Google announced that it will acquire dMarc Broadcasting, a radio advertisement service. In an earlier post "Search is a commodity - Ad serving is the business" I postulated that delivering advertisements in a targeted and efficient way is the real business of Google and the major search engines. This acquisition should convince everyone. The technology behind targeting and delivering ads for web search can be applied to radio, TV, and print, a $250B market.
Take a look at this from the Wall Street Journal:
In Latest Deal, Google Steps Further Into World of Old Media
Internet Giant Expands Role As an Advertising Broker;
Automating Radio Sales
Next Target May Be Television
By KEVIN J. DELANEY
Staff Reporter of THE WALL STREET JOURNAL
January 18, 2006; Page A1
"At the core of Google's foray into offline-media advertising is its realization that traditional media such as newspapers, TV and radio remain vastly larger ad markets than the Internet, despite shifts to the Web in recent years. Online advertising was a roughly $10 billion market in the U.S. last year, a small fraction of the more-than-$250 billion total ad market, according to estimates by ZenithOptimedia, a media services unit of Publicis Groupe SA, the big advertising-holding company.
As it moves onto new turf, Google will rely on a potentially powerful advantage: its huge base of advertising customers. The search company had more than 400,000 advertisers who bought Google-brokered online ads or ads on Google's own sites as of last year, according to internal company documents released as part of a recent lawsuit. The advertisers range from Ford Motor Co. to bird-diaper seller Avian Fashions in Stafford, Va.
Google hopes to use its automated system to link these advertisers, particularly the smaller ones, with ad opportunities in traditional media they might not have otherwise bothered with. The Web-search company believes its systems can help advertisers target their ads at susceptible audiences and then track data on any increases in sales that result -- and do it all through a simple Web site."
Google has built a very efficient and profitable technology for targeting and delivering ads. They use an automated auction for selling the ad words and placement to the highest bidder, without expensive sales people. They have attracted over 400,000 advertisers, many of them small companies that do not use traditional advertising vehicles. Remember that simple classified ads in newspapers are far more profitable than flashy full page display ads from major retailers. This is the difference between Google and Madison Avenue. Now Google will extend this advertising model to traditional media.
Microsoft recently announced Microsoft's AdCenter. This will allow Microsoft to compete directly with Google for ad placement. This will be a big business and major revenue producer for MSN. Previously MSN used Yahoo's ad service, which will be phased out over the next few quarters. This move by Microsoft will allow them to keep a larger percentage of ad revenues.
Yahoo reported earnings last night. One of the key issues was that Yahoo's ad serving network technology was not as efficient as it should be. So, they couldn't optimize the revenue on each click. They are working hard on this and will see results later this year.
There is a huge market opportunity for GYM (Google, Yahoo, Microsoft) in targeted advertising. For many years advertisers have spent billions of dollars without any clear measureable results. Marketing people would lament "Half of all advertising is a waste of money. We just don't know which 50% is wasteful, and which 50% really works". The GYM advertising networks are changing that. Madison Avenue types are very nervous.