By Forrester Research
Special to CNET News.com
April 26, 2005, 2:19PM PDT
by Charlene Li, Principal Analyst
Google enters the growing online display advertising market with the beta launch of site targeting within its AdSense for Content product.
Site targeting will bring Google new revenue growth, give marketers more control over their Google ad buys, and strain existing publisher-advertiser relationships.
To date, contextual ads appear across every site in Google's network--so an ad for the keyword "china" could appear on bridal or travel sites. With site targeting, marketers can select sites where they want to advertise, buy ads on a cost per thousand impressions (CPM) rather than a cost per click (CPC) basis, and apply a new ad format--animated image ads.
Site targeting is significant because it does the following:
Brings Google a new revenue stream. Faced with slowing top line growth, Google wants to expand its current search revenue by tapping into the $4 billion online display ad market. Site targeting gives Google access to current customers' untapped branding budgets and attracts new advertisers not interested in Google's direct response model. The result: Display ad spending will become easier and more efficient, with dollars moving from large branded online sites to targeted niche sites and blogs. But Google won't enjoy the spotlight for too long. We expect Yahoo to offer a competing product that exploits its deep brand advertiser base within the next six months.
Gives marketers control over ad pricing and placement. Site targeting affords marketers pricing and placement more appropriate to their branding objectives than Google's current AdSense product, which charges identical CPCs for search and contextual ads and runs them across the entire Google publisher network. To best take advantage of site-targeting, marketers currently running contextual ad campaigns should shift their best branding keywords from CPC campaigns to site targeting and CPM pricing. This new keyword-based branding capability will introduce a new marketer challenge: how to manage direct response and brand marketers from one organization bidding against each other for the same keywords.
Threatens publishers' relationships with brand advertisers. Google's site targeting gives marketers--not publishers--the ability to set the price of CPM ads. This could bring more ad dollars to strong brands like CNN.com, as marketers will advertise more on those sites than a smaller site or blog. But will revenue from Google's site targeting be enough to offset losing direct sales from the same advertisers? Publishers concerned about this should opt out of the site targeting features--which will not affect their ability to show CPC-based ads. Forrester expects that publishers with significant brand advertiser relationships--like The New York Times on the Web or CNN.com--will accelerate discussions with vendors like Quigo and IndustryBrains about offering their own private-labeled bidded marketplace for contextual ads.
Puts pressure on traditional media to demonstrate value. As they gain experience knowing what impressions are really worth--rather than what a publisher says they are worth--marketers will start transferring that knowledge to their brand advertising buys in television, radio and print. Moreover, it's unlikely that Google will stop at offering only animated graphical ads; it's likely that rich media and online video ads will also be options in the future. With the expansion of Internet-based technology into traditional platforms--especially interactive TV--could Google site targeting extend to a local cable company, video on-demand or The Food Network on your TV in the future? Stay tuned.
© 2005, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.