Google Becomes an Ad-Network Company

Earlier this month, I posted how Yahoo has the wind against its back with the market trend towards rich-media advertising, and predicted that “Google [will] make some moves to play catch up in this race.” Yesterday Google confirmed that forecast, taking a significant step forward.

ClickZ reported that Google now “will let advertisers choose on which sites their contextually targeted ads appear, but they will have to pay for those ads on a CPM basis… Using the same AdWords interface, advertisers will be able to select sites on which they want their ads to appear. They can either enter in the URLs of specific sites, or they can perform a keyword search to find sites on which to place their ads. Google will return a list of sites similar to the URLs people select, or a list that matches with the particular keywords. Advertisers can then select sites from those lists.”

With this move, Google is officially transforming into an ad-network company. No longer is the company solely focused on search and search technology, merely wrapping CPC ads around results. As John Battalle summarizes,

“Not to put too fine a point on it, but this is Google as DoubleClick, Web 2.0 style (ie with an auction and with massive scale). Any pretense this has to do with search should be put to rest. This is an advertising play, pure and simple.”

What does this offering mean, then? A few thoughts and quotes:
• Tony Gentile says, “By allowing advertisers to target specific sites, Google has moved into the role of a rep firm. Contextual Advertising will now compete against a major publisher’s internal sales force, as advertisers will have the ability to buy Contextual placement via Google instead of directly from the publisher.” Very insightful ramification.
• Also, this move heats up the holy war between the behavioral and contextual networks. With Google now in the ad serving business, behavioral advertising network startups firms like Tacoda and Revenue Science will need to demonstrate their true effectiveness with their technology. It is for them both a threat and an opportunity.
• Finally and most importantly, it finally validates the fact that large traditional offline advertisers are truly looking to purchase branding ads on a CPM basis, not just performance-based buys on a CPC or CPA basis. Advertisers want to target messages to specific demographics, not just specific web-based contexts. We’ve known that for years now, but with this step Google is finally admitting it.

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist. As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by where David served as Vice President of Marketing. David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.