Tuesday, April 3, 2007

Google In the TV Ad Business

Today's WSJ included an article about Google and its foray into the TV ad market. Google will start selling advertisement through an online auctioning system. They will be selling advertising to be aired by EchoStar Communications Corp. which has 13 million households subscribing to its dish service.

"Under an arrangement announced Tuesday, Google will sell TV ad spots through an online auction system, with advertisers bidding the amount they are willing to pay per thousand households that view each commercial."

TV networks have previously been reluctant to relinquish control of the advertising process for fear that they would lose some opportunity to capture value, but now seem convinced that they can limit Google to a small portion of their advertising operation.

"TV networks and some advertisers and media buyers have in the past proved reluctant to join Internet-based efforts to change how TV ads are sold, at least partly out of concern that their business would become commoditized. But advertising executives briefed by Google on its plans welcomed the announcement, saying it could improve the market for cable and satellite-TV ads and nonpremium ad purchases. Some added, however, that Google's auction system wouldn't replace the way the premium spots, such as those for prime-time broadcast television, are sold."

"I don't think anybody is thinking this is going to change large national broadcast," says David Kenny, chief executive of Publicis Groupe's Digitas digital unit. "This is something that brings a lot of value to the more fragmented end of television."

Perhaps Google will excel at this endeavor because they seem to understand the value of information better than most. Businesses will want to pay for more accurate advertising to their target markets.

"Advertisers who use Google's Web-based system for buying commercial spots have the option of selecting specific TV networks, times of day and regions where the ads will be viewed. Eventually Google intends to allow advertisers to target specific groups of viewers, based on information about the viewer demographics for each channel."

The only thing that may limit Google is the restriction imposed upon the gathering of information for privacy reasons. There may be a limit to how focused the advertsing can be in a TV environment as opposed to an internet environment.

"Google is relying on information collected from set-top boxes by operators such as EchoStar, which it says does not permit it to identify any specific subscribers. At least initially, Google is not matching commercials with the content of TV programs or showing ads to specific users based on previous viewing habits or other personal information. The Internet company says concern for user privacy will be a factor in any future efforts to target TV advertising more specifically."

Will Google succeed in this endeavor? It seems they understand the consumer of media and the value of information. TV executives may be underestimatoing Google's ability to bring efficiency and effectiveness to the TV ad process.

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