Can Google crack $74 billion TV ad market?

ALSO: Google Television engineering targets mass TV personalization and  Google searches for TV ad dollars and Why Google CEO wants $74 billion television advertising business

UPDATE: As I put forth last month, Google is stepping up its designs on the $74 billion TV advertising market. I reported in February that Google is recruiting agressively for "Google Television" (see below). Google is also embarking on "testing" of the delivery of TV commercials, an initial effort has debuted with California cable provider Astound Broadband, The Wall Street Journal reports.

February 26, 2007: Will the third time be the charm for Google, the TV advertising charm that is? 

Google CEO Eric Schmidt has a fantasy, a world wide advertising domination fantasy: “The long-term fantasy is we walk up to you and you give us, say, $10 million and we'll completely allocate it for you’ across different media and ad types.” 

Google has spent years trying to diversify into offline advertising, but the Schmidt “fantasy” remains just that to date. 

In "Google Radio NOT a category killer" I dissect the Google track-record in radio and print advertising. Despite much Google fanfare about its ambitions to “revolutionize” radio and print advertising, Google has yet to formally announce an official Audio Ads program or an official Print Ads program. 

Google has done numerous print advertising tests with newspapers and magazines, has made a $100 million plus acquisition of dMarc Broadcasting radio technology firm and has invested in radio ad sales infrastructure and personnel.

Google’s difficulties in penetrating into radio advertising illustrate why Google is not destined to dominate all the world’s advertising, despite its grandiose ambitions.

Google AdWords were revolutionary because Google created a new advertising market; Google introduced a new product, in a new industry, with a new value proposition. Moreover, Google was able to set the pricing ground rules in its new market from the get go, and they favor Google, big time.

In “Scoring Google on quality: C” and “The Google riddle: ‘organized’, ‘useful’ but impossible to comprehend” I dissect the costly Google Search Advertising Pandora’s box that continuously increases in complexity, opaqueness and Google centricity. I conclude that for all of Google’s talk of “quality,” the Google bottom line is that higher cost-per-click bids win the privilege of buying ads from Google.

Google created its own advertising market and it dominates it, to its $150 billion market cap advantage. Google can not readily enter legacy advertising markets offline, however, and disrupt long standing market dynamics by imposing its Google centric pricing schemes.

The super profit margins Google reaps in AdWords also reflect that Google is a direct seller of advertising on its own property. Google’s diversification into offline advertising requires it to act as a broker on third-party platforms though. Google as a reseller means no control and lower margins, resulting in a smaller piece of the advertising economic pie.

Reseller Google also is deprived of prime offline ad inventory to resell. Radio and print advertising properties, for example, will naturally retain their high-value advertising opportunities for direct sale to their top tier in-house clients.

Who needs Google if it means splitting advertising revenues and diluting direct client relationships? Radio properties are also concerned about the negative impact a Google induced low quality inventory ad sales approach would have.

I asked radio station owner Jack Taddeo if Google dMarc is a “win” for radio stations:

Not for stations. That is unless you are trying to reduce your ad inventory to pennies on the dollar. I call it the "station going out of business rate".

The argument goes: if you have an open slot then why not get some money instead of no money? Plus you will be "sold out" which can help increase unit rate based on supply/demand pricing.

The problem is that you are doing two things you would never allow your own staff to do. 1) lower the rate by about 95%. 2) fill up the station with cheap commercials, decreasing the listening environment for what amounts to a few dollars.

Google has found out that radio stations are not impatient for the Google advertising "revolution" if it means depressed ad rates and wreaking havoc on direct sales efforts and pricing power.

Google is also learning from legacy radio advertisers that they enjoy the favored client treatment they now receive direct from radio stations, such as high-quality radio advertising packages and financial incentives. Why should high-quality brand advertisers forgo their privileged direct relationships with radio stations in favor of a Google middleman, a Google centric one.

Google now is stepping up its designs on the $74 billion TV advertising market.

I announced last August “Google CEO wants $74 billion TV ad market" Will Google fare any better in attempting to diversify into television, than it has in its radio and print advertising efforts?

We will undoubtedly soon know! I reported yesterday in “Google Television: Sell TV ads for Google!” that Google is ramping up its television advertising efforts and recruiting sales staff for “Google Television.”

ALSO: GOOGLE SEARCHES FOR TV AD DOLLARS