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Is Google a threat to world's ad markets?

Google CEO Eric Schmidt asserted at the company’s Q2 conference “our goal at Google is to have the strongest advertising network and all the world’s information.
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Written by Donna Bogatin on
Google CEO Eric Schmidt asserted at the company’s Q2 conference “our goal at Google is to have the strongest advertising network and all the world’s information.”

Google is dominant online but, as I discuss in “Google failing to snag $116 billion print, radio, television ad markets,” and “Why Google can’t make it in the real world,” Google’s performance offline does not match its grandiose ambitions and rhetoric. 

On the other side of the Atlantic though, traditional media is beginning to worry.

Google is on track to book more advertising revenue in the UK this year than Channel 4, a publicly-owned broadcaster, according to Reuters reports.

Andy Duncan, Channel 4’s chief executive, believes the British TV industry “underestimated the threat of the Internet.”

In 2005, Google’s UK business accounted for $878 million, about 14%, of the company’s revenues. Schmidt, at the Q3 conference call, pegged 2006 Q3 UK revenues at about 15%-16%.

 

What does the Google ad future portend?

 

U.S. domination, UK domination...the world? NO

 

Omid Kordestani, Google Senior Vice President of Global Sales and Business Development, spoke about Google’s international efforts at the Q3 conference call. Color provided suggests Google’s strong UK performance is a one-off, case-specific market scenario.

 

Analyst question:

Give us some color in terms of breadth of advertisers in the France, Spain and Italy market. If I look at Germany, France, Spain, and Italy, it's like 2.5 times bigger than UK, but I think less than 10% of your revenue each of those countries represent. So can you give us some color? What do you think in terms of advertisers take rate?... So I was wondering, are you seeing any resentment from advertisers that they're not taking the search advertisement? Or what is the reason that you're not seeing a big take rate? You know, commerce is going very strongly in those countries.

Kordestani:

What is really happening is there are just local dynamics that are very different. As an example, traditionally in some of these markets we realize that the websites of, for example, financial institutions were more information-oriented than transaction-oriented. Whereas in the U.S. you can complete a loan transaction or a credit card transaction right away, instantly.

So we have taken a lot of care and time to basically move advertisers that are capable of using our systems to our online channel, as well as then having our sales force on the ground in the field, really spent a lot of time working directly with major companies in each of these reasons regions….they are small bases and we think though that they have the potential as we get the core search products and advertising products working well there, and the future of the newer monetization products extending to these markets.

Google is a threat to the world’s ad markets, but the world has plenty of time to play defense and, hopefully, offense.

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