Having conquered classified search, Google is targeting display advertising – a move that makes media companies nervous
Neal Mohan is known as Google’s $200bn man. Mohan, vice-president of display advertising products at the US technology giant, has been tasked with emulating the company’s unrivalled success with online search in the digital display market.
The $200bn (£123bn) figure, he says, is a forecast of the potential size the global digital display ad market could reach. He, and the digital display sector – currently worth about $24bn annually – have a long way to go. But the opportunity is clear.
Broadcasters, print media companies and marketing services groups such as WPP also have an eye on digital display as a potentially lucrative revenue source to offset declining offline advertising income. So they can be forgiven for shuddering at Google’s display ambitions, given the way the company’s search business dominates the digital classified market.
Sir Martin Sorrell, WPP chief executive, has labelled Google a “frenemy”, due to both the threat and the opportunity it represents, while former ITV chief executive Michael Grade decided not to sit on the fence, preferring the term “parasite”.
Mohan defends Google against such criticism, trotting out the company line that it is in the technology not the media business sector. “We don’t own inventory, we are not a media company. We can’t execute unless [ad agencies, advertisers and publishers] buy into it and adopt it,” he says.
By helping to grow the digital display market, Google would be giving media companies a leg-up as well, he says. “I truly believe that $200bn is the opportunity. We think there is a tremendous opportunity not just for Google but for the [media] industry.”
However, altruism aside, Google has its own obvious motivation for eying up the digital display market. In 2010 Google made revenues of $30bn, with display estimated to have contributed just $2.5bn.
Last year in the UK, Google’s second largest market, the total display advertising sector grew by a staggering 27.5% year-on-year to £1bn while search grew just 8%, albeit to £2.35bn, with much of it lining the US company’s pockets. Enders Analysis reckons that Google UK made £100m in display advertising last year – a small sum compared with total net UK revenues of £1.53bn, but a 65% year-on-year rise.
“If you look at growth patterns and the fact that video is one of the drivers of display advertising – Google owns YouTube – there are plenty of reasons why Google might want to increase its footprint,” says Adam Smith, futures director at media buying agency network Group M. “Display advertising also influences search, and sales, much more than it is given credit for. It makes sense for Google’s overall model.”
Mohan, who joined Google in 2008 when it made the $3.1bn acquisition of DoubleClick that marked its entry into the display ad market, argues it can overcome a “big barrier” in the sector to the mutual benefit of all parties. “The world is extremely fragmented, with the proliferation of devices, mobile apps and websites, there is infinite fragmentation,” he says. “A lot of media dollars are destroyed through fragmentation and inefficiency, there is a lot of wastage and campaigns are less effective. Our approach is how to be an end-to-end platform in the market.”
Mohan believes Google can offer a technology-driven solution to the inefficiencies inherent in the $170bn-a-year global TV advertising market, with many airtime sales decisions made by “two guys in suits” negotiating deals six months before the commercials they are haggling over will be broadcast. This potential alternative would draw on Google’s experience with online search – a one-stop digital shop that agencies could use to buy ad space across different devices, in real time, basing their decisions on constant feedback on viewing behaviour.
Media buying agencies fiercely guard their relationships with clients and some fear being cut out of the loop if the sort of digital technology advocated by Mohan allows media owners to deal directly with advertisers. But Lyndell Bartley, digital display director at media agency PHD, is unfazed by Google’s ambitions. “I don’t see it as a threat to media agencies,” she says. “Any display network that can boast of reaching more than 80% of the global online population represents an opportunity for those seeking to influence the behaviours of that audience.”
Mohan argues that a lot of the negative talk about Google’s ambitions in the display sector, such as that it aims to turn the TV airtime trading market into an online auction, is misinformed. “It is not just an automated system where you hit the button and it does its thing,” he says. “A lot of stuff is said generally in the market [but] when I’ve had conversations with publishers with TV and video content they want a platform that can extract value. When it actually comes down to a conversation with the person responsible for revenue they say ‘Google, what can your technology do’.”
It looks as if the media industry is about to find out.