Nieman Foundation at Harvard
HOME
          
LATEST STORY
Journalism scholars want to make journalism better. They’re not quite sure how.
ABOUT                    SUBSCRIBE
June 28, 2011, noon

Google plans for “the second phase of the display ad revolution” with a focus on smartphones and tablets

Google is known primarily for its work in search advertising. But it’s making an investment — a big one — in another area: display ads.

This month’s acquisition of AdMeld was only the latest in a series of moves that are positioning Google for “the second phase of the display ad revolution.” According to the Wall Street Journal, around 1,000 of Google’s engineers are currently working on display technology.

That’s not entirely surprising, given that growth in display continues to outpace search: In the first quarter of 2011, AdWeek reports, display comprised 33 percent of digital ad spend — an increase from 29 percent two years ago. (Search, on the other hand, declined: Q1 of 2011 saw 48.7 percent market share for search, a decline from 53.4 percent two years ago.) And Google itself, thanks in large part to its $3.2 billion acquisition of DoubleClick, is set to grab 12.6 percent of the U.S. display-ad market by the end of the year, up from 9.6 percent last year.

What’s especially noteworthy, though, is the extent to which display has become a focal point for Google — and, by extension, for the products it offers to news publishers. In the first quarter of 2011, Google bested Yahoo in display for the first time in 16 years, largely on the strength of its push toward small and medium-sized company display buys. As a promotional website puts it, “Display advertising really is at the heart of what we’re doing at Google these days.”

I had a chance recently to meet with some of Google’s top execs on display-ad strategy to get their take on how the sector is evolving — and what role they’d like to see Google play in it.

Fragmentation and friction

Display ads — banner, video, and mobile — currently comprise about a $25 billion market globally, says Neal Mohan, Google’s VP of product management for display advertising. But “we believe that the potential of the industry is dramatically larger than it is today,” he told me. In fact: “I believe the potential of the display market is something on the order of $200 billion over the course of the next several years,” Mohan says. The broad question he and his colleagues are focused on from a technological standpoint: “How can we help grow the overall pie — grow the overall industry — from the market that it is today to the $200 billion vision?”

The broad answer: improve efficiencies in the relationships between publishers and advertisers. Display advertising as it currently operates is “massively fragmented,” Mohan notes. As media outlets proliferate — and as the devices we consume them on proliferate, as well — the A-to-B link between advertisers on the one end and media companies on the other becomes increasingly disconnected.

“And as a result of this fragmentation,” Mohan says, “there’s tremendous friction” in the advertising process overall. Marketers and agencies end up using multiple types of interfaces, technologies, and ad networks to find the audiences they’re looking for among the mass of overall web users. “And what that leads to,” he notes, “is a destruction of value — a destruction of ROI, in terms of what marketers are looking to achieve, and fundamentally a destruction in the amount of revenue that a publisher can generate. So I believe that publishers can generate tremendously more revenue from display advertising than they do today. And our mission is to create the tools and the products and the technology that allow publishers to do that.”

“An end-to-end-platform”

Google being a technology company, “I think the way that Google can add value to this is by building technology for publishers and advertisers,” Mohan says. “Our vision is to build an end-to-end-platform for buying and selling display advertising, so a publisher doesn’t have to go to multiple places to manage its mobile inventory, its desktop inventory, its video inventory — whether it sells it directly or indirectly.” The platform may be plugged into other technologies, but it would also be, Mohan notes, a singular space: a one-stop shop for publishers and advertisers alike.

The platform Mohan’s talking about isn’t a single product — it’s more a series of incremental products that serve the broad goal of a friction-free advertising process. And though Mohan describes the platform in the future tense, Google has already begun rolling out its building blocks, testing out components with publishers. And the publishers have seen a 188-percent lift in revenue as a result of it, he says.

“I think we’re really in the first inning of what the implications of this technology are,” Mohan says. “You can imagine that if we’re seeing a 3x improvement just today, what that world will look like a year from now, two years from now, three years from now — and I think that’s the path to getting to that $200 billion vision.”

And a big part of that vision will play out on mobile devices, within apps.

“Speaking and breathing mobile”

“What’s really evolved over the past three or four years is this apps ecosystem,” says Clay Bavor, Google’s product management director for mobile display ads. Apps facilitate “these experiences that are highly customized for mobile devices and tablets,” he notes. And “they create these beautiful experiences that are really tailored to the features and functions of the device.”

While much has been made of smartphones’ and especially tablets’ effects on the presentation of publishers’ content, those effects, Bavor notes, are equally applicable to ads. For Google, he told me, one of the big challenges — and opportunities — is “making our products just speak and breathe mobile.”

Google has two primary goals for its mobile display ads, Bavor told me. On the one hand, it’s to “allow advertisers who are used to advertising on desktop to seamlessly extend their campaigns and metrics and measurements to mobile.” On the other hand, though, it’s to work with apps as their own kind of spaces and experiences — building ad formats that are native to the app environment rather than simply grafted onto it. Ads that are swipe-able, tap-able, rotate-able, and “that really make use of the unique properties of smartphones and tablets.” In May, Google rolled out a series of new HTML5-based ad formats that were, Bavor noted at the time, “built specifically for tablets’ larger, high-definition screens.”

But those tablet-native ad units aren’t just aesthetic propositions; they’re practical, as well. Go where the people are is as relevant to Google as to anyone else in and among the media; and where Internet users are, increasingly, is everywhere, rather than seated in front of computers. The first quarter of 2011 saw smartphone sales of over 100 million — an 85-percent increase from 2010. And traffic from tablets on Google’s AdMob network increased 300 percent between December 2010 and May 2011.

And “if you just look at the people using mobile ads to support their app or mobile content,” Bavor says, “that’s growing like crazy, too.” In January of this year, he notes, Google had about 50,000 developers and publishers using AdMob to monetize their apps and mobile websites. By May, that number had jumped to more than 80,000.

Which is a reflection of what Eric Schmidt, on behalf of Google, has been saying for some time now: The future is mobile — and it will play out on, and within, and through, smartphones and tablets. “That,” Bavor says, “is where we’re placing our big bets right now.”

Creativity and engagement

And that could also lead to a new kind of display ad, which could, in turn, “support the next big wave of content creation and application development and so on on the Internet,” Bavor says.

Bavor has been meeting with publishers to determine what both groups actually want from an ad platform. And one broad, if unsurprising, thing he’s heard repeatedly is the importance of direct sales. “If I get a call from Ford,” he says, “and they want to place an ad — help me manage that relationship. Help me help them create beautiful formats that look great in the context of our tablet app. Make that great and easy for me. And, to the extent possible, make it an extension of my existing tools.”

“Whether it’s direct sales or any other aspect of monetization,” Bavor notes, “the last thing any of these publishers want is yet another tool or workload to think about.”

What they do want, though, is ads that are both easy and, even more importantly, impactful. And Google believes that the path it’s on now will benefit publishers and advertisers — and, by extension, users. As Mohan put it in a speech to the Interactive Advertising Bureau earlier this month, “Display ads provide an incredible platform to engage, excite and inspire. If we as marketers, publishers and technology providers can deliver experiences that delight the user, we can take this industry to new heights.”

POSTED     June 28, 2011, noon
Show tags
 
Join the 60,000 who get the freshest future-of-journalism news in our daily email.
Journalism scholars want to make journalism better. They’re not quite sure how.
Does any of this work actually matter?
Congress fights to keep AM radio in cars
The AM Radio for Every Vehicle Act is being deliberated in both houses of Congress.
Going back to the well: CNN.com, the most popular news site in the U.S., is putting up a paywall
It has a much better chance of success than CNN+ ever did. But it still has to convince people its work is distinctive enough to break out the credit card.