By Scott Liu, Paid Search Coordinator, Advertising Solutions
For most users, search engines are about the technology that organizes the world’s information and makes it universally accessible. For us search engine marketers, it’s also about how the search engines monetize the information on the web. Back in the fall of 2007 when Google’s share was at its all time high, the question for investors/traders was “where will Google land in 5 years?” Online Advertising Professionals are often asking the same question--- no doubt Google is the industry leader, and thus by taking a deeper look at what Google is focusing its efforts on beyond search and why, it could lend us some insights on the future of the industry.
Needs to sell more ads beyond search through its network
Search represents about 47% of total online ad spend in 2009 (According to IAB ). As the search marketplace matures and grows at a much slower rate YOY, Google’s Content Network (GCN) is likely the natural extension of Google’s core search business. However, it will never become as profitable as search due to revenue sharing with publishers.
To break it down:
• Video/YouTube. According to eMarketer, video is going to post the highest growth rate in 2010, at 48.1%, as more advertisers see the effectiveness of online videos to boost brand awareness. YouTube brings in more than 108 Million unique users on a monthly basis, and it’s the second largest search engine by number of queries. For example, a homepage takeover on YouTube costs about $300K per 24-hour period, which can deliver an audience size that’s about 3-4 times greater than the same media investment on a Super Bowl ad.
• The network/reach. A few weeks ago, Google disclosed how it shares advertising revenue with AdSense publishers—68% for content publishers. Transparency on a revenue share model could potentially attract more publishers.
• Technology. Google continues to experiment with new product offerings for GCN, like Remarketing-- which gives advertisers the flexibility to do behavioral targeting. The other big technology piece is DoubleClick, for which Google acquired in 2007. Not only will Google be able to generate a considerable amount of revenue through ad serving, but also the DoubleClick Ad Exchange—a real-time bidding platform for display advertising that helps increase the effectiveness of ad placement -- will potentially help Google gain some share in the data-driven display market.
Needs to sell more ads through other “NEW” channels: Mobile and TV
Mobile
Mobile online advertising will see a very strong growth rate (97%) in 2010. With the exponential growth of Smartphone adoption rate, Google is well positioned to replicate the success in desktop search through its popular Android OS and a deal to acquire AdMob. However, unlike paid search 10 years ago, Google now faces the competition from one of the biggest Tech company of all-time (not Microsoft)—Apple with its revolutionary iPhone and iAd platform. However, Mobile still has a long way to go in terms of becoming a major revenue driver--- the entire mobile advertising market is less than 2% of search in 2009.
TV
First of all, TV still has the biggest share of advertising spend, and it’s not declining at all. Why? Because watching TV is part of consumers’ lives and they keep buying new TV sets. Google recently announced Google TV--- a new product aimed to optimize consumer experience by bringing the power of search/internet to TV. Our VP of Product Development Dave Tan has just written a post on this topic. If the new product is widely adopted, Google could possibly gain scalable data sets and offer some new targeting options for TV advertisers as well as integrated advertising campaigns across its multiple platforms.
Google’s every move has a major impact on where the online advertising industry is heading. For us online marketers, search is far from the final answer. Understanding the interaction between search and other form of advertising, as well as building an integrated communication plan across multiple consumer touch-points is the key to effective marketing.
To sum it up, search business makes a large portion of revenue for Google, and an even bigger portion of its profit. However, as it becomes harder to gain domestic search market share, the growth of the search business will likely continue to slow down. Therefore, it’s crucial for Google to keep innovating and growing in areas other than search, as well as find a way to improve profitability in those businesses. Search doesn’t work in a silo, not for Google, neither for us online marketers --- the goal is to reach the consumers on multiple touch-points throughout the purchase funnel or an hourglass.
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