Photo: Benjamin Tegarden and Kristina Chu for NPR
Google has taken WATCH THIS SPACE — its all-out, all-caps ad campaign to hype up its display business — offline, with a huge billboard in Times Square.Advertising the fact that you are in the advertising business sounds silly. But this push is very serious: display is one of Google’s best shots at future growth.
Google makes the vast majority of its (very impressive) profits in search advertising. It is widely acknowledged that Google doesn’t have much room to grow in that business, either in scale or efficiency. If Google is going to remain a growth company, the fuel needs to come from somewhere else.
In a new research note, Gleacher & Company‘s Yun Kim argues that there are three things that might make that possible:
- Google’s display business shows that it “can grow significantly over the next several years on a consistent basis.”
- Google finds a way to turn Android into a significant money-maker.
- “Monetization rates in the emerging markets improve enough to maintain its current revenue growth rate in its search business.”
Betting on emerging markets is obviously dangerous business. And while Android is a smashing success in terms of adoption, Google hasn’t even demonstrated how it plans to make money off it, let alone that it can succeed.
Display is the one potential growth engine that is already starting to move the needle for Google, albeit just barely. Kim points out that sudden acceleration is display boosted Google’s growth by 4% last quarter. But he still gives Google a neutral rating: one quarter does not a trend make.
The Times Square billboard might be a little goofy, but don’t laugh. Display is the business to watch if you want to know about Google’s future.
Here’s the company’s display pitch: