• by David Berkowitz , April 10, 2007

What’s the value of advertising with Google? With Google’s forays into television advertising, can there be a uniform value proposition?

Google’s advertising offerings can be grouped into three overarching categories: search, contextual, and offline media. The three are connected to each other, but the offerings aren’t identical, so if you’re an advertiser, what exactly is Google bringing to the table? For each of these three categories, we’ll briefly review the inventory, targeting, and pricing, and then determine where advertisers will ultimately find the most value.

Search

Inventory: Google controls its own inventory, the volume of which fluctuates based on the queries entered. It also reps search inventory on publishing partners like AOL and MySpace.

Targeting: Ads are targeted primarily based on the query entered by the consumer, but implicit demographic targeting can play a role (if I type in “pizza” without any location, it serves several ads customized to my city). Query-based targeting is the highest level of targeting Google offers, as the consumer’s explicit expression determines what ads appear.

Pricing: Advertisers pay on a cost-per-click (CPC) basis. You can back into cost-per-impression (CPM) metrics or others, but no matter what, you’re paying for the clicks.

Contextual

Inventory: The inventory comes from its AdSense partners, and their traffic determines the number of impressions.  

Targeting: Ads are targeted to the content of the page, and if the advertiser chooses, to the demographics of select sites’ visitors. The targeting is less effective than search targeting, and it’s not unique to Google, but the model as a whole is a dramatic improvement compared to print advertising, as AdSense aims to provide the most relevant ad for every single page view.

Pricing: What’s your pleasure? Google uses its contextual network to experiment with auction-based pricing through just about any model you can think of -- CPC, CPM, or cost-per-action (CPA). Google won’t do this with search, and it can’t do this with offline media, so Google chooses this channel to give advertisers the most choice.

Offline

Inventory: Google doesn’t own any of this inventory, and it’s trying to represent whatever it can in radio, magazines, newspapers, and now TV. Outdoor advertising can’t be far behind, and if the print Yellow Pages keep kicking around, it’ll go there too.

Targeting: This is the major pitfall for advertisers who appreciate Google’s targeting abilities online. For print media, advertisers can only target ads based on the publications’ demographics. For TV, the options are targeting by demographic, daypart, and network.

Pricing: As much as Google’s targeting for offline media feels so 20^th century, the auction-based model for offline media is decidedly something new. This is especially true for TV, where advertisers pay only for impressions delivered.

The Value

Google is sending mixed signals on where its value lies. For all channels, inventory is increasing, whether it’s the searches per user, the publishers in its contextual network, or the media properties in all of its offline efforts. Though Google’s TV ads will only run on EchoStar and Astound Cable, that’s still astounding for a company that, based on its revenues, is still a search engine. It’s also even more impressive given that the Cabletelevision Advertising Bureau rejected the auction platform being developed by eBay. Google will now have a live trial where it can prove itself.

The targeting gets progressively weaker as advertisers migrate from search to contextual to offline. Yet the TV targeting may well improve as TV becomes more digital, and potentially more interactive. If Google gets enough inroads into TV, it could target ads based on program transcript, the viewing history of consumers, and searches on interactive program guides. Still, today the offline targeting is hardly a selling point.

The pricing, conversely, is a bigger selling point as Google expands away from search. Its CPC model for search ads wasn’t innovative when Google first ran ads. The flexibility of CPC, CPM, and CPA on an auction basis for contextual advertising offers much more value for advertisers. And an accountable, auction-based platform for offline media places Google among the pioneers there.

To see where Google’s going with this, we have to return to its mission statement: “Google's mission is to organize the world's information and make it universally accessible and useful.” Along with organizing the world’s information, it wants to represent it, and then monetize it any way it can. For advertisers, that means Google will keep building out its one-stop-shop approach. If you have a single point of contact for connecting with consumers through all the world’s information, then you don’t need to go anywhere else.

How well Google will succeed with that is another story, but its value proposition extends far beyond its targeting and its pricing. In the end, inventory is everything.