The official word from Google said they will run a trial of targeted video advertising with a couple of outlets: EchoStar, which operates the DISH Network, and Astound Cable, a small operation in Northern California.
Google earns 99 percent of its revenue from online advertising. Their contextual search products, and expansions into different advertising models like CPM and CPA, still rely on getting those ads in front of Internet users.
That doesn’t seem to be much of a problem these days, as Google has become the dominant player in search and advertising online. But they caution investors with each quarterly financial statement that the possibility exists it could all come crashing down at some point.
Diversifying the revenue stream for a company can be a risky business. Side efforts can distract a company from the core that put it in a position to need such diversity. It’s a risk that Google has wanted to take, by finding ways to inject its auction-based ad model into the world’s of radio and television.
Google will try to make the TV side of the advertising equation a reality with its formal testing of video ads. The company announced it will partner with EchoStar, operator of Dish, and Astound Cable, a small outfit in Northern California.
Though the announcement arrived as a very low-key discussion of the partners and some talking points, it’s likely to be discussed at a much higher volume in the boardrooms of the advertising industry on Madison Avenue.
The Fear of advertising evolving from a nebulous, semi-quantifiable business, navigable only by highly-compensated ad professionals into a measurable commodity product probably has those executives on edge, and with good reason: why pay a lot for a scattershot ad approach when a brand name can go for a highly targeted market segment, and know who watched what, when they watched, and how much of it they viewed.
“With our AdWords and AdSense advertising programs we have seen the benefits of the long tail and we think we can apply these principles to help grow the TV advertising industry,” Google said in a statement. “Our goal is to extend the reach and visual power of this medium to include more advertisers, large and small, and help monetize more TV programming with relevant ads.”
Madison Avenue may breathe a little easier when considering the travails Google has faced in the radio market. Google’s acquisition of dMarc Broadcasting hasn’t brought Google great success yet, for a variety of reasons.
EchoStar/Dish and Astound have something radio doesn’t: set-top boxes, Sirius and XM Radio subscribers notwithstanding. Measurements Google may not be able to gather as well with terrestrial radio will be a lot easier for them to grab from a set-top box.
Google said advertisers can target by demographic, daypart and channel and pay only for actual impressions delivered, with pricing on a CPM basis.
Imagine the shakeup that could come if Google could make a deal with someone like News Corp’s Fox, to auction ads for a popular show like ‘American Idol’. Google already has a deal in place to provide search and advertising for MySpace, so there could be a natural match to be made there.
(Of course, News Corp did go out and buy online ad placement company Strategic Data Corp in February, so they may be just as terrified by Google too.)
With Google working toward television and video advertising, webmasters may be wondering if there could be some impact on them. Unless advertisers start bypassing online ads in droves in favor of TV ads, it’s hard to imagine Google’s test being detrimental to the market that built Google into a tech powerhouse.