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Summary:

Traditional media companies are in a persistent state of confusion when it comes to Google. The question that keeps these media executives up at night is… is Google a friend or a foe? If recent conversations I’ve had with such executives are any indication, Google’s recent […]

Traditional media companies are in a persistent state of confusion when it comes to Google. The question that keeps these media executives up at night is… is Google a friend or a foe? If recent conversations I’ve had with such executives are any indication, Google’s recent deals and initiatives (e.g. acquiring YouTube, selling newspaper and radio ads, etc.) have only served to heighten their frustrations to an all-time high.

From where I sit, the answer to this vexing question lies in one’s ability to foresee what Google is planning from a product development perspective. If you read through all the announcements and analyses about their recent deals and initiatives, it becomes clear that a common vision unites them all. Simply put, Google is building what is essentially an operating system (“OS”) for advertising… one that will work across all media.


Just like Microsoft’s Windows (or any other OS) manages all the hardware and software resources of a computer, Google’s Ad/OS will similarly manage all the critical components of an ad campaign, regardless of media type. But instead of controlling and allocating memory, Google’s Ad/OS will allocate ad budgets… instead of prioritizing system requests, controlling input & output devices, Google’s Ad/OS will enable ad inventory buying & placement… instead of facilitating networks and managing files, Google’s Ad/OS will optimize media buying across the spectrum & manage creative placement.

Google’s Ad/OS will be used to manage and buy ads at many of the top new media publishers like MySpace, YouTube, AOL, Ask, and Google itself, of course, along with hundreds of thousands of blogs. It will also be used to buy ads in the NY Times, the Boston Globe, the Washington Post, and all sorts of local papers owned by Tribune, Gannett and McClatchy… not to mention radio stations all over the country that are owned by Clear Channel and other radio conglomerates. And if Google executes on its plan, soon all the major broadcast TV and cable networks will join in to make their ad inventory available via Google’s Ad/OS.

So sit back and imagine that for a minute… the development of an operating system for advertising where anyone (from mom-n-pop stores to Fortune 1000 brands) can sit at their computers and slice, dice, & puree all their ad buys across web sites, newspapers & magazines, radio, and TV. Over $500 billion is spent every year advertising on these traditional media markets and Google is using its superior technological advantage to become a media-agnostic advertising platform.

Now, taking it from the top… if you were an executive at a traditional media company, would you consider Google a friend or a foe? As one media executive said to me the other day… “as long as they don’t develop their own content, we think we’re safe”. Hmmm, interesting. But it would behoove him and his colleagues to remember that Google’s core competency is to use technology in a manner that devalues and deflates traditional industries by extracting inefficiencies in existing processes. And the long-term strategic implications of this “Google effect” is much more disruptive than simple market realignment… rather, it’s an issue of rendering old core (human) competencies obsolete and replacing them with new ones reliant on automated, scalable technologies (much like what Wal-Mart did to retailing and what Craigslist is in the process of doing to classifieds). For instance, the only way for traditional media companies to leverage the core competencies they have today in order to compete with Google’s Ad/OS, in the long run, is to start breeding ad salespeople who will have the expertise and capability to sell across all media platforms. Sure, that’s feasible… when pigs can fly.

  1. So, what’s your take on Yahoo or Microsoft ad services? If Google disrupts traditional media then the competition may come from other tech seeking to replicate Google’s formula (and at least take a share of the ad revenue pie).

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  2. Brion,

    Good question. It’s my belief that Google is upping the ante precisely to make it even more challenging for Y! and Microsoft to keep up. While traditional media companies and Madison Ave ad agencies may not like what Google is promising in terms of a cross-media Ad/OS, it definitely meets the needs of advertisers across the board. And at the end of the day, giving advertisers what they want will likely win their budgets.

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  3. What is your opinion regarding Google’s move aggressively to buy dark fibre, build buildings for their own data centres around the world, rolling out a global VPN infrastructure, in addition to their advertising and consumer reach model? Especially with the recent launch of Wi-Fi in Mountain View, is Google attempting not only to take on the media giants but also the service providers of the world by building their own Google infrastructure which the Googlites of this world will use?

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  4. good post, though i’m not sure that OS is the right analogy…they are more like the ingram book group of advertising, with far less physical inventory but a set of universal standards that work with all systems and vendors…ingram even has acquisitions that now support the tiny independents helping them manage production for small channels (POD)…

    or maybe just the mitsubishi ‘insiderazation’ approach? as in, don’t just trade fertilizer – make it, trade it, and be the farmer, don’t just sell to the farmer…own the channel inside and out up and down stream…

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  5. Embrace the model, not the Google.

    Auction everything. Self-service everything.

    Google won’t add value in the areas where it cannot provide a targeting lift if the off-line media companies embrace the process improvements Overture and Google have introduced to the market.

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  6. Completely agree with the thought that Google is moving in on the video, rich media market and more traditional media services don’t have a lot of options to distribute your traditional media.

    After attending the NYC ad:tech conference, even Google didn’t talk much about innovative platforms and recommended me to talk to bus dev about thoughts there. If they are planning on creating a platform, its still at the corporate level.

    As a marketer, I agree that there’s a long way to go to create online platforms to manage statistics on a much more granular level. With the incursion of X-Box, DVR’s and streaming to TV combined with a targeted-consumer advertising model, the move is ready to happen in the coming years. Google may be able to create an option for that market, but they will need to move away from contextual ads and the core focus on CPA as CPM has value in the world from a branding standpoint as part of the $500 B market. There are a lot of marketing options to fill that void.

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  7. Robert, I think you are on to something and that is that IP connectivity is the new network in what has been known as media. It has the potential to replace print, television and radio in one fell swoop and that is why I believe google is going to offer free connectivity to the masses. bandwidth costs have fallen to a level that the advertising revenue more than subsidizes the cost of the network. i believe we are in the very early stages of a true ‘gloabl village’ as Marshall McCluhan called it. The cost structure for a traditional ISP like PacBell DSL..errr AT&T, comcast, etc to supply services to the residence is around $40 per month but trends downward as you grow because you get cost scale….at least in the network world, the more you buy the less it costs…wish power markets were the same :-)

    goog is placing a bet, and a very calculated one, that the revenue that can be produced from marketing to(advertisting) and selling or providing for free their own services to their future isp customers will more than offset the costs of a purchase. Kinda like how Urs, GOOG VP of Eng, has said that power companies would do themselves a favor by giving away computers because the money they can make selling the customer the power for that computer is far greater than the cost of the computers.

    what this provides them is an end to end solution for delivering customized content and adverting to each and every one of the people using their service. this delivery platform is alway on and knows where you go, what you type, where you live, who your friends are, what files you have downloaded, what you look like, and whatever else they add on to their services. So when Johnson & Johnson or GE or Proctor & Gamble or Coca Cola or Pepsi is planning their media buys for the next year do you think they’ll purchase advertisements on radio, television, print of the 4th network(Google)? based on the ability to target a specific population that has certain attributes you desire, the choice is clear…you pick google. Why? because you know that your marketing msg is going to a qualified prospect as opposed to the traditional ’shotgun’ approach. plus, you can get results in realtime and tweak your msg if its not working in real time. with the other three media you are somewhat ratholed into trusting some third party for ratings that may or may not even reach the people that you want it to. by the time you figure this out a slew of things can happen…some good some bad but why chance it when you don’t need to.

    At the end of the day, Google is building a traditional media killer and the funny thing is..actually not really funny but kinda, that the writing is on the wall but nobody seems to believe it. I do. @Home Network had this vision but couldn’t pull it off because the cable co’s couldn’t get their heads out of their rear to see the opportunity that was sitting right in front of them and there weren’t enough complimentary services like youtube, grouper, etc to make use of the connection.

    time will tell but if i’m a content producer where would i want my content to be seen? ex. let’s say you are the producer of CSI Miami and goog offers you the ability to place your content on their network so that it can be viewed by anyone, anywhere, anytime and offers a revenue share or some other creative structure around it such that you know your worst case scenario beforehand. simple choice right? sure abc or cbs might offer an upfront fee in the form of $$ per show but the audience is limited, the timeslot is finite and in order for someone to view it, they have to purchase cable tv or satellite or whatever whereas on the google network you content would be globally accessible and the broadband access which replaces the cable or satellite tv service, is free to the masses. additionally you can develop complimentary services that engauge your viewership such that you are able to really develop a community around you content as opposed to content around a community.

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  8. Google has to move very quickly to see this vision through. I would imagine the next set of updates to Vista/XP will be the ones that enable advertising on the desktop. I foresee that Microsoft’s advertising api will be available to both web sites and desktop software. With the 100s of millions of desktops running Windows, Microsoft immediately has a larger advertising base and advertisers will opt to have their web site ads triggered on the desktop rather than through the browser window with its more limited capabilities for placement, interactivity, and richness.

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  9. Your views are intriguing. I read this post with eyes of an ad salesman. When new tech services and strategies evolve, new skill sets are required. I don’t think I agree with you when you imply that sales people won’t be able to effecitively sell across all media. Sure, most current ad sales reps don’t know the intracacies of all media, but I think a Google Ad OS would enable such capabilities. I feel that ad reps that have had experience selling in different media (online, radio, print) will become much more valuable than those dinasours that have developed deep personal relationships with a few clients in one medium (i.e. TV). What do you think? What skill sets will be powerful for sales people in a Google Ad OS world?

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  10. Google is taking advantage of the fact that all radio stations have a large amount of unsold commercial inventory. That costs these stations money.

    If this “experiment” works as well as I think it will that excess inventory will become a thing of the past. Google already bought all of Clear Channel’s excess. I’m pretty sure that’s what the $1billion dollar purchase was.

    It’s a win win for Google and the broadcasters. Also, at the end of the day, if this allows the stations to shrink their sales staff they would be more than happy to do that. I’m sure a lot of people will lose thier jobs over the next few years. The same thing is happening to radio DJ’s due to automation, Voice tracking and syndication. Broadcasters are becoming more efficient across the board. I feel bad for the employees.

    It might be a good time to pick up some radio stock.

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