Let’s start with some eye-popping numbers….
On Friday an article ran in the NY Times on Google’s advertising profits surging in the second quarter. Your own AdWords account may or may not be leading you down the road of economic recovery, but Q2 for Google is showing sizable profits.
Here’s what’s got me taking notice: Google may be the established lead (and to some policy makers a near monopoly) in search advertising, but contextual advertising is still a frontier. Do some digging and it seems much is in flux with the Content Network.
The original online version of the NY Times article ran with slightly different text than the final version, and cited stats more specifically. Digging through that source data, the real eye-popping numbers for me weren’t Google’s profits in search, but a profitable swing for Google’s content network – growth of 47% year over year, and with a smaller amount of impressions. Read that again, because it’s not a typo. It’s a lot more money with a somehow smaller inventory.
See, there are higher stakes on the content network than you think…
What’s going on? Is Google’s reverence of relevancy making that big of a change on the Content network? Prune the network, increase quality and you increase demand (and thus CPC) is the theory. But can it really be that much of a swing?
Well, I have indeed noticed a content network push lately by Google. They’ve officially promoted a new content strategy they call “Cast a Wide Net,” and they’re very helpful in assisting advertisers who want to try it—(we’ve found it works quite well too ). Not to mention, they’ve also paid special attention to how their content ads appear on mobile devices as that market grows.
And that attention should not be surprising. That’s the frontier battleground. Display advertising is a natural outgrowth of contextual advertising, and an area where Google is not king. Did you know Google’s certainly not the number 1 ad network?
According to comScore ad focus ranking, Google’s ad network came into this year with the 4th largest reach (82%), behind display giants like Advertising.com (otherwise known as Platform-A, and also known as AOL), ValueClick, and even behind Yahoo’s network (remember Yahoo’s historical strengths have been in display advertising). Google’s in a competitive fight in that arena.
How does this war play out for a guy who owns his own business and spends under $30,000/month on AdWords? Factor in Facebook…
Well, that itself could make a rather full blog post. AdWords’ ultra convenient interface made search advertising a success for millions and millions of small and medium players, but the big money in display advertising remains in the hands of large-brand advertisers, often working with minimum buys exceeding $50,000/month. As the technology behind behavioral targeting is refined, CPM style brand advertising gets more laser-targeted, and closer to the precision of keyword-based search advertising. Factor in Google buying DoubleClick for the fruits of their data collection process, as well as Google’s recent shift to utilizing behavioral targeting on the content network, and you see how real the battle is.
My take…? In general, the successful medium sized companies I see in AdWords haven’t profitably found a way to make display ads profitable, and I suspect Google knows that’s the next battle frontier: One in which they may have a formidable competitor with unique, real-life data that Google has no significant access to – Facebook.
I’ll leave that for a later blog post, but as a primer read Fred Vogelstein’s excellent analysis in Wired.
Director of Paid Search