Google can turn ad buying into a commodity

It really shouldn’t surprise anybody who thinks a few minutes about it that Google believes it needs to move into print ad sales.

For all of the Internets stunning growth and advantages, print is still relatively strong, and newspapers tend to dominate local markets.

On the flip side, the efficiencies of online marketing will always make it a lot cheaper to advertiser online than in print. This means, Google’s revenue growth will eventually slow and there will be fewer opportunities for new growth markets. Since Google is GOOG, then its executives have a fiduciary responsibility to start scouting now for other areas of growth.

Google has established relationships with advertisers. It understands how to make ad buying more efficient. It has great technology and great minds to make great technology. So why not leverage those advantages in other media? Google has the power and reach to turn ad buying into just another commodity.

The print ad buy as a commodity will drive prices down, which on a per-ad basis, decrease margins for print publications, but print should also gain in volume and, in theory, help with the bottom line.

Google entering print is less of a threat to newspapers than it is to traditional ad agencies — the middlemen of large ad buys. This New York Times piece talks about frayed nerves on Madison Avenue.

Of course, Google isn’t the only player in the bid to streamline ad buying. Read the whole thing, as they say.

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2 thoughts on “Google can turn ad buying into a commodity

  1. “Google …understands how to make ad buying more efficient.” Which is exactly why Google entering print is a threat to newspapers and other publishers. Once you wring out the inefficiencies in ad buying/selling, you drive down costs for the advertiser, as you noted. Great for the advertiser, bad for the publishers. Thanks to cost-per-click advertising, advertisers now expect to run their ads for free until they get clicks, and then to pay just pennies or nickles or dimes for each sales lead.

    So to make up for the difference, publications need to gain volume. But where does that scale come from? Unlike Google, which has a near-infinite amount of digital real estate for its ads, smaller, local pubs are limited, – whether online or print. In many instances, I don’t see how these pubs scale up enough to make up for the depressed ad prices.

    A couple of paths forward – expand your product lines beyond news or whatever to create more ad opportunities. Or offer more value or a better ROI for the advertiser. These are both doable. I just don’t see a lot of it happening yet.

  2. You’re right Michael … the race is on … I didn’t state that clearly. Can volume ramp up sufficiently to make up for falling margins, and how much will they fall? One thought that flickered through my mind as I was writing this, is that while the market and efficiencies can drive prices down, they can drive them down only so far. The is a level below wich publishers can’t take prices down — at that point, either the market pays the price, or finds alternatives. The big question then becomes is the “must achieve ” price still a fair value from an advertiser standpoint.

    There are a lot of unknown dynamic market questions that will only be answered by doing it.

    But I think the ability to turn certain classes of advertising into a commodity will allow newspapers to turn business attentions to other pressing needs — if Google is successful with its effort.

    Every change is a threat. The question is, is this an innate, obvious threat, or only a threat in that it’s change. I tend to think there is opportunity and risk, not threat.

    Dude, you need to blog.

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