Google muscles into TV market with video ads

The internet giant claims its low-budget click-to-video system, launched last week, will be used to trial new TV ads, not poach them.

The internet giant claims its low-budget click-to-video system, launched last week, will be used to trial new TV ads, not poach them.

Like Communist regimes of old, which preached the doctrine of perpetual revolution, Google appears to believe that ceasing the valiant struggle would be to leave the door open to the weaknesses of the old order.

Having conquered the online world, the company has been looking for opportunities offline. Last week it had television advertising firmly in its sights when its new click-to-video system went live across its global network on July 18.

The service allows advertisers to run video ads of two minutes or less, with the cost of delivery based on the low-cost auction model which the company uses for static advertising.

The move could threaten the position of broadcasters and traditional agencies, although Google is keen to suggest its actions complement rather than compete with the TV ad business.

Industry observers expect MSN and Yahoo! to follow suit, although neither has announced plans for such a service. For Google, video ads are likely to be just the first stage of a far more ambitious strategy to get on to television screens.

Gokul Rajaram, product management director for advertising products at Google, predicts that the average price an advertiser will pay will be &£3 or &£4 for every thousand viewers. It could rise beyond that, but the minimum price will be set at 15p per thousand viewers.

“The pricing is not a negotiated pricing, but an advertiser-set auction price,” says Rajaram. “The ads are extremely cost-effective. We believe video ads are not just going to be a niche luxury but are going to be available to companies of all sizes.”

Although video ads won’t appear on the main Google search results pages, they will appear on Google Video and sites that use Google advertising – its AdSense network. The company refuses to say how many sites are enrolled in AdSense, but it is thought to reach into the hundreds of thousands.

James Booth, of rich media ad specialist Tango Zebra, welcomes Google’s move, calling it “a good phase one”. He says the next step is to increase the levels of interactivity within the videos so that online viewers could, say, download a car brochure through an ad. “The technology that allows this to happen is already in place,” says Booth.

Google has tried to move into other broadcast media before, with mixed results. A year ago it started to buy ad space in some US newspapers and magazines, which it then resold through auctions. Reaction to the Google Publication Ads service has been muted, with reports that some advertisers found it less cost effective than the online ads they were accustomed to buying through Google.

Video killed the radio star

In January Google moved into radio, spending up to $1.1bn to buy dMarc Broadcasting, a Californian company with an automated radio ad platform. Few results have been seen from this deal as of yet, but Google chief executive Eric Schmidt fleshed out some of the company’s ambitions to a New York audience last month.

“Ads are going to be much more targeted,” Schmidt announced. “Radios that are coming out all have the ability to do various forms of digital targeting. Eventually the same thing will be true of set-top boxes with your television⦠Those ads will convert an awful lot better than traditional broad advertising.”

The rationale behind Google’s expansion is simple. The company knows that its growth rate is slowing and is likely to slow even further in the future. It needs new sources of revenue to keep investors happy.

In this context, the move towards video advertising is just one small step. Its wider ambitions to move from PCs to set-top boxes could be one reason why it is keen to suggest that its new, click-to-play video ads can complement rather than threaten the television industry.

“We’ve seen advertisers think of it as a complement to their TV buys, not replacing them,” says Rajaram. “Instead of spending millions of dollars on a TV buy without doing pre-testing, the video ads product will allow them to test different messages in a very short period of time and figure out which message audiences respond to. Online can complement the offline buy and help them take better decisions.”

Advertisers have already been keen to experiment with online video ads elsewhere on the Web. Marco Scarola, international marketing manager at digital specialist Eyeblaster, says 40% of its clients’ ads use video, up from 20% last year. Some of these use footage from TV ads, but some use scenes shot specifically for the web and feature a microsite to give the ads more interactive content.

Channel hopping

All this is happening in a world where TV viewing is itself moving online. Channel 4 was forced to suspend the simultaneous broadcasting of TV ads on its website last week, due to rights issues, but it knows its audience is moving online and is determined to hold on to them as they go.

Andy Taylor, managing director of Channel 4 New Media, says the number of video clips shown on Channel4.com grows by about 50% a month. It served up more video clips in the first three hours of day two of Big Brother this year than it did in all of last year’s show. In November Channel 4 plans to launch an online, video-on-demand service for all of its programmes. As people will have to register their details to watch a programme, there will be opportunities for more targeted advertising and viewer segmentation.

“In five or ten years 30-50% of viewing is going to be online,” predicts Taylor. “What’s going to be interesting is the extent to which that shift is going to be captured by pay-per-view revenues, subscription revenues or advertising revenues. The pot may be the same but it’s taking advertising revenues on to different platforms. So there’s going to be a shift.”

The advertising industry will be watching closely to see how much of the market Google is able to capture as this process happens. If the company is successful, traditional agencies will have to learn to work with Google, if they are not to leave the ground to the specialist online agencies which already do.

Henry Rowe, joint managing director of media agency Carat Digital, part of the Aegis Group, thinks that integrated agencies with online and offline abilities are the best placed in this converging market.

“As the lines blur it’s going to be interesting to see how things work out,” he says. “The good integrated agencies will win out because they have all the skills.”

Pushing too far

Not all of Google’s other attempts to move into new markets have flourished. Its spreadsheet, internet telephony, and e-mail services, for example, all trail well behind the market leaders. But TV and radio advertising are far closer to the one thing which has turned Google into a &£64bn corporation in just eight years – the ability to run ad sales auctions and then deliver targeted ads according to users’ actions.

One problem Google may run up against is growing unease in the industry about how much power it wields. Privately, many executives who deal with the company say they find it arrogant and aloof, and they would prefer to see rivals succeed in chipping away at its market dominance.

Given their dependence on the company they don’t want to say such things in public. Offline agencies may be able to sympathise with them soon.

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