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Can Google Crack the TV Ad Market?


Plans to bring Web-like targeting and measurability hinge on finding willing partners

Google's foray into TV advertising is an important test for the Internet giant.

MOUNTAIN VIEW, CALIF.  Like many at the bustling Google campus here, Keval Desai has a degree in computer science and tends to view things through the lens of mathematics. Even the topsy-turvy world of TV advertising.

"TV, for the most part, has been unmeasurable," said Desai, program manager for Google's TV ad efforts. "We're making TV as accountable as the Internet is."

Google's foray into television advertising is an important test of whether the Internet giant can use its wildly successful system of search advertising in the biggest of media channels. While it is pursuing efforts in print and radio, TV represents the company's biggest hurdle to achieving its goal of building a broad platform for advertisers to run targeted ad campaigns, continuously changed based on metrics, across all forms of media. Unlike online, however, Google faces a struggle in television to convince wary cable operators and networks that its vision is good for them.

For all its lofty talk, Google is far from achieving its goal. Its footprint is quite small, reaching just 14 million households through inventory with EchoStar's Dish Network. (Google also has a deal to run ads with a small Northern California cable company.)
"All they've got is the EchoStar footprint," said Sarah Fay, CEO of Aegis North America. "They haven't cracked any of the other [cable and satellite operators]."

Desai said Google is in negotiations to gain access to more inventory, saying the company will announce a significant deal in the next few weeks that will greatly expand its reach. Google's pitch: It can allow networks to tap into Google's enormous base of hundreds of thousands of small advertisers, most of whom have never run a TV campaign. As for the cable companies, Google sees an opportunity for them to aggregate demand on niche channels that fall off the radar on their own.

"We have to prove ourselves," Desai said. "With the Internet, it was a nascent industry when we entered it. In TV, we're novices in an entrenched industry."
It is clearly early days for Google in TV advertising, a $77.5 billion market, according to Nielsen Monitor-Plus. But its executives are bullish that they can make an impact. In the words of Google chief economist Hal Varian, TV will "come into the 21st century" in the next five years. The heart of Google's system is an ability to gather second-by-second viewer data from set-top boxes. On the Web, Google relies on mouse clicks to gauge performance; on TV, it's using remote- control clicks to tell which ads are tuned out. It can then crunch the numbers to give advertisers a direct view of which ads are performing well and which aren't. Adding in search and Web analytics data, the company provides tracking reports down to sales generated through spots.

For now, Google is only using the data -- it measures when people turn the channel during ads -- in order to inform advertisers of ad performance. Ford, for example, could see how many people changed channels during its ad on ESPN compared with similar spots. It could also measure reaction over time to determine when creative is worn out. At some point, this "retained audience" metric will be used to determine which ads to show, much the same way that Google combines price and ad performance online in choosing ads.

"We have a feedback loop now," Desai said. "The end goal is to show more relevant ads to users."

Google is not alone in seeing the opportunity to bring Internet-like targeting to TV. Spot Runner promises to do the same for local TV ads. Microsoft signaled its interest in the area with the purchase of Navic Networks, a system for targeting TV spots. But the Internet giants face a common hurdle: They don't have access to the data needed to make their systems work. That's the domain, for the most part, of the cable companies, which are marshalling forces to provide a similar service through Project Canoe, an effort headed by Sarah Fay's former boss at Carat, David Verklin.

"I don't think Google is going to own TV advertising," said Roger Barnette, president of SearchIgnite, an advertising bid management system. "They can in search because everyone goes to to do a search. They're not going to own TV networks. They're going to be a technology middleman."

In many ways, Google has changed its system to fit traditional media. As it does with its print ads, Google lets advertisers choose exactly where their ads will appear. It struck a deal with Nielsen, parent company of Adweek, to include its demographic data in the system. Google is also working to link up its system with industry-standard billing service Donovan Data Systems, a departure from its initial reluctance to integrate AdWords with third-party ad servers. (Google eventually bought the largest, DoubleClick.)

A larger, mostly unspoken problem for Google: its size and outsized ambitions worry both agencies and networks. Desai chalks this "Googlephobia" up to inevitable wariness of a new entrant to an established business. When Google talks of eliminating "inefficiencies," some players think they're talking about them, whether it's media buying shops or network sales forces. On the Web, many publishers have complained that ad networks have commoditized their inventory.
"It seems that the television establishment, both the buyers and sellers, are likely to want to buy it person to person," said David Graves, an analyst with Forrester Research. "Changing the way TV is bought and sold is a not-insignificant task."




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