- The Search Agents - http://www.thesearchagents.com -

How Google’s Content Network Is Like John D. Rockefeller

Posted By Ted Ives On September 22, 2009 @ 4:55 am In Display,Featured | 1 Comment

Rockefeller took the oil industry, which consisted of a large number of small players, and which was subject to massive swings in capacity (a boom/bust industry similar to the 21st century’s semiconductor industry in some ways), and consolidated much of the industry into his Standard Oil company.  In the process, he drove efficiencies through standardization (one example widely cited: the cost of kerosene dropped by 80% over the life of the company).  While controversial, it’s an undeniable fact that Rockefeller organized a disjointed industry and turned it into an engine that powered the industrial growth of the United States throughout the 20th century.

I have seen many markets in my career and I have never seen a market as fragmented and confusing as the display advertising market.  There are over 300 ad networks; every one of them has one button on their main page that says “publishers” and another button to attract “advertisers” – most are completely incapable of explaining why they are different or what their value add is.

Much of display buying occurs in a medieval fashion (in my opinion), with a buy being duly scheduled ahead of time, and as it begins to run, the advertiser will analyze the conversion rate, often decide the campaign is not doing well, contact the network or the publisher, and renegotiate the price of the buy on the spot or pull the campaign.  There are thousands upon thousands of these people doing this highly inefficient work by phone and email.  The better ones focus on buying “remnant” inventory for cheap, and slicing and dicing the inventory based on behavioral targeting or some form of segmentation to better target the ads to relevant audiences and increase the conversion rate.  Good display people are hard to come by, and they do a great job – but frankly, it is a shameful waste of talent in the 21st century for people to be doing this kind of work.

In contrast, Google’s content network (their network of third-party sites where they place display ads and take a cut for doing so), utilizes their AdSense technology, which scans the target page and makes automatic decisions about which display ad to place based on the relevance of the ad to the target page.  It does so using a form of semantic analysis (essentially scoring the page against keyword information from the advertiser, among other things, for relevance).  It’s not a perfect system, and sometimes you’ll find an ad that seems a little odd, but 95% of the time its results are remarkably relevant.

AdSense’s Achilles heel, until recently, was that it was extremely difficult for publishers (the web sites hosting the ads) to block undesirable ads – you had to come across the ad and then block that specific advertiser.  Any company with more than 20 web pages would find it difficult to be aware of all the ads running on their site; but recently Google added the ability to block ads by category [1], placing ads into various buckets you can select from (Dating, Drugs, etc.).  While imperfect, this removes a huge barrier to AdSense’s adoption by publishers.

Last month, Google’s content network began accepting inventory from 3rd party ad networks [2] (and announced last week these ad networks are vetted by Doubleclick [3]).  Presumably these networks will try to push their “remnant” or leftover inventory through AdSense in order to monetize it.  But this looks to me like a big wakeup call for the display advertising market (and kudos to Google for going in this direction, even though to some degree it might reduce profitability of Doubleclick if it drives pricing down – better they should do it themselves than have someone else eat their lunch!).

Google has two things going for it:

1.)    Auctions

2.)    Keywords

Auctions, like the type that AdSense uses to determine ad prices, lead to high efficiencies.  I don’t think anyone would argue that the Display advertising market is very efficient, with one person calling another and cajoling her over the phone for pricing.  Keywords lend themselves to semantic analysis, which can automatically provide correct ad placements at low cost.

If Google can successfully pull in enough inventory from other ad networks, they can reduce display advertising costs across a wide section of the industry in a highly efficient manner;  this will likely have a number of positive effects — downward pressure on ad rates, increased adoption of display advertising by publishers, and the reallocation of thousands of display advertising professionals into more value-added (and hopefully fulfilling!) positions within the online marketing professions.

If Google can drive some of these changes into the market, the benefits of display can then be fully realized; search marketers will be able to bring technologies from the paid search side of the business to bear on the display market.  These technologies, in particular bid optimization engines and influence/attribution models, can then systematically drive higher levels of ROI than have traditionally been possible (see Where Should I Spend My Next Dollar? [4] for some illustrations of how this will work…)

So hats off to Google for starting to clean up the Display market – hopefully they will get more thanks and less grief than Rockefeller did for cleaning up the oil market ;-)

Article printed from The Search Agents: http://www.thesearchagents.com

URL to article: http://www.thesearchagents.com/2009/09/how-google%e2%80%99s-content-network-is-like-john-d-rockefeller/

URLs in this post:

[1] Google added the ability to block ads by category: http://adsense.blogspot.com/2009/08/extending-category-filtering-beta-for.html

[2] Google’s content network began accepting inventory from 3rd party ad networks: http://adsense.blogspot.com/2008/05/introducing-third-party-ads-on-google.html

[3] vetted by Doubleclick: http://adsense.blogspot.com/2009/09/bringing-more-buyers-to-adsense-through.html

[4] Where Should I Spend My Next Dollar?: http://www.thesearchagents.com../2009/08/where-should-i-spend-my-next-dollar/

[5] The Net on Display Networks: OMMA Ad Nets 2010: http://www.thesearchagents.com/2010/08/the-net-on-display-networks-omma-ad-nets-2010/

[6] Google Code Update: Page Speed Service: http://www.thesearchagents.com/2011/08/google-code-update-page-speed-service/

[7] Google TV and SEM: Why Can’t We Be Friends?: http://www.thesearchagents.com/2012/02/google-tv-and-sem-why-cant-we-be-friends/

Copyright © 2009 The Search Agents. All rights reserved.