The Associated Press reported this morning that Google is expanding a pilot program representing the company's second attempt to crack the realm of traditional print advertising.
Two months after launching a trial run with 100 selected advertisers and 66 newspapers, the online ad firm will soon be rolling out the next stage of its print publishing campaign in earnest, enabling online advertisers to purchase surplus print ad inventory.
Last November, Google auctioned off ad inventory from about two dozen magazines, to existing customers of its AdWords program. As BusinessWeek reported following the end of that experiment, customers paid as low as $4,000 for half-page, full-color national print ads that would normally sell for over $59,000 apiece. Even then, however, testers found their ads returned as little as 6% of their cost in sales. Kind of makes you wonder how much they would have lost had they paid full price.
Google's second experiment focused on newspapers, and while more limited in its initial scope, appears far more successful, with ad sales reportedly tripling the company's expectations.
The concept of ad brokerage is nothing new to the industry. What is new is Google's spin on it, which is essentially pure automation and acceleration of the process, not unlike what eBay has done for barter. The AP reported this afternoon that newspaper executives remain skeptical, not so much of Google's motives, but rather of its technology. In an industry where change remains an incrementally measured process, there's simply not enough metrics to prove the viability of Google's business plan to newspapers.
As veteran publisher and Wired magazine founder John Battelle wrote for his personal blog last month, he feels newspapers may also resent the notion that the future of their business plans lay in the backwaters of unsold inventory.
"I think the issue here for Google really comes down to scale and context," Battelle wrote. "Print advertising is a maddeningly 'human' business, driven by passion, emotion, and gut feeling. I'm not sure that's ever going to go away. Ads for a specific, community driven audience need to be part of a conversation, not an algorithm. However, I can see this working well for remnant/backfill, as well as classifieds, where I'm guessing the system will really excel."
Last December 15, Bear Stearns analyst Alexia Quadrani reported that overall national print advertising revenue declined 6% in the third quarter of 2006. Even in the segments where the print ad market still shows growth, that growth is obviously tapering off. For example, real estate advertising had grown at a 23% annual rate in Q1 2006; by Q3, with the housing market slamming to a screeching halt, growth was curbed to 9% annually.
Quadrani's disturbing numbers led her to predict "the print malaise will likely continue, leading to declines in revenue growth again in '07," as cited in Editor & Publisher last week. But the bright spot in that mix could still be provided by Google. "If successful, Google print ads could impact the sales force role," she wrote, "as Google begins to develop traditional media relationships directly with advertisers in addition to its Interactive ones."