Google Dives Head First into Display Advertising

[UPDATE 10/14/10] Google shares soar as the company reports impressive 23% YoY growth after the closing bell. CEO Eric Schmidt attributes growth to strength of Google’s core businesses and “significant momentum” in its newer display and mobile advertising businesses. For the full report from Google, click here.

In a move intended to diversify their revenue stream, Silicon Valley giant Google launched a sprawling multimedia campaign named “Watch This Space”, announcing their increased efforts to grow their business in the display advertising sector.

There was a time when Google could do no wrong, and investors witnessed the search engine’s share price rocket into the stratosphere, reaching its peak at $741.79 in November 2007. Google shares are down approximately 16% YTD ($525.62) and many indicate this is the result of growing concern over the company’s dependence on search. As the New York Times highlighted in September, over 90% of Google’s revenues come from text ads.

The new campaign includes a massive interactive billboard in Manhattan and seemingly omnipresent display ads across the web displaying bold messages: “This Space Can Be Smarter” and “Display ads are big. They’re gonna be huge.” The ads often occupy every open display ad slot on their platform sites, making it difficult for readers to miss.

Google Ad Campaign - Bloomberg

Earlier this year, Facebook surpassed long-time industry leader Yahoo! to become the leading publisher of display ads in the United States with 16.2% of the market. Yahoo! sits in second with 12.1%, and Microsoft has a 5.5% share to hold third place. (It is critical to note that comScore does not include ads from Yahoo! and Microsoft’s partner networks, which would undoubtedly vault Yahoo! beyond Facebook as number one, and advertisers pay significantly less to display ads on Facebook than Yahoo! and Microsoft.)

Notice the glaring omission? Google is nowhere to be found. Back in 2007, when Yahoo! acquired Right Media for a total of $725 million, the display ad market was growing but the future of success was not set in stone. The fear was that with a wealth of new websites competing for visitors and advertisers, the average price of display ads would decrease. As it turned out, the fear was not to be realized, as ad exchange services like Right Media and Google’s DoubleClick increased the average price of ads as a result of the tracking information and user behavior metrics they were able to provide.

With display advertising now solidified as a powerful revenue source, growing faster than the overall ad market, Google is at a key competitive disadvantage by not having a meaningful presence in the market. These new efforts indicate Google’s recognition that they can capitalize on a rapidly growing advertising sector by leveraging their incredibly talented human resources, expansive networks, and powerful financial position. Its search dominance not in doubt, Google needs a blockbuster new business unit to reassure investors that they aren’t a one-trick pony.

Will Google become a major player in the display advertising sector? Share your thoughts with a comment below.

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About Michael Dossett

Inactive since Sept. 2011

Posted on October 2, 2010, in Uncategorized and tagged , , , , , , , , , , , . Bookmark the permalink. 5 Comments.

  1. Google has seen a massive failure on a plethora of recent product launches. I think Google is in for a hit, and although this is not the type of innovation that makes up the bread and butter of Google, I don’t doubt their undeniable advertising prowess. I’m keeping a very close eye on this move as a GOOG shareholder.

    • Google has indeed seen several recent product failures, but there is no question it has also seen recent successes. Case in point: Android is now #1 worldwide, beating Apple in the smartphone market. This move to increase its display advertising presence is absolutely related to mobile.

      • Look, Google is Google. They won’t stop innovating and they won’t stop creating and releasing new products. There will be failures along the way. I don’t expect they will turn into a Microsoft for another 10 years or so.

  1. Pingback: Is Google Offers Too Late to Compete? | Michael Dossett

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