engine then sliced up the space and sold the pieces to other advertisers. One can assume that Google turned a profit on the deal.
Since one of the key advantages to online advertising is the ability to track it, Google gave buyers of the print ads a special toll-free number to use. In this way, they could tell which leads (and how many leads) they were getting from the ads. According to some of the advertisers, the results left something to be desired. Google had predicted a response rate of one to two percent of a magazine’s readership base. Some advertisers complained that they didn’t see even half that.
Undaunted, the search engine is trying again. In early February, it opened the bidding in an auction for advertising space across more than two dozen magazines. Interestingly enough, Google stated that its attempts to try advertising in magazines and newspapers were motivated by requests from existing AdWords users.
This is the way the auction worked. Prospective advertisers were advised to check the data for each magazine, such as circulation, demographics, and household income for readers to help them decide which magazine or magazines to advertise in. Magazines normally collect that kind of information anyway for more standard advertisers.
Then, advertisers chose an ad size: either full page, half page, or quarter page. Full page ads were a little more than eight by nine inches. Once an advertiser chose the size of the ad, he had to choose which issues to advertise in. Finally, advertisers filled out a form in which they entered maximum amount of money they’d be willing to pay in all of the selected issues. If you won the auction, you wouldn’t pay the maximum price; Google would reduce your actual cost to the lowest price needed to win the auction.
The lucky winners found out via email. We won’t know for a while how well this plan will work, however. Ads start running in April. It may have more of a chance for success than the original pilot program. The ads will be running in magazines that have varied readerships. Advertisers should be able to better target their audience this way; after all, a product or service suited for PC Magazine readers might not strike a chord with Ellegirl and Martha Stewart Living readers!
No, the search engine giant has not purchased its own radio station—yet. But in January it did spend $102 million to acquire DMarc Broadcasting. DMarc and Google actually have a lot in common: they’re both in advertising and they’re both using high-tech methods to make their industry’s advertising model a lot more efficient.
DMarc created an automated system for radio advertising. About 5,000 radio stations use its service, which lets them fill their unsold inventory of advertising space with just a click of a button. In this way, space that would have gone fallow brings cash to the stations instead.
This literally could not have been accomplished with the standard model for radio advertising. “If you can think back to the old days, to do this, you’d have to call all the stations individually and ask what’s available,” reflects Michael Douglass, general manager for a company that uses DMarc’s system. “With the advent of digital technology, it can be accomplished very effectively and efficiently.”
The technology also lets users track their advertising much more quickly and accurately. Customers of the service have online access to their information on a real time basis that, again, simply was not possible before. One media buyer enthused, “I can find out when my spot aired and where, rather than waiting for three months for an affidavit from the station.”
The DMarc computer system could let Google bring targeted ads to radio in very much the same way it targets ads with its AdWords service. Google might even be able to expand the system beyond traditional radio, to include satellite radio and digital HD radio. Advertising in such venues would allow even more precise targeting of the audience.
There are a couple of ways Google could bring its advertising model to television. One way would be to expand the DMarc system. But there are other ways.
Google’s online video store features reruns of shows from CBS and PBS, which purchasers can view on Internet-connected PCs. Google could take this a little further with TV set-top boxes. Google CEO Eric Schmidt, in thinking about future possibilities, pointed out that “Cable, satellite, telephone companies—they are all putting devices in the home that make it possible for our computers to find them. That makes it possible for us to, say, address men who are 20 and in college, buy a lot of music online and also voted in the last election.”
Again, this is the kind of targeting and tracking that old media have not been able to deliver. If they want to compete with Google, they need to do that—but they might be missing a wider opportunity by not considering what it is that Google actually threatens.
Google is no threat to content, be it radio, TV, or print. It is, in effect, a large advertising company. If old media wants to work with Google (which I think would be in their best interests at this point), they need to make sure that Google’s advertising payments to them help pay their bills. They can do that by targeting their content profitably. They can also diversify their revenue streams by charging for their content. Some are doing that already, by selling TV shows for a nominal fee in places such as Apple’s iTunes.
There are also things that Google can’t do, for which some parts of old media might be able to fill in the gap. For example, Google can’t produce a TV or radio commercial, but if a lot of small sellers decide to advertise this way, someone will have to help them create their spots. Remember how eBay spawned businesses who serve people who want to sell items on eBay? You bring them your item, they handle the rest. Mini-production companies could help small advertisers; these could range from one-person start-ups creating radio commercials to a small segment of an old media commercial production company branching out into a different market.
It should never be forgotten that old media has two products to sell. One of them is its content, to readers and viewers, and the other is its audience, to advertisers. It may now have a third product it can sell on a small scale: its expertise. But to have a hope of doing that, it must make sure that its content attracts the right audience for its advertisers—remember, with all the options out there, old media has needed to become more like the Internet, appealing to niche tastes. Once old media is sure of the value of its different audiences, it can tell small advertisers, “You can see from what Google is telling you that you will have a nice ROI advertising with us. We can also build you an attractive commercial to help you.” Thus, one way or another, old media can focus on what many of us think it should do best: create content.