Being in the display ad business, I’ve long suspected that Google will make a bigger push into display advertising. Yes, they’ve had display advertising in the Adsense program for a couple of years now, but the results have never been very good for publishers or advertisers from what I’ve heard, and Google has never pushed it.
So as linked above, John Chow is reporting that he’s now part of what sounds like a beta invitation-only Google display network that is a negotiated CPM with Google and a year long contract. This is more interesting than it sounds for a couple of reasons:
1. A year long contract
It’d be nice to know more about what this means, but I’m guessing it may give Google some exclusive right to represent your inventory. This is really to Google’s advantage if that’s the case, and is definitely not a step towards what we preach at Right Media about competition and working with multiple parties being the most beneficial to the publisher. It is possible the contract just holds the rate you agree on to be steady, which may sound good on the surface to the publisher, but actually can hurt you. If you lock in with Google at a $5 CPM for a year, what happens if you have advertisers coming to you willing to pay much more but you’re allocating inventory to Google to fulfill some contract? While I need more details, I don’t like the idea of a year long contract from a publisher point of view.
2. A Flat CPM
This means Google would be doing a guaranteed buy. So again let’s say that’s a $5 CPM flat buy. That may again sound really nice to you as a publisher to have that guaranteed rate, but that allows Google to go sell your inventory at whatever price they want, and only give you a $5 CPM. What if they can sell it for a $10 CPM to the advertiser? Are you happy with a 50% revenue share? I wouldn’t be. It also goes against how Google has normally worked in advertising with their pay per click roots.
What does this really mean though? These moves aren’t surprising. Display is a part of online advertising where Google has been weakest, and they are butting in to all forms of advertising. It’ll be interesting to see if they make headway here, or if they fail like they have in some other areas outside of their core offerings (auctioning print ads). It does help explain them building up their New York offices and hiring more traditional media sales people. They also have a very large core of advertisers they work with through Adwords, so I don’t doubt they can get some advertisers on board.
It also moves them along in a trend we’re seeing with the bigger online companies starting to “rep” other companies. Yahoo’s sales team now sells ads for Ebay as well as all the Yahoo properties, and I wouldn’t be surprised to see Yahoo sell inventory across other publishers and networks in the future with their strong display sales force. MSN also now sells ads for Facebook and they’ve openly said they’d like to start an advertising exchange.
Why no announcement though? Well, it could be because it’s so new. It could also be them sticking their toe in the water without jumping in and having it fail. Their was a lot of press about Google launching a beta CPA network months ago that shared some similar traits as this display network by being invitation only and publishers only getting email reports. There hasn’t been much said about that CPA network since. Was it a failure? Are they still building an interface? Why is Google beta testing the CPA network and the display network with no interface for publishers to use? Perhaps they aren’t so committed yet?
Directly repping premium inventory in this way can be a good business, but in some ways it would be a step back in advertising for Google. They created an automated machine with Adwords/Adsense that makes unbelievable profit, but repping premium inventory is a very manual business. Evidence of that would be negotiating CPMs with each publisher directly. Those types of things can make it harder to scale.
Spreading themselves in so many advertising areas could end up being genius for Google, or lead to their ultimate undoing. We just don’t know yet, and it will be interesting to watch.
John Chow added in the comments on his post that “When there is no display or video ads to show, Google shows a normal AdSense ad. However I still get my contracted CPM for it – even if the AdSense ad is CPC.”
What this means, if true, is that Google is actually arbitraging here. They are buying at a flat CPM and hoping to sell inventory for more than they paid for it, so Google could actually be losing money on certain publishers if they can’t sell their inventory above the rates they’ve negotiated with the publishers. This is good for publishers, at least in the short term until Google has to renegotiate the CPM rate or just cut the publisher altogether if they can’t make it work.