Online: where advertisers no longer fear to tread

Imagine for a moment that you’re a small business owner. If you’ve survived this economic downturn, you’ve no doubt got passion, work ethic and a real talent in delivering what your company offers. What you probably don’t have is much of a marketing budget, or a lot of experience in conducting advertising campaigns.

Ten years ago advertising options would have been limited. You wouldn’t have the cash to be on the radar of major media companies, and there was no easy model to advertise online. It was pretty much Yellow Pages or billboards.

But now you’ve got two substantial choices. Those big media companies are desperate for ad dollars since car dealerships and retail chains are no longer thriving. So they’ve dispatched their attractive, charismatic ad reps onto your office with sweet talk on the “magic” of having a place in an established media brand. You probably grew up reading the newspaper or watching the TV program they’re selling space for, so the prospect is alluring.

On the other side is a nameless, faceless, utterly lifeless computer interface. In static pixels it promises to pair your ad to whatever specific audience you want to reach online. You decide where the audience will live and what they’re looking to find. You set your budget, and you only pay when potential customers click on your ads.

The verdict’s in, and it’s option two that is overwhelmingly proving the favored choice. That’s the approach taken by Google through its AdWords and AdSense programs that pair online ads to relevent search results or places them directly onto websites that have content matching the advertiser’s target demographic (my colleague Cory Morrison has a nice post summarizing how these programs work). Those programs now account for more than 95 percent of Google’s revenues, the cash cows for a company that rakes in several billion dollars of profit annually. For all the campaigning by legacy media that advertising can’t work online and nothing competes with the magic of a TV commercial, legions of business owners have voted otherwise with their marketing budgets.

This seismic shift in ad dollars is chronicled with precision in the fantastic book Googled. Written by Ken Auletta, a veteran in covering media issues, the book tracks the meteoric rise of the search engine giant, with the key turning point when the company figures out how to monetize its free search service by selling targeted ads.

For all the ways Google has upended the media pecking order, it’s in advertising where I feel it has made the most profound impact. Traditional media always depended on ads to survive. Newspaper circulation only accounts for around 20 percent of revenues. TV networks broadcast for free. Music labels and movie studios produce hits only if backed by expensive marketing campaigns.

But Google trashed that model by proving how a massive data network could more efficiently deliver ads. No more middlemen were needed. No need even for a big budget as long as you knew your target market. This single-handedly rocked the foundation of old media’s business model, and sent them scrambling to get online whether they liked it or not.

This has major implications for journalists and PR professionals, since the platforms where they deliver content are financed by ads. For too long their bosses haven’t embraced online platforms for fear they won’t produce ad revenue. In the pay-per-click model Google uses, it’s a self-fulfilling prophecy. If a website isn’t filled with good content it will get little traffic and thus produce little revenue.

Today, most legacy media companies say they can only charge 5 to 10 percent for online ads compared to print. But it’s hard to see that continuing. As the book points out, people on average consume 20 percent of their media online, yet only 9 percent of advertising spending is placed there. For all the billions the search giant has raked in by making online advertising simple, there are billions more to be claimed if someone figures out how to follow Google’s lead.

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