Google Signs New TV Ad Deal

With a deal signed Tuesday, Google is expanding its online empire. The deal, with EchoStar Communications Corp., will allow Google to sell commercials for the television network, based on a system similar to the system Google already uses for online advertising. The deal will vastly increase Google's position in the advertising industry, one which began with online advertisements.

Google began its highly successful AdWords system a few years ago. Coupled with the Adsense program, it allowed businesses to advertise on web pages on a pay-per-click basis. Advertisers would bid on a price per click for each keyword, specifying the number of clicks it was willing to pay for each day. The ads would then be displayed in those "Ads by Google" boxes that appear along the sides of web pages everywhere. Owners of these web pages would receive a certain percentage of the money for every click, providing them with an incentive to increase their traffic. Although the exact ratio has never been published, it is estimated that Google pockets about a third of the money spent on each click. Google has profited immensely from the program, which last year was a $5 billion business.

Now, Google wants to do the same for internet and radio. Although it has not yet introduced content specific advertising, which was one of the key features that made the AdWords program successful, the new television advertising system works along the same lines, and with it, Google hopes to extend its monopoly in advertising.

This is somewhat troubling to radio and television stations, many of which have longstanding relationships with advertisers, and who would not like to see their entire fortunes in the hands of Google. Many are trying to keep the percentage of their total ad space sold to Google small, maintaining relations with their previous advertisers. So far, Google's service has been used primarily to fill open spots at the last minute, for a discount rate. The service is good for this, stations agree.

In the future, Google hopes to make its radio and television ads context specific. This will vastly improve their effectiveness, and hence allow the gargantuan web company to profit even more. In the long term, there is speculation about individually tailored television commercials, which would advertise products to individual cable subscribers, based not only on their viewing habits, but also on other information collected from various sources. One has to wonder where the newly invigorated advertising industry will come to an end, and reach a point at which consumers will not be able to spend more money, no matter how tightly advertising is tailored to their specific needs and interests. That point, however, seems to be a ways off.

Sources:
The New York Times
http://www.wsj.com, April 4