Google’s Surge Highlights Minitrends in Online Advertising

by Steve O'Keefe on October 15, 2010

Yesterday, Google Inc. announced an amazing 23% jump in year-to-year revenue, from $5.95 billion in third quarter 2009 to $7.29 billion in third quarter 2010. The print and broadcast media, who compete with Google for advertising budgets, must have choked reporting those numbers. That is a stunning amount of growth in a non-essential service while much of the globe claws its way out of recession.

Google derives most of its revenue from online advertising, a megatrend that began 16 years ago with the release of the first Web browser. As the Internet penetrates into more homes and workplaces around the world, the Internet advertising market will continue to boom. Advances in technology promise to reduce the costs of serving ads while generating a variety of Minitrends in the online advertising market.

Perry Mason on YouTube

Screen capture from a Perry Mason clip on YouTube showcasing a text ad for Bing across the bottom of the screen.

One of the brilliant Minitrends pioneered by Google is the ability to put fresh ads into stale content. If you have a DVD with preview trailers on it, you know those ads get stale in a matter of weeks. What if every time you watched the DVD, fresh trailers appeared? That’s what Google achieved with YouTube advertising. Now, when you watch an old Perry Mason clip on YouTube, you get an up-to-date ad. In the screen capture of this clip, shown on the right, the ad is rather hilarious. It’s from Google’s rival, Bing, trying to get you to watch videos at Bing instead of YouTube.

Another Minitrend in online advertising is being able to quickly profile a browser and adjust the ads accordingly. Now you not only get fresh ads, you also get targeted ads based on what the ad server knows about you. That’s why if you clicked on the YouTube video above, you most likely saw a different ad completely, based on your past Web history and search patterns.

Part of the online advertising megatrend is display advertising, which is on pace to generate $2.5 billion out of Google’s projected $30 billion in 2010 revenue. Henry Blodget, one of the most astute analysts of Internet stocks and the editor-in-chief of Business Insider, which runs on the San Francisco Chronicle‘s SFGate site, isn’t impressed with the trend in Google’s display advertising revenues:

The reason Google is so amazingly profitable is that it keeps 100% of the revenue for AdWords — the sponsored search results that appear on Google’s search pages.

Since Google has not yet stooped so low as to serve display and video ads on its own pages, however, it has to share display revenue with content partners. The average split for this display revenue is probably on the order of 70% to the partner and 30% for Google. The same goes for YouTube: Google does not produce videos itself, so it has to share revenue with partners.

One promising Minitrend in display advertising — technology to serve video ads into YouTube videos instead of the text ads that currently appear — could dramatically increase the display ad revenue generated by YouTube. Video ads are dynamically inserted into streaming video at NBC, Comedy Central, and many other television websites, although it does not yet appear they are customized for individual browsers.

Google Maps Search for "Walgreens" with a Pin Ad for RiteAid

Google Maps Search for "Walgreens" with a Pin Ad for RiteAid

Another megatrend that Google is benefiting from is the mobile advertising market, where searches on Google have grown 500% in the last two years. Google’s mobile advertising revenue is expected to total $1 billion in 2010. One of the Minitrends within that megatrend? The ability to put ads into Google Maps. Recently, while searching for a Walgreens on my iPhone, I was presented with logo pins for every RiteAid in the area.

Congratulations, Google, on milking the megatrends like no one else. And congratulations to all the entrepreneurs who have fueled that growth by pursuing the Minitrends that make it possible.

STEVE O’KEEFE
News Editor, Minitrends Blog

Source: “Sorry, But Google’s Still A One-Trick Pony — That ‘$2.5 Billion Of Display Revenue’ Is Not As Impressive As It Sounds (GOOG),” San Francisco Chronicle, Business Insider, 10/15/10
Screen capture from video at YouTube is used under Fair Use: Commentary.
Screen capture from Google Maps is used under Fair Use: Commentary.
.

Share and Enjoy!
  • Twitter
  • Facebook
  • Digg
  • StumbleUpon
  • del.icio.us
  • Reddit
  • Google Bookmarks
  • Tumblr
  • email
  • Print

Comments

Got something to say?