Internet Advertising

The Economist writes that “Google’s new advertising service could make the internet an even more valuable marketing medium.”

This year the combined advertising revenues of Google and Yahoo! will rival the combined prime-time ad revenues of America’s three big television networks, ABC, CBS and NBC, predicts Advertising Age. It will, says the trade magazine, represent a watershed moment in the evolution of the internet as an advertising medium. A 30-second prime-time TV ad was once considered the most effective form of advertising. But that was before the internet got going. This week, online advertising made another leap forward.

This latest innovation comes from Google, which has begun testing a new auction-based service for the more sophisticated advertising of brands, rather than of just individual products. Both Google and Yahoo! make most of their money from advertising. Auctioning keyword search-terms, which deliver, along with their own search results, sponsored links to advertisers’ websites, has proved to be very lucrative. Advertisers like these links because, unlike with TV ads, they pay only for directly measurable results. They are charged when someone clicks through to their own website.

If Google can prove that bidding for display ads works, then its rivals are bound to follow with similar services. This could shake the industry up even more.

Other innovations in online marketing are said to be in the pipeline. Local search and its associated advertising opportunities are one huge growth area. Sites such as eBay, the leading online auctioneer, and Craigslist, which hosts local sites, are soaking up large amounts of classified advertising for everything from used cars to job vacancies that once might have gone to newspapers. Yahoo! is expanding rapidly into entertainment, with film and video clips providing another avenue of advertising. This week, Yahoo! appointed another top executive to its media group, fuelling speculation that the website may start to produce its own entertainment content. That should seriously worry TV broadcasters, who are already losing viewers and ad revenue to the internet. writes that Mary Meeker of Morgan Stanley is bullish on Interneta advertising:

“We think Internet advertising spending has nowhere to go but up,” Meeker said Monday during a keynote speech at the Ad:Tech industry conference here. Meeker added that the Web is the most underutilized advertising medium, garnering only 3 percent of total ad spending in the United States, according to estimates.

But with eBay as a benchmark, she said, the most successful companies could benefit from an ongoing shift online. After all, eBay is in the business of connecting buyers and sellers, much like search-advertising giant Google. And eBay commands 62 percent of the total classified ad market, according to Meeker.

Both eBay and Google “are about increasing the user experience and also increasing the ability of the ecosystem to handle growth,” she said. New tools to improve consumer usage and target ads will be the key to future expansion, she added.

“We’ve got 900 million global customers driving on the same highway,” Meeker said. The only differences in people, she said, are in their access speed, language and access device.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.