It is certainly an understatement to write that Google has been an extraordinary advertising story. In a few short years, it has built a highly profitable ad listings business with a $6 billion annual run-rate that grows at about 100 percent a year and shows no signs of slowing down. In major stories in publications from The New York Times to the Wall Street Journal to Business Week over the past six weeks, Madison Avenue has been told to watch out for Google. Many of the stories focused on Google's recent forays into traditional advertising channels like magazines and newspapers, and its stated intentions to enter the television business as well. As a result, the anxiety level on Madison Avenue has risen significantly.
I am not convinced that Google's magic will disrupt brand advertising to the level that many believe.
Google is the modern Yellow Pages. It has been successful because small and medium-sized businesses have been poorly served by traditional marketing channels like telemarketing, direct mail, radio, newspaper display, and Yellow Pages. They are systemically inefficient and are no match for Google's version of search and contextual advertising. Google's ascendancy over these traditional media has only just begun. It can certainly grow to five or six times its size over the next few years on this basis alone. This is an enormous market and Google is simply gobbling it up.
However, brand advertising is different.
All of this said, it is great to see Google shifting its attention to Madison Avenue. The attention and competition can only be good for the industry. However, Madison Avenue shouldn't fear too much. Google is now moving onto unfamiliar turf. Markets where logic doesn't dictate success are markets where a Ph.D.-laden company may find success more elusive than it is used to.