Google puts toe into video ad market
AdSense is Google's non-search advertising program in which Web publishers allow Google to serve text or image ads on their sites. Later this week, Google will begin distributing online video ads for the first time.
"There are certain segments of advertisers who need a richer experience, like movie studios that want to show movie trailers," said Gokul Rajaram, product management director of Google's AdSense program. "It's more compelling."
These video ads, interestingly, will not be appearing on Google's own Web site. And on the publisher side, only static web pages will display the ads. To view the video ads, which are as long as two minutes, visitors will have to click on a play button.
Despite those restrictions, Google's push into online video advertising is expected to be one way for the company to propel its rapid earnings growth. Google's revenue in the first three months of 2006 totaled $2.25B of which 58% came from Google's Web site. Presently, the company produces about $13.6B annually.
Video ads generally command a premium price, which makes them even more enticing to Google. In general, they cost double or triple what a banner ad would cost. However, ultimately the market will determine the price based upon each advertiser's bid.
"If you try to go buy video ads today, you find it impossible because much of it has been locked up for months and the CPMs are very high — as high as $15," said Mr. Rajaram. "We wanted to bring the scale of our publisher network to video ads."
So do the numbers make sense? For a quick calculation on what advertisers pay for video internet ads: $225M presently, projected to go to $640M next year.
For a down and dirty calculation of what might be expected for Google: they create $13.6B annually but only 42% on the publishers' Web sites. Reduce that by the number of publisher pages that are static and the number that permit video ads. Theoretically, maybe $1B of present ads can be enhanced with more expensive video ad. Perhaps we get to a ballpark possibility of over $2B in video ad revenue.
No matter how you cut it, the expectations on Google's revenue enhancement will be larger than the entire market can provide. Therefore, my prediction is that some advertisers will find value (for example, movie studios), but we will soon hear very little about this initiative.
Posted by admin on May 23rd, 2006 :: Filed under Internet TV
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