Google may not have much of a play in online display advertising, but that’s about to change, said the two execs leading the content-and-advertising charge, president of advertising Tim Armstrong and VP of content partnerships David Eun.
Usually careful to downplay any competitive threat to traditional media, Armstrong dispensed with that notion in a talk Monday at Bear Stearns’ media conference in Palm Beach, Fla. Over time, he said, Google’s strategy is to have advertisers load their entire ad budgets into Google’s system, which would allocate spending across media whether online or offline.
So far, Google has tread carefully in terms of commercializing YouTube, but that’s about to change. Armstrong called YouTube the company Google’s “brightest light” in terms of display-ad potential, and Eun said 2008 will be the year they “dial-up” the amount of advertising on the video-sharing site. “We will be very disappointed in 2008-2009 if we don’t have a very significant position in the display ad marketplace,” Armstrong said.
A summary of the Armstrong and Eun Q&A session at Bear Stearns:
2:35 pm: When can you become a force in display advertising?
Armstrong: Google has most of the large advertisers as search customers, which will help. YouTube is the “brightest light” for Google in terms of potential display advertising. We would be disappointed in 2008-2009 if we don’t have a very significant position in the display ad marketplace. Over time, the Google ad system won’t differentiate between search and display. We want every advertiser to put all their assets in our system with multiple creatives that can go against all types of media reaching the right person in the right place.
Eun: I think we have a lot of the components in place but there is a lot to be learned. Says YouTube rolled out its overlay video ads late last year.
2:32 pm: Any concerns about a potential Yahoo-Microsoft combination?
Armstrong: Google launched in an environment where we were No. 12 out of 12 search engines. The short term opportunity for us is to capitalise on the disruption. In general, in any competitive environment we’ve performed very well.
Eun: As long as innovation thrives, competition is generally a good thing. This could allow us to accentuate the differences in approach. We are not here to program our users. We have an infinite shelf to offer products. That’s not the approach everyone else takes.
2:26 pm:Talk about the difficulties in monetizing social networks …
Eun: An increasing amount of traffic on YouTube is coming from social networking sites like MySpace. Its an opportunity to provide more services to social networks.
Armstrong: We used to look at social network sites like we would any ad-supported sites, like the NYTimes. Now we think differently. We look at social networks as a platform and see an opportunity to monetise widgets and social network applications. We now have a clearer path and direction on it internally. I am hoping for a lot of success in the coming year.
2:22 pm: How does Google evaluate content partnerships?
Eun: When we think about a project like Book Search, instead of monetization, we look at how that will drive queries. We are getting more sophisticated if a given query is best answered from book content. The searches get better and that’s how a product like Book Search is judged in the long run.
2:20 pm: International revenues?
Armstrong: Our international monetization is below our market share. I think international remains a strategic advantage for Google.
2:17 pm: What is your view on Viacom’s lawsuit?
Eun: We think the lawsuit is a mistake and an attack on innovation on the Internet. We have been huge supporters of copyright; we wouldn’t have so many content partners if we didn’t.
2:15 pm: When are you going to be able to make money from YouTube?
David Eun: Over the past year we made sure we were staying true to the mission of keeping the best user experience possible. Traffic has skyrocketed especially outside the US. In that time we have been careful about testing different monetization approaches. We have purposely not taken the easy money. Last year we could have taken cut-down TV ads and shoved them down our users throats as pre-roll ads. I can tell you how much money we would be making by doing that, but can’t tell you how much we would be losing by annoying users. That said, we are going to turn up the dial on monetization on YouTube.
2:10 pm: Armstrong asked about the clicks decrease that began in Q4.
Tim Armstrong: We saw an abiltiy in Q4 to change the way consumers clicked on ads. Conversions went up for advertisers but there are less clicks overall. We got better end-user quality and the advertisers got increased conversions so we saw that as a positive change.
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