Google's Search for the Advertising Edge
For those buying advertising these days, the first stop for many is Google (GOOG). Already the leader in Internet search, the Mountain View (Calif.) company is quickly growing new media tentacles -- from buying and selling magazine and newspaper ad space to last week's announcement that it's entering the radio advertising fray and TV ad placement isn't far off.
To learn where the Internet search giant is headed, just sit in on a recent session with Google sales folks and one of its advertisers. It's a frigid, snow-swept afternoon in Malvern, Pa., at the campus of mutual fund giant Vanguard.
The meeting begins with a discussion of the fund company's simple text ads that run alongside the right side of a Google search and link Net surfers to Vanguard's homepage. That strategy is clearly a slam-dunk: Vanguard in November paid the least per keyword of any of its rivals yet scored the best rate of click-through from ads to its Web site. The Vanguard team is grinning.
Then the contagion kicks in. The Google model has opened up so many possibilities for reaching consumers that the two sides at the cramped conference-room table are acting like they are rowing the same scull rather than buying and selling. Way ahead of schedule, they're quickly onto new Google products. Piquing Vanguard's curiosity: a series of banner ads on a network of small-audience sites tailored for the client by Google and a new product in which consumers can, if Vanguard bites, click an on-screen icon to make an Internet phone call to a mutual fund adviser.
This meeting lasts about 90 minutes, brief these days by Google standards. National sales chief Tim Armstrong says planning sessions can last a few hours, and some clients are asking for a "summit," a half-day deep-dive into all things Google. As Google's media footprint expands, Armstrong, 35, seems to be wearing the biggest sneakers, with his estimated 2,500-person sales and marketing unit. Based in Google's Times Square offices in Manhattan, Armstrong's sales group will help bring Net ad revenues to an estimated $6.5 billion for 2006, up from just $2 billion in 2004.
Google's popularity with advertisers is foremost based on cost and accountability. Its simple text-ad service, called AdWords, enables marketers literally to count how many Net surfers click from a Google text ad to the company's Web site. That ad model is increasingly preferred to traditional TV, print, and radio ads that have difficulty quantifying how many people are actually paying attention.
IT'S THE FOLLOW-THROUGH.
But while Google has gone from search engine to media octopus in less than a year since expanding its reach, it hasn't lost all the feel of an Internet startup. Says a slightly self-effacing Armstrong: "One of our challenges is just figuring out the right way to sell and even who and how many should be in the room when we go see a client."
For the Vanguard meeting, there are just six people -- two from Google, two from Vanguard, and two from Vanguard's ad agency, Avenue A/Razorfish. It turns out that with AdWords, Vanguard in November spent less than 50¢ per click, one-tenth that of some rivals, and 14% of Net surfers exposed to the ad clicked through to its Web site.
That performance beats the response rate from a typical direct-mail effort, for example, of about 2%. And it's why Vanguard upped its Net ad spending by 33% since 2003, to $12 million last year, while it cut every other media category, according to TNS Media Intelligence. Vanguard spent $40 million total on ads last year, says TNS.
Next up: how to better reach financial planners. So Google pitches the company a "site targeting" program in which its banner ads could appear on a handpicked network of news sites, blogs, and even message boards. But Vanguard is wary of throwing up its logo and Web site link next to unpredictable content like blogs. For now, Google looks out for advertisers with its own eyeballs.
But ad sales manager for financial services Jerry Canning lets it be known that Google is working on an algorithmic lever that advertisers might pull in the future to keep their ads from running next to blue or just pinheaded consumer-generated postings. In Vanguard's case, it might be someone mouthing off about its fees or an ill-informed analysis of college savings plans. "We're in the trust business, so we like to examine the content adjacent to our ads," says Sean Haggerty, Vanguard's marketing chief.
Vanguard is also interested in RSS feeds (for really simple syndication) and podcasts, to which retirement planners subscribe. It's a delicate balance, though, between putting up an effective ad and intruding on the Web surfer's self-directed content, worries Vanguard's director of marketing Marilyn Harvey. Such concerns surprise Armstrong. He's fascinated that, overall, many of the same advertisers that increasingly want to jam their brands into TV shows "are as sensitive as we are about polluting the Web experience."
"NO BRICKS AND MORTAR."
Another of Google's new products now in the testing phase surfaces: Click-to-Call. This allows people with Internet phone service to connect to, say, a Vanguard call center via a mouse-click. Vanguard worries, though, about driving traffic to its centers during hours when staffing is low. The Net, after all, is a 24/7 medium.
Google's Canning assures Harvey that phone service can be targeted both by geography and time of day. Again, Harvey is interested but wary: She doesn't want to drive phone calls, which are expensive to handle, for general inquiries. "We like our Web site to do most of the work," she says.
Still, Vanguard's Haggerty is almost giddy with all the possibilities. "As big as we are, we are a Web and 1-800-number company. We have no bricks and mortar, so our Web site and call centers tell us what works," he says. He might even hike his now-small TV ad spending, but only after TV and the Internet mesh, as Google expects, in the consumer's living room. No wonder Google is examining buying up TV time and reselling it to its advertisers.
But such ventures progress slowly, especially such recent moves as reselling magazine ad space and offering TV shows like Star Trek via broadband. "People think it's a no-brainer for us, but it takes time to do these things right," says Armstrong.
Yet the ad world has certainly been turned on its ear since the distant days (way back in 2003) when auto makers booted Armstrong and his staff out of pitch meetings because text ads didn't show pictures of cars. Now some General Motors (GM) ads actually link a GM brand name with the search engine for the instant cachet, calling on consumers to "Google Pontiac."
Says GM sales and marketing chief Mark LaNeve: "We're touting Google, frankly, because it stands for credibility and consumer empowerment, and we like the association." Recalls Armstrong: "I remember one guy in Detroit who cut us off, saying we didn't understand advertising." Now it's the advertisers that are busy trying to understand Google.