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Google to sell banner ads

The search giant plans for the first time to sell ads that include images, a surprise reversal for a company that has won regard for its pioneering use of text-only marketing pitches.

Search giant Google plans for the first time to sell ads that include images, a surprise reversal for a company that has won regard for its pioneering use of text-only marketing pitches and for keeping its home page religiously free of banner advertising.

A posting on the company's Web site describes the new program, which will allow customers to place image, or banner, ads on third-party Web sites that participate in its AdSense program. AdSense promises to place ads on Web pages that are relevant to a marketer's message, based on an analysis of the page's content.

The posting noted that Google will not put image ads on its own site for now, but the company said it looks "forward to offering more image ad distribution options in the future."

The image ad program was launched late Wednesday in a beta, or test, version, said Tim Armstrong, Google's vice president of advertising sales. He said the decision to wade into banners came after nine months of interviews with Web surfers, publishers and advertisers, and was based on what he called Google's core mission.

"The noise in the advertising market is really going up over ROI (return on investment)," he said. "There was a pretty clear signal from advertisers that there is an opportunity to use Google's relevance technology for images as well as text. Over the last 14 months, we've been able to grow a network of content publishers (that use AdSense), and the message was to make it more useful."

In just a few years, Google has grown from a start-up to an Internet giant, thanks in large part to an advertising program modeled on the ground-breaking efforts of Yahoo's Overture Services division. Both companies auction search keywords to the highest bidder and ask customers to pay only when Web surfers click on advertisements.

So far, these pitches have steered clear of designs incorporating images, which have been deemed a distraction that would likely diminish the Web surfer's experience. Although it's not clear whether image ads will be coming to Google's own site any time soon, the company is poised to put them to its first test, potentially opening the door for wider use.

The move puts Google firmly into the camp of Internet advertising network providers such as ValueClick and 24/7 Real Media.

Using attention-grabbing methods could help make up for shortfalls in Google's relevance technology, which has not proved to be as clear a winner on ordinary Web pages as it has alongside lists of its search results. Google's Armstrong declined to discuss response rates for AdSense, saying that the company is continuing to innovate to improve relevance and return on investment for its advertisers.

In a list of frequently asked questions describing the new program, Google said it would offer four layouts of varying sizes: leaderboard, banner, skyscraper and medium rectangle. The image ads will be limited to 50KB--much larger than the typical 1KB to 2KB used by text-only ads. Nevertheless, Google said the limit will ensure that the images have a minimal effect on load time for most sites.

Armstrong added that Google will include a "user bar" along the bottom of its image ads displaying the addresses of the sites the ads link to, a feedback button to let people send messages about an ad directly to Google, and an "Ad by Google" label.

Google is looking to expand its advertising programs as it prepares for an initial public offering that could value the company at more than $25 billion.

The company has already gone well past its bread-and-butter AdWords search engine advertising program.

In recent weeks, Google has reversed a policy restricting the sale of trademarked terms to non-trademark holders and has begun testing a system for automatically matching ads to little-used keywords.

Sales from U.S. search engine marketing will reach $2.1 billion in 2004, up from $1.6 billion last year, according to Jupiter Research. By 2008, sales are expected to hit $4.3 billion.

According to a securities filing, Google generated $961.9 million in revenue in fiscal 2003 and posted $105.6 million in net profit. That marked the third consecutive year of profit for the Web's most popular search engine. During the most recent quarter, which ended March 31, Google collected $389.6 million in revenue and posted a $64 million profit.

Google's image ad program was noted Wednesday by Search Engine Journal, an online newsletter.

"There has been some questions about whether Google is getting away from (our) core business, and I feel that we're not," Armstrong said. "The thought from four years ago was to come up with a way to create better relevancy for ads. We've done that with text ads, and that's how we've come to this."