After months of speculation, Google has officially jumped into the television business.
The Web giant announced on Monday that it is partnering with EchoStar Communications to sell commercials over the Dish satellite broadcaster's 125 national programming networks, an early indicator of how the Internet giant plans to use its $10.6 billion online-ad business to conquer television.
Under the EchoStar deal, advertisers will use Google's AdWords automated auction interface to bid on ad spots. Advertisers can upload their TV commercials and select the desired time of day and channel, as well as choose regional or national area coverage. They can also target the ad based on a show's demographics, such as males 18 to 34 years old, said Keval Desai, director of product management for Google TV Ads.
"We are not targeting households or individuals," he added. "We want to be cautious about user privacy," Desai added, referring to user concerns about Google's highly targeted online advertising.
In a related move, Google also confirmed that it has been testing a similar advertising effort with Astound Broadband, a small cable TV operator east of San Francisco that serves about 23,000 subscribers.
Astound has been testing TV ad sales with Google since the fall, the companies said. Cable set-top boxes track which programs a household watches so that targeting systems eventually could match the kinds of shows the household prefers with ads for products and services that would suit their interests, Astound President Craig Heiting said.
The Astound project is admittedly small, but it may indicate that Google is intent on doing more than the deal with EchoStar's Dish (short for Digital Sky Highway).
Several advertisers, including E*Trade Financial and 1-800-Flowers.com, plan to buy ads to run on Dish. They say knowledge of where and when a spot ran, and how many people likely saw it, is what attracted them to buying their TV spots though Google.
Several industry experts, however, said real interactivity and targeting will come when Google announces a deal with a major cable operator. Cable companies are known for being able to target and segment audiences--sometimes to even the neighborhood level--to a much narrower degree than satellite operators.
"To me, (the Dish deal) is less interesting than a cable deal would be," said David Bank, an analyst at RBC Capital Markets. "At the end of the day, they are going to have to store targeted ads--calling up the ones that are relevant--at the set-top box, as opposed to direct interaction (which they could get with cable).
It's always been a difficult sell for satellite operators because it's not quite local and not purely national, either.
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I don't think it's a game changer for TV advertising," Bank said, "but I think it's got some interesting implications, and we'll all be watching it pretty closely."
"The obvious first place to try this out is in cable, which has a much greater aptitude for targeting than satellite can do at this point," said Tim Hanlon, a senior vice president at Denuo, a consulting arm of the advertising agency Publicis Groupe.
"Satellite is quasilocal, and it's always been a difficult sell for satellite operators because it's not quite local and not purely national, either. So it would stand to reason that this would be a natural for Dish to experiment in selling in a more efficient manner," Hanlon said.
Google is in discussions with several cable providers, Google's Desai said, but he declined to elaborate. "This model and product works for anybody who has TV ad inventory; networks, satellite operators and cable operators."
The search giant has reportedly talked to Comcast, but so far to no avail. Even eBay Media Marketplace, a cable TV ad marketplace created by eBay and backed by Microsoft, Hewlett-Packard and others, is having a hard time getting up and running because of a lack of participation by cable networks.
Networks and ad agencies fear that they will lose control over ad scheduling and pricing under the system. Google's plans, however, might fare better, as its AdWords platform has already proved successful as an ad-selling model.
With EchoStar, Google has electronically tied its online platform to the "head end" of the satellite TV operator, so the ad is inserted into the programming by the operator's server, according to Desai. Advertisers pay based only on the number of impressions, or potential views, of the ad.
As with any television commercial, the advertiser can never be sure that the viewer has not left the room during the commercial.
Advertisers currently produce the ads themselves. However, Google is planning to launch a marketplace that matches up marketers who don't have experience creating ads with agencies that do, similar to what Google offers for its Google Audio Ads radio platform, Desai said.
Google TV Ads will be the first automated system for buying, selling, delivering and measuring television ads on the Dish Network, whose affiliate networks include Fox News, ESPN and HGTV.
Nielsen measures TV viewing at a sample of the 13.1 million households that Dish serves, but Google's system will measure viewing at all the households served, said Michael Kelly, executive vice president of advertising for EchoStar.
"I'm not convinced we are going to sell more (ad space), but it will sell more targeted advertising," Kelly said. "There will be viewer measurement information from millions of households versus thousands of households, and as a result, our ability to refine that information down to a narrow, targeted audience and anticipated response rates will improve."
Last year, Google turned targeted online ads into a $10.6 billion business, and it has been pushing into offline advertising with the promise that its automated online-auction system can revolutionize traditional, inefficient ad markets, including radio, newspapers, magazines and now television.
"What's really interesting about this is, we are moving to some future which features an online media-buying dashboard that will incorporate tracking across multiple media," said Greg Sterling, principal of consulting firm Sterling Market Intelligence. "The supreme irony is that brand advertisers have started to move advertising from traditional media onto the Internet. At the same time, Google is reaching out to traditional media to try to incorporate that inventory into their offering."
Online brokerage E*Trade participated in Google's newspaper ad test and plans to try out Google TV Ads too, said Nicholas Utton, chief marketing officer. "Real-time reporting is something the industry needs and wants. Hopefully, this accelerates a move to total digitization," he said.
Even Utton is waiting for the cable shoe to drop. "Ultimately, our hope, and I think Google's hope, is...eventually to get the major cable providers involved, like Time Warner and Comcast," he said.
1-800-Flowers, which has sold newspaper ads through Google, is working to finalize a deal to sell ads through Google's TV Ads and Audio Ads programs, said Steven Jarmon, who runs the flower company's offline-advertising efforts.
"We like the idea of auction-based pricing. That gives us flexibility," Jarmon said. "We also like the idea of virtual real-time reporting. The measurability and accountability aspects will make our (ad buying) system more efficient."
Google's forays into print have been mixed, and its effort with radio has stumbled, making its future in television uncertain. Its test with selling ads in magazines in 2005 fizzled for lack of advertisers, but the company's test to sell ads in more than 60 newspapers, begun late last year, appears to be faring better, with more newspapers joining and then reporting good results.
Google's push into radio by using the technology acquired from radio ad company DMarc Broadcasting, however, got off to a rocky start, mostly because stations fear that an auction would commoditize ad space and drive prices down. Meanwhile, a 2005 Google patent application indicates that Google is also targeting outdoor ad displays such as billboards.
And in addition to its Dish efforts, Google is deploying search, advertising and video functions for satellite company British Sky Broadcasting in the United Kingdom.
Google appears serious about TV. It hired Michael Steib, the general manager of strategic ventures for NBC Universal, to head up its TV ad sales. And last summer, it hired Vincent Dureau, chief technology officer of interactive-TV company OpenTV, to be a senior engineer.
"Vincent was a key architect for what is today the world's leading set-top box middleware," according to an OpenTV news release that announced his departure.
"The biggest question of all is, does Google have the capability of being a multimedia ad broker?" Hanlon said. "Truly, that remains to be seen. They certainly have the resources, the money and the wherewithal. But the way you sell an AdSense ad is very different to how you sell a television ad."
Correction: This story misidentified E*Trade's chief marketing officer. His name is Nicholas Utton.