Tuesday, April 26, 2005

New advertising strategy

Google is declaring war on internet ad servers by offering image ads and CPM (cost-per-impression), in addition to CPC (cost-per-click), bidding model. Site targeting will ensure that click fraud stays at a minimum (even though it may significantly impact revenues). Regional and local targeting gives advertisers control on a fine geographic granularity. This is especially important to the CPM model (which does not use keyword targeting).

Google is trying to take over a shrinking industry (image and banner ads), but the costs of doing so are low due to their leadership in search advertising. DoubleClick has fallen from its height in the dot com era doing exactly what Google wants to do. It will be interesting to see if Hellman & Friedman get their money's worth for their acquisition, now that Google is moving in on their turf.

This move may tarnish Google's "good guy" mystique. It will probably increase demand for ad blockers like AdBlock. Also, the image/CPM ads may not be as compelling or relevant to the user as keyword-targeted ads. I sincerely hope Google avoids the pop-up business.