Google's Armstrong: We're Not Launching An Ad Agency
"We are not launching an ad agency," said Armstrong. "It would be mathematically impossible for us to get into that business, and we have no interest in doing it."
In response to a direct question at Google's New York industry press event on Thursday, Armstrong said that the search giant tapped former Ogilvy & Mather New York Co-President Andy Berndt to help market Google products in a better way and to help Google work better with agencies--not eclipse them.
Berndt will serve as the Creative Lab's managing director, leading a division focused on "thinking creatively about how we market our own products and services," said Armstrong, so that the reasons an agency partner had for choosing to use Google Gadget Ads, for example, were clear to other advertisers.
To gain any scale as an advertising agency, Armstrong added, Google would need to make at least 10,000-20,000 hires overnight.
While Armstrong maintained that the search giant is not "getting into the ad agency business," Google is changing the way that major advertisers spend their billion-dollar budgets, which will continue to shift priorities in key industries such as automotive, financial services and health care.
The company's early strategy to create industry vertical specialist teams is paying off "in spades," he said, through intimate relationships with marketers at the CEO, CMO and CFO level.
Armstrong pointed to leading auto manufacturers, for example, and noted that they have begun to call Google's senior auto industry specialists into meetings before they develop their ad budgets or decide to build a new dealership.
"We're sitting in meetings with CMOs, seeing ad budgets turning into operational or [capital expenditure] budgets that are tied to consumer interest cycles," said Armstrong. "They're moving from fixed to variable budgets because the translation point is so closely related to the success of connecting with people."
Part of the shift stems from Google's auction-based model--a disruption to the general budgeting process that has allowed marketers to really "look at the consumer behavior underneath things," said Armstrong. "People are looking for SUVs on a regular basis--not 6 weeks out of the year--so to reach them, the budget should be on all the time."
Armstrong said that Google's goal is for advertisers to have a number of different tools that will help them leverage "all of their assets." The ad team's strategy starts with having corporations "write down all the assets they have that consumers should know about," said Armstrong, then the search giant partners with their ad agency to devise the best way to make all of those assets available all the time.
Marrying consumer insights with assets and the ability to advertise 12,000 products versus 12 will fundamentally change the nature of advertising.
"Our strategy is everybody's strategy at this point," Armstrong added. "It's really an execution game."
Armstrong spoke of the eventual "microsegmentation" of advertising as more impactful and relevant ads built on the fly, based on the target user and such macro-trends as stock market or weather.
Mobile is another important growth area, Armstrong said. While sidestepping any comment on a rumored Google phone, he noted "in some parts of the world, people think Internet and they think mobile phone, not PC."
Google's launch of its ad programs on the mobile platform makes absolute sense, since it's five times more important to have the right ads come up in a search from your mobile phone when you're on the road with a flat tire, he said.
The company will continue to work to supply the information to government authorities to get the acquisition of DoubleClick to the closing point, he said. A Senate hearing set for next Thursday in Washington is just one of the public forums scheduled this fall addressing potential anti-trust and privacy concerns raised about the deal.
Social networking is another important area for future growth, he said, because they represent communities that are active 24/7 and advertisers want their assets turned on 24/7. "It makes sense," Armstrong said. "It's a really interesting phenomenon."