Google Introduces Animated Ads

by Ross Fadner, Dec 8, 2004, 12:00 AM

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Search engine giant Google this week announced it will now allow eye-catching animated GIF banners throughout its AdSense network for publishers. Google intends to continue charging advertisers on a cost-per-performance basis--a decision that has raised eyebrows among analysts, who claim that banner ads are better at promoting a company's name than at eliciting direct responses from consumers.

The Google Web site stated that Google has already begun accepting animated GIFs from a test group of unnamed advertisers. The move follows a decision earlier this year to allow static banners on the network. As with static banners, Google limits the size of animated GIFs to 50 kilobytes. AdSense publishers need only opt-in to receive image ads.

Graphical banners are linked to keywords in the same way Google handles text ads. Advertisers still bid on keywords against each other for top placement across Google's extensive and growing network of publisher Web pages. As with text, graphical advertisers only pay when a user clicks on their ad. A Google spokesperson confirmed that the company would use the same pricing model for animated GIFs.

Some analysts criticized the move, saying that it's a mistake for Google to use a cost-per-click pricing model charge for banner ads--which can have a branding value even if consumers don't click on them. Sometimes, especially with streaming and rich media banners, advertisers don't even call on consumers to take any direct action. For this reason, banners are traditionally sold based on cost-per-thousand impression basis.

The danger faced by Google is that advertisers will get the branding benefits of banner ads, but won't have to pay because consumers might not click on them.

"History has proven the financials of the banner network business," warned JupiterResearch analyst Niki Scevak. He said that charging per thousand impressions would make more sense for Google and its AdSense publishers; otherwise, Google runs the risk of giving away free campaigns to its advertisers. Scevak added that the prospect of animated GIFs is "fantastic news for advertisers," primarily because of the free branding they receive when their ads aren't clicked on.

But this danger is somewhat mitigated by Google's policy of removing low-performing advertisers from its program. When publishers agree to receive both text and image AdWords, Google's AdWords ranking program determines whether to display text or image ads based on an analysis of previous performance. Each display ad is the equivalent of four text ads; Google determines whether four text ads would perform better than a single banner.

Banner ad networks are a notoriously difficult business. DoubleClick, provider of the world's largest display ad serving network, has struggled to churn a profit. Following disappointing third-quarter results, and an undervalued stock price, the company announced that it would explore the possible sale of its ad-serving network, in addition to its other business units.

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