Google’s Online Ad Auction System Builds Hope for Improved Information

Apr 9, 2007  •  Post A Comment

Google’s entrance into the television advertising market through its partnership with satellite-TV service EchoStar has the potential to change how many TV ads are bought and sold, but it won’t eradicate a decades-old business built on handshakes and relationships.

At least not yet.

Last week, Google announced that it soon would test an auction-based system called Google TV Ads for buying time across 125 cable networks carried on EchoStar. The project will give advertisers new power to measure who watches their ads. Early partners include 1-800-Flowers.com, Intel and eTrade as well as media agencies OMD and Publicis.

An auction can deliver many of the efficiencies of Internet advertising to TV, said Alec Gerster, CEO of Initiative Worldwide, who’s not currently involved in the project. The Google-EchoStar experiment may portend a future where less complicated advertising packages are brokered without the human touch.

“What you will find is a bifurcation between what’s truly unique and important — and requires a person-to-person relationship,” and more commoditized airtime, he said. “But that doesn’t mean we can’t approach the non-differentiated part of the business and figure out more interesting ways to do that.”

As satellite TV provider EchoStar embraced an auction-based system, cable networks backed away from an auction initiative championed by eBay and several large advertisers. The Cabletelevision Advertising Bureau last week withdrew its participation in trials of the eBay system, saying it lacked needed features. To the extent auctions supplant human-brokered, volume-based purchases, media agencies will need to respond by training staff on the new methods, either migrating Internet buyers to the TV auction tools or retraining TV buyers to become more familiar with Google’s online ecosystem, Mr. Gerster said.

Advertisers are eager for faster, more accurate ways to measure effectiveness of advertising.

“We want to know if an ad ran, how many people saw it,” said Steve Jarmon, VP of brand communications and partnership marketing for 1-800-Flowers.com. His company is participating in the Google-EchoStar test, but he has no plans to jettison his media agency.

“There is still added value in negotiating promotions. … You can’t just rely on a computer and go home at night,” he said.

Google’s auction system may actually expand the TV ad market, said David Hallerman, senior analyst with market research firm eMarketer.

“Look at how Google AdWords brought a lot of advertisers onto the Internet who had not been advertising before. Small and midsize companies. It made it easy,” he said. “The auction helps the smaller companies fit it into their budget.”

Google’s system can offer capabilities that have buoyed the $16.4 billion Internet ad market, such as campaign management and optimization.

With Google TV Ads, the Web-search giant reports back to advertisers 24 hours later on how each commercial fared on a second-by-second basis, with data on how many households tuned into the commercial and for how long, explained Michael Steib, director of Google TV Ads.

That’s the sort of optimization that has worked well for online buying.

If successful, Google will expand the test to other advertisers and video distributors and also will include demographic data. In addition, Google will build an online marketplace to match advertisers to creative shops who can help craft ads for TV.

The TV industry shouldn’t take Google’s entry lightly.

“There have been any number of industries that have been surprised at how things have moved. Just look at the music industry,” Mr. Gerster said.