What do you think when construction starts on a massive new home in your neighborhood? On the one hand, it brings some prestige and interest to the community. Real estate values will probably go up.
On the other hand, it means a lot of disruption and noisy construction vehicles and, when it's over, two or three SUVs parked in the driveway and a fountain in the yard.
And so it was when
Google unveiled "Image Ads" as a part of its AdSense program and started what I am sure its architects mean to be a big, fancy new home in the ad network neighborhood. As a longstanding resident of
that neighborhood, BURST! would like to welcome Google, and be among the first to introduce them to the Neighborhood Association that meets regularly - constantly, in fact, - on issues affecting the
community.
The Ad Sense program began as an extension of Google's core business. Having attracted a large number of advertisers to its keyword services Google extended its inventory by adding
multiple text ads across a large selection of independent publishers. The demand for keyword advertising drove this inventory expansion program.
At the time, this was seen as a substantial, and
logical extension of Google's services. What may have been underappreciated at the time was the fundamental difference between AdSense, and the rest of Google's business. Google and other large
portals enjoy the benefit of controlling their entire inventory. Where Google's early business model only needed to satisfy the advertiser and Google's own internal metrics, AdSense would have to
satisfy the expectations of the publishers participating in the program.
Google quickly realized that click-through performance on destination sites was not as high as when the ads were on the
Google site, for obvious reasons: while the editorial context in which the ads appeared was mostly the same in both places, the context of user behavior was different: search is about click-throughs,
destination is about page views.
AdSense works on a cost-per-click (CPC) model, and lower click throughs result in lower payments to the publisher. As CBS MarketWatch.com reported earlier, S-1
documents reveal that in some cases Google was paying out more than it was receiving in order to entice some publishers to join the program. In April 2004, Google publicly adjusted pricing to more
accurately reflect the AdSense performance.
The current impact of the AdSense program on Google's revenue is relatively minor. Most people within the industry are more interested in whether the
AdSense program reflects a substantial change in Google's positioning. Much in the same way people analyzed the launch of Gmail, analysts want to know if these moves represent an extension of or a
departure from Google's core business.
The text ads phase of AdSense taught Google the golden rule of representing publishers: a steady supply of ads and timely payments ensures cooperation.
However, entering into the world of image ads, they are about to be introduced to a number of additional rules and expectations publishers have regarding aesthetics.
The text nature of the early
AdSense program was a major draw for some publishers. The genius of text advertising is, in fact, its ability to qualify as "content" and many publishers were excited for non-intrusive targeted ad
opportunities on their site. A single large graphic co-existing with its content, however, dramatically changes that perception. Publishers predominantly still see image-based ads as part of a
branding strategy, and they are typically unwilling to sell it on a performance basis. Many publishers may find it telling that Google choose not to roll out Image Ads on its own site.
By adding
images to AdSense, Google must now prove their value to advertisers, internally manage the pricing model to ensure their revenue, and perhaps most significantly manage a large number of relationships
with publishers whose inventory they wish to represent. Google has the resources to tackle all of these issues, and is a strong example of the success of contextual advertising.
So, Google,
welcome. We're sure you will be a great addition to the neighborhood. Please don't park your boat where we can see it from the street and, remember, if the network is the model, the publisher is the
customer.
G. Jarvis Coffin is president-CEO of BURST! Media