I've been thinking a lot about Google's (GOOG) proposed $3.1 billion acquisition of DoubleClick and the implications for advertising. In fact, a lot of people have been reflecting on the deal, what with Microsoft (MSFT) and AT&T (T) crying foul, and Yahoo! (YHOO) reporting a first quarter that underscored exactly why it's trailing Google in online advertising. I've known DoubleClick since the mid-1990s, when I was editor of Forbes.com and the company acquired our first ad-server provider, NetGravity. In my days at tech researcher IDG, as I learned online ad ops—the art of placing ads on Web pages and reporting the results to the advertisers—I even used DoubleClick's primary product, Dart.
Ad servers—the tools that place ads on a page—are neither interesting nor fun to play with. Those who do use them usually hate them and trade tales of their quirks and bad behaviors like grizzled war veterans. Which explains why ad ops is the most thankless job in the interactive world, even though it's the one with the highest stakes. Screw up an ad campaign—say, by missing a date or placing the ad on the wrong pages—and you can kiss the advertiser goodbye.
Enter Google, which by cracking open the concept pioneered by Idealab founder Bill Gross of placing ads against search results, has become the de facto master of ad serving and targeting. Sure, Yahoo has Panama, Microsoft's MSN is getting it together, and lots of nimble little mammal vendors like Quigo are providing paid search capabilities to publishers who don't want Google to say "all your base are belong to us". But let's face it, when it comes to ad-serving networks, Google is, as a colleague said in a recent e-mail, a "media titan."
Private Equity Parent
Which brings me back to DoubleClick. In my mind, the interesting thing about the acquisition is not the competitive play of keeping a tired product like DoubleClick out of the competition's hands. DoubleClick has been a creature of its private equity parent for the past few years, and there wasn't any doubt that someone, someday would cough up the cash to take it over. So now that Google has it, what chance do DoubleClick's competitors have? I like Atlas, Acquantive's (AQNT) ad server. It is allegedly more precise than DoubleClick and, when it first came on the scene in the late '90s, tortured us at Forbes.com in terms of its precision demands. Quigo is a great company, out of Ziff-Davis, with a very aggressive attitude about niche paid search. As The New York Times noted on Apr. 17, all the ad server alternatives got a nice share-price boost thanks to Google putting a value and some attention on their market.
The more interesting thing is the potential for the DoubleClick deal to revive the market for banner ads. I've seen Google's pitch, and it goes well beyond the search terms that most people associate with the search giant. Video is now playing a stronger role in its pitch (it figures they have to do something to make good on the YouTube buy). And given the higher potential for online media to induce users to click on an ad and be redirected to a specific destination, advertisers are going to be drawn to the online 30-second spot (not pre-roll, which I don't like at all). This is great news for agencies that were worried about their TV practice. There is an avalanche of client demand headed their way for short, smart Web videos to stick into big interactive marketing units.
But the banner—the lowly, punch-the-monkey, lower-my-bills piece of animated junk that delivers abysmal click-through rates—is the modern equivalent of direct mail, where a 1% response is considered a massive success. I've seen stats for a major project (I won't name names) where the agency proudly proclaimed it served 45 million impressions, resulting in 62,000 visits, for the client. That stinks.
"Search Death Spiral,"
Display or banner advertising basically just contributes to clutter and place emphasis on inflated page view numbers that no one believes because no one can agree on how to audit the numbers. That makes no one happy—not the poor junior ad designers who have to shoehorn genius into a slot 468 pixels wide by 60 pixels tall; not the traffickers who have to pore through Comscore to find the right demographic to serve them to; and not the client who knows return on investment is going to be a joke; and not the site that hosts the suckers and has to watch its gorgeous site design get nuked by the online equivalent of NASCAR after too many beers.
Can you tell I don't like banners?
O.K., but my mind changed last summer when I read an internal company metrics review with the weird correlation that when we ran banner ads our search campaigns performed better and when we didn't run banners our search yields declined. Hmmm. Then our agency told us the same thing: Run banners with search and both get an uplift. O.K. Lesson learned. Reserve some component of every campaign to run in parallel with search. Not exactly rocket science nor cause to proclaim the renaissance of display ads, but enough to get me looking at banner advertising in a new light.
Search is pretty saturated. Get into a bid war over a nonbrand term like "digital camera" and the cost per click gets ugly fast, as every digital camera manufacturer and retails tries to buy camera buyers' searches for "Best" or "Cheap Digital Camera." It's also dangerous to get into a "search death spiral," where you see search outperform other tactics such as e-mail, viral, and banner ads so you starve those other budgets and allocate more to search. Meanwhile, that elusive thing called "awareness" declines and the pipeline of prospective customers dries up.
Don't Count Yahoo Out
What Google just did—in its infinite wisdom and good M&A sense—is ensure a rebirth in banners. The space is distressed. Targeting impressions with behavioral tactics is still in its infancy, but interactive marketers are doing a deep dive of their campaigns and making every dollar they put in market fight for survival. The ad is going to perform if the advertiser's offer is right, the targeting is going to work if the ad server does its job, and the marketer's site metrics are going to show plainly whether the campaign performed. Those that perform get renewed and refreshed. Those that don't move on-fast.
Google obviously is looking at its own analytics and saw potential for a banner revival. By taking the industry standard tool—DoubleClick—they lock the interactive agencies and media buyers deeper into their clutches, and by waving rich media opportunities like video at marketers, they offer an integrated network that is easy to buy, easy to measure, and easy to manage.
Of course, it's too early to count Yahoo out. Disappointing earnings are not a measure of future potential, only past performance, and Yahoo has a compelling consumer brand awareness story to tell marketers. Yahoo is an entirely different animal from Google. It is a true content and service network. Google is search and applications. Yahoo is search and content and applications. Sure, Yahoo media czar Lloyd Braun wasn't able to turn it into an interactive TV network, and lost his job in December, 2006. Still, the notion of a global buy on a network with monster page views and great insights into their audience makes a rich media buy on Yahoo, combined with search and banner, attractive to a marketer.
But Google is virtually everywhere now. And the DoubleClick deal takes it even further.