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Google Poised To Lead Another Revolution

The advertising industry is on the brink of a technological revolution - and if there is one company more than any other that is leading the charge of new technology, it is Google. Already the king of search advertising, the group has set its sights on a far bigger prize: the entire US$424 billion global advertising market, online or off.

For Google, the push into mainstream advertising markets could represent Act Two of what has already become one of the biggest business stories of recent years. Act One, built almost entirely on a search advertising market that did not even exist at the start of the decade, will see revenues hit nearly US$11 billion this year, according to Wall Street estimates.

The company's existing advertising network lets advertisers bid online to have their simple text messages displayed alonside the results of Internet searches relevant to their products. This low-cost automated network has already been extended once, bringing advertising space from websites other than Google to the same group of advertisers.

Now, the company plans to automate the sale of all types of online advertising through the network, including display and video. It also wants to use the same platform to sell radio, print and television inventory.

Over the past year, Google has expanded into video with the US$1.65 billion purchase of YouTube to create an outlet for video advertising; into audio with the acquisition, for up to US$1.24 billion, of dMarc, an automated network for selling radio advertisements; and into print with an agreement to sell adverts on behalf of 66 US newspapers with a combined daily circulation of 15 million.

It is now looking to cap these moves with a landmark deal that would show off its widening reach. The Internet company has been angling for months for a deal with a big media concern that would bring YouTube into the mainstream, putting copyrighted content on the video website in return for a cut of the advertising it can produce.

As Google looks to break out from its search engine roots, it stands to benefit in particular from three attributes of its advertising technology: an ability to service small advertisers economically; transparency of its advertisement sales; and an ability to target adverts to particular preferences. All were honed on its search engine and could give it a leg-up in the broader advertising world.

Reaching small spenders
First, Google's network reaches what has become known in the Internet industry as the "long tail" of advertisers: the large number of small spenders that together make up a substantial market.

Before trying out Google's search advertising, many of these advertisers were limited to the local Yellow Pages. Its technology has made it possible to link these small advertisers, which have never had an economic way to reach mainstream audiences, with media companies, which have never had an economic way of selling to them.

The same things that lowered transaction costs and drew small businesses to search advertising - such as the self-service nature of the system, where advertisers bid for space in an online auction - are being applied to radio advertising and will eventually work elsewhere.

Some executives in tradition media-buying companies concede this point but argue that Google will never have much to offer big brand-name advertisers. But Google management maintains that a strategy trageted at small advertisers may also work with big ones, which have thousands of different products or versions of products, often with relatively small sales and little or no direct advertising budget.

Making prices transparent
A second promise of Google's technology is the transparency and liquidity it could bring to some of the biggest media-buying markets. At present, advertisers negotiate directly with media owners and have little idea what other advertisers are paying.

The television market, in particular, is highly opaque. There is very little transparency. Google search advertising business was founded on the idea that letting advertisers bid against each other in an open market would be better both for buyers and sellers, since it would match supply and demand more efficiently.

That is a method that Google is looking to bring to other markets, either by acquring large blocks of advertising space and airtime directly and reselling them, or by acting as a broker on behalf of media owners.

When it comes to applying this idea to television, others are further ahead tha Google. Along with several other big advertisers, HP is now working with eBay to test an automated market to buy television advertising time. Yet Google's ambition to do something similar validates the idea.

Rivals in the media-buying business contend, however, that Google will find it hard to replicate its dominance of the search business, where it runs the most liquid auction market, to other advertising fields.

For media companies, meanwhile, greater transparency and liquidity could turn out to be a double-edged sword, making them wary about surrendering too much control. Still a liquid market would give them an easy way to price excess inventory that they cannot sell profitably themselves.

The third and perhaps the most important, characteristic of Google's advertising technology is the ability to bring direct adverts to the people most likely to be interested in them. Linked to that is the ability to measure the response to adverts, then use that information to perfect the message.

These by definition, are things that work better in an interactive medium such as the Internet, where users can be defined individually and direct response measured. Certainly if televison and other media move to the Internet over the long term, Google's techniques would come into play. Even before that, it may be gaining an informational edge. Automating parts of the advertising process, for example could give it access to more timely data than available to rivals

Armed with better information, advertisers can make better judgements about which parts of their campaigns are working and adjust their spending accordingly. If these three broad technology trends point to the long-term potential for Google in many different advertising markets, however, it faces considerable challenges in the short term.

Consider YouTube, the great for Internet video. As long as it remains a place to watch user-generated content, it may fail to attarct many advertisers. This is a broader problem for new forms of online advertising. There is no guarantee that Google will be the one to discover the secret to making it work, as it did with search advertising.

Google also has to learn how to win the trust of media companies, advertisers and others - no easy thing for a newish company, particularly one known for arrogance of its engineering-led culture. Google, however has been applying the two things it seems to have in abundance: cash and brain power.

Aprt from the high-profile acquisitions of YouTube and dMarc, it has spent the past year buying up some of the best brains in the media-buying and media-planning business, says industry experts. These inlcude Mr Michael Steib, formerely head of strategy ventures at NBC Universal.

Even rivals credit Google with making massive investments in technology to support its ambitions. While the outline of a new approach to advertising is starting to take shape, it will probably take some time to become a reality.

Richard Waters
San Francisco
U.S.A.
31 January 2007

This article is abstracted from The Straits Times, Monday, January 22, 2007.

Conversion Rate Optimization Part 1, Google Takes The Leading Role

Within the e-commerce sphere, the "mind games" between site owners and search engine designers have focused on search engine optimization (SEO). After all, you can't make a sale if visitors aren't reaching your site. However, as the web marketplace grows exponentially more competitive, attention among webmasters and site owners has turned to conversion optimization — converting site visitors to buyers.

Conversion optimization has nothing to do with SEO. SEO is designed for spiders and bots. Conversion optimization is based on two factors only: the needs and motivations of human site visitors and persuasive site content and design to encourage humans to make a purchase or perform some other action. Any other considerations are sub-sets of these two factors in conversion optimization strategies.

Measuring Human Motivations and Site Effectiveness
SEO is based on the development of numbers (metrics) that are immutable. Numbers are numbers, there's no debating that. The interpretation of site metrics, on the other hand, is a true combination of art, science and testing.

Assessing conversion rate optimization must apply a completely different approach to data gathering and the accurate, actionable assessment of the cold hard facts (percentages and such) that are the basis of SEO.

The Google Website Optimizer (GWO)
Google owns SEO (sorry Yahoo). It is now moving into eyeball optimization (EBO) to help site owners improve conversion rates. It's got lots of features, it's totally flexible in designing useful tests for human reactions and it provides data using simple to read and understand charts showing what's working and what would work even better.

One key point here: after indexing billions and billions of web pages, who is going to know better what works and doesn't work for solid EBO? After all, all the Google gurus have to do is evaluate their top performing sites to develop measurement criteria and tools to improve conversion optimization. Google is going to know what works.

One other point worth mentioning — it's frëe. A flexible, user-designed test engine developed by Google and available frëe. It's a must have for any site owner, site designer, webmaster or SEO.

What Can Google Website Optimizer Do For Me & How Can It Do It If I Don't Know the Difference Between a Statistical Mean and a Statistical Average?

Multi-Variable Testing
Got to have it. When quantifying human motivations and the effectiveness of a site page, you must have data to compare - data based on site variables such as a different home page image or revised site text. There are hundreds of variables within any website. Color selections, type font, type color, navigation tools, product images and descriptions — literally an endless líst of variables.

Google's Website Optimizer allows you to design tests to compare variables to see which ones work best. Often called A/B split tests, these simply compare a change or two to see which performs best. For example, you might have a picture of your product on test site A and a photo of the product in use by a human on test site B. Simply by comparing visitors' reactions to pages A and B, you can make refinements to your site.

Another useful A/B split test to chëck the success of your Adwords placements is to create two identical ads with two different destination URLs. You'll quickly discover which placements pay for themselves and which should be dropped.

Easy Analytics
The information gathered by Google during testing is delivered in an easy-to-understand format. You'll see, in graphic förm, where visitors go and where they don't go when on site. Taking a good hard look at your bounce rates and possible paths-thru-site are essential parts of your ongoing conversion optimization diet.

Usability Testing
Real humans navigating your site. Get as many people as you can to site down and clíck around - from your computer-whiz 12-year-old to mom and dad who still use dial-up. These tests provide the reasons why visitors take specific actions — over and over again.

Eyeball Optimization
GWO shows you what attracts eyeballs but doesn't generate a clíck. It also shows what visitors miss entirely because it's misplaced or mislabeled. Every page should undergo an "EBO" to improve conversion rates.

Follow the Leaders
You can't copyright an idea so use the same features and techniques employed by higher ranking competitor sites. Then, conduct A/B split tests to see which changes show improvement in conversion optimization.

People Are Still the Same
There's nothing new about direct response advertising, which is what successful sites use. Infomercials, newspaper ads, TV 30-second spots — these are all examples of direct response advertising and the same motivators that work in other media will also work on your website. Once again, you can't copyright an idea and the principles of direct response marketing haven't changed one iota.

Determine and identify the buyer's needs; provide the solution to meet those needs. It's worked for the past few millennia and it'll work for you today.

Small Steps or One Giant Leap
Do you make incremental improvements or try to fix everything all at once. It depends on where you are right now. If you've optimized your site (or paid to have it optimized) a small step here and there can make a huge difference, and a major revamping of your site may actually set you back in the optimization race.

On the other hand, if you're just launching, run a couple of A/B splits and other analytics to see which site pages are hot and which are not. Adjust accordingly. The point here? The more optimized the site, the less optimization is needed so if you've been at it for a while, take small steps and assess improvements. If you're just starting out, launch, track and adjust as needed — whether it be small steps or the proverbial giant leap.

Create a Diagram of Your Marketing Funnel
Start with placed adverts (Adwords, paid links, etc.) Add your home page, each product page, the checkout, automated order conformation, customer care and order fulfillment. Each one of these is a component of a sale and, from the líst and with the help of GWO, you'll be able to more clearly identify holes in your marketing funnel — those areas most in need of improvement, i.e., optimization.

Now, this is just the beginning. Conversion optimization is an on-going process and there are additional steps you can take based on test results delivered by Google's Web Optimizer - steps that we'll look at more closely in part 2 of this series.

Frederick Townes
20 May 2007

Frederick Townes is the CEO of W3 EDGE, a Boston-based web design company specializing in web standards and search engine friendly web design. Whether your needs fall into the Web 2.0 category or if you need an attractive design that will convert your visitors into buyers, W3 fills the need.