Advertisers Lament Google's 'Kleenex-Like' Dominance, Razorfish Says
(Bloomberg) — Google Inc.'s (GOOG) Internet dominance is a concern to advertising firms, because it could limit the choices they can offer clients online, said Bob Lord, the head of Publicis Groupe SA's Razorfish agency (PUBGY:US).
"People don't want Google to become Kleenex (KMB)," said Lord, the chief executive officer at Razorfish, which Publicis acquired from Google rival Microsoft Corp. (MSFT) this year. Microsoft took a 3.3 percent stake in Publicis as part of that deal. "I don't want one big giant here. If I only have one major platform to go to like Google, it's hard for me to do my job."
Google, which already leads the market for search advertising, is now gaining customers for display ads—an area where Microsoft and Yahoo! Inc. (YHOO) have had an edge. Google also is bolstering its mobile-ad business. Even so, Microsoft's new Bing search engine is letting the company "give Google a run for their money," Lord said.
The total market for Internet ads is showing signs of recovering from the recession, when Razorfish clients such as Starwood Hotels & Resorts Worldwide Inc. (HOT) and Capital One Financial Corp. curbed spending, Lord said.
"I don't know if it is a full recovery, but I see my advertisers planning out the whole year," he said. "People are feeling more stable. That is giving me hope and making me more bullish."
Nothing for GrantedAdam Kovacevich, a spokesman for Mountain View, California-based Google, said the ad market remains highly competitive.
"We don't take anything for granted, since new players are emerging all the time," he said. Google also has a great relationship with Razorfish and works closely with the company, Kovacevich said.
Google announced plans last month to acquire AdMob Inc., paying $750 million for the mobile-phone advertising startup. The U.S. Federal Trade Commission is now reviewing that deal, The Wall Street Journal reported this week, citing unidentified people familiar with the matter. Last year, Google backed out of a proposed advertising partnership with Yahoo, after the Justice Department raised antitrust concerns.
Publicis, the fourth-largest network of ad agencies, acquired Seattle-based Razorfish in October for about $556 million in cash and stock.
Increasing ShareMicrosoft has gained about 2 percentage points of the U.S. Internet-search market share since Bing debuted in June, according to research firm ComScore Inc. That's increasing the amount of listings that clients want to buy on Bing, Lord said.
Microsoft, No. 3 in the U.S. search market, accounted for 9.9 of queries in October, compared with 65.4 percent for Google, according to Reston, Virginia-based ComScore. Yahoo ranked second with 18.8 percent.
Microsoft has tweaked its Internet-search strategy, shifting from bigger, less frequent upgrades to a steady stream of improvements, Lord said. That, along with a July deal to combine search efforts with Yahoo, has kept Bing in the mind of advertisers, he said.
"The industry was sort of surprised that Microsoft launched Bing the way they did and got such a reaction," he said. "Everyone stepped back and said, 'There is another alternative here.'"
Still, Google has good software for managing campaigns and tracking whether ads are effective, Lord said. The company's effort to sell more graphical ads also is bearing fruit, he said. Customers seem to be increasing the percentage of display-ad budgets spent with Google, Lord said. He said he wasn't able to provide specifics because Razorfish is still crunching its own numbers.
Google rose $2.48 to $591.50 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 92 percent this year. Paris-based Publicis, up 49 percent this year, was little changed at €27.32 in French trading today.
In the coming year, Lord expects customers to gravitate to social-media advertising on Facebook Inc. and Twitter Inc. The two sites still need to figure out what advertising business models allow them to make enough money, he said.