Google


APRIL 2003
You know and love Google as a search engine. Tim Armstrong, its VP of Advertising, wants you to know that Google is a top media property, too.

Tim Armstrong, Google
Golden Google
Exactly how did Google -- so storied in search -- get to be a player as an advertising medium? Scale, technology … yes, those things helped. But most of all it is the users, says Tim, who are the "Golden Goose" of the Google business model.

"Because Google has such a strong user experience, we've been able to turn it into a successful advertising network in all of the major media markets across the world," he notes. After all, if the ads are relevant to Google's users, the return on marketing investment can't help but add up for its advertisers.

The proof is in the click-throughs, says Tim: "Our users are about five times as likely to click on our links as they are on other ads on the Web."

So successful is Google as an ad medium that it recently expanded its network beyond its own servers to include other content sites. Meanwhile, its recent acquisition of Blogger.com, the Weblog publishing site, appears poised to deliver yet another innovative twist in online advertising.

Google's arrival as an advertising network didn't happen overnight, of course. The journey began back in 1999, when Tim arrived at Google as VP of Advertising.

His own path to Google actually began about a year after he graduated from Connecticut College, when he and his best friend started a small magazine called, Beginnings in Boston, a lifestyle/career magazine for 18-30 year-olds.

"I would call it advertising boot camp," says Tim, "because we didn't know anything about publishing and we knew even less about advertising." The magazine ended up losing a lot of money, but Tim views it as "kind of the beginning of the advertising education that I continue to receive."

Thing was, the magazine was based in Harvard Square in Cambridge, Mass., which led to a meeting with one of the founders of Netscape, who had come to make a presentation about a little technology then known as Mosaic, at nearby M.I.T. Tim was sure he had seen the future of media and it was on the Internet.

Soon after, around 1994, he sold his magazine and went to work at IDG, the technology publisher, on its first Internet magazine, I-way. Along the way, he met Paul Allen, the co-founder of Microsoft, who had started a company in Seattle called Starwave, which was building content, and planning to start an advertising model, on the Internet.

So in 1995, Tim left Boston and moved to Seattle to work at Starwave, and was there for the launch of ESPN.com and ABCNEWS.com, among others. "It was the beginning of trying to figure out business models on the Internet," he recalls. He was there through 1999, during which time he met Rich LeFurgy, the founder of the Internet Advertising Bureau.

Rich turned out to be a "major mentor" to Tim. When Rich left to start Snowball.com (now IGN Entertainment), a content site for teens, Tim went along to help start the advertising group, which soon numbered 200 people.

After about two years, the venture went public and shortly afterwards Tim got a call from Google. He's spent about last three years there, in the New York office, ramping up an advertising program that today includes some 100,000 advertisers -- not to mention pioneering an advertising model that is nothing if not Google-worthy.

verbatim

Tim Armstrong, Google
Where did the idea for Google's advertising network originate and how was it developed?

The advertising network is an outgrowth of one of the main promises of the Internet, which is the ability to target advertising to specific users. Google's platform of search, where users drive the information they are looking for, provides a great way for advertisers to reach people as they are searching for specific products and services. It is very much a high-R.O.I. driven model.

Google's advertising program has changed dramatically over the last three years from both a technology and targetability standpoint. But the core, fundamental D.N.A. that Google started with -- a focus on our users and to create a very high-R.O.I. advertising platform for our advertisers -- hasn't changed.

Is that the essence of what makes the Google ad network different than other attempts at ad targeting, or is there more to it than that?

It's also that Google is really the first company to achieve the scale that we have. To be successful in the ad network business, you need to have three things. You need to have a broad reach of users. You need to have technology that can target ads in a relevant way to those users. Finally, you need to have a large partnership network of advertisers.

So, if you have the reach, the technology and the large ad network of advertisers, you have the ability to create a very successful and profitable business model on the Internet. That's what Google has done.

Now that Google is expanding out into a broader network, across multiple Web sites, are all 100,000 advertisers also advertising across the network?

Yes, the majority of the 100,000 advertisers run ads on Google as well as across our syndication partners, which include content sites such as AOL, Ask Jeeves and Earthlink, among others.

Google basically has two ad products, one of which is a CPM-driven ad product that just runs on Google. The other ad product, which is where the majority of our customers are, is Adwords, which is a cost-per-click product.

So, advertisers have a choice -- they can run on Google by itself, or they can run on Google plus our syndication partners. Most advertisers opt for the larger network and advertise on both Google plus the larger network. Since cost of advertising on the network is determined on a per-click basis, the cost is the same either way.

Some people think that there's an inherent conflict between delivering search results and delivering ads. How do you respond to that?

People have questioned that with other search players, but not with Google. We have a real "church and state" policy when it comes to advertising and search.

Our search index is the value proposition that we offer to our users. The reason people come back to Google every day -- and there are some 70-plus million users a month across the globe who come to Google -- is that we offer them non-paid, relevant information, both quickly and totally objectively.

Our advertising program is clearly called out and labeled as sponsored links. We've made it very clear that we have two very distinct things happening on Google. We have an objective search index and then we have an advertising program -- and we don't mix the two together.

Tim Armstrong, Google
But isn't it still a bit of a hurdle in that some people "just say no" to paid links of any kind?

We really haven't heard that issue very much because we try to make the advertising just as relevant as the search results. Google actually serves ads on fewer than 50 percent of our pages.

We don't accept pop-ups or do a lot of the things that are annoying to users and that ruin the objectivity of the Internet. As a result, our average click-through rates are more than five times the click-through rates of traditional banner ads.

Do you think that the Google model will eventually put traditional banner ads out of business completely?

No. Over time, we think our approach will make online advertising more relevant, but there's a place and a time for the banners on the Web. We do think we will help drive greater relevancy in advertising across the Web. So, you might see banners become more relevant across the Web because of Google, but you're not going to see them going away.

How do you go about communicating the value of your network to advertisers?

The value that Google tries to communicate to advertisers is very simple: If you want your ad budget to attract more customers and generate more revenues, then that is what our ad product does for you.

Our proposition is not a branding proposition. It's that if you spend your ad dollars with Google, we're going to give you back more customers and more revenue and a really strong return-on-investment for those ad dollars. There are other places on the Web that are very good at the branding elements, but that's not something that we have focused on.

So what you're offering is more of a sales proposition than it is a marketing proposition?

What we really try to focus on is meeting the needs of our customers. At a macro level, most of our customers spend ad dollars to grow the size of their businesses. We try to provide them with a platform that is consistent and that's easy to use, as well.

Ideally, we want customers to feel very good that if they make an investment with us, that their investment is going to produce a very good return for them, whether their objective is marketing or sales.

How do you work with your advertisers and what kind of results have you achieved?

Typically, our customers come to us with fairly straightforward needs. They either want to drive sales on their Internet properties, or they want to educate people about different products or services that they have.

We sit down with them and we help them think through their goals and what they're hoping to achieve. We then help them figure out exactly the types of things their customers are searching for and build their ad programs based on that.

We like to do tests for our advertisers. We will try out many different types of advertising and many types of creative messages for them. So, in general, we start with a test campaign and they end up using Google to drive a fairly significant amount of their online advertising activity.

How do you help them quantify their return on investment?

That is a big focus for Google. We actually have a higher ratio of service people than we do sales people. So, when customers get into relationships with us, we've made pretty significant investments both in human capital and technology capital to both track and report back to the customers what their R.O.I. has been, and hopefully what it will be.

Tim Armstrong, Google
We become, in effect, an extension of our customers' marketing departments. We give them both online reporting as well as human-based reporting on the results of their campaigns. By the time a customer finishes a program with us, they typically have a very good sense of the R.O.I. metrics, of what was successful, and what was not successful, overall.

Google recently acquired Blogger.com. What makes Weblogs attractive as an advertising medium?

Blogger gives users the opportunity to create content on the Web, and it's a very good user experience. Going back to Google's focus on the user experience, we feel that Blogger is just a cool technology that a lot of our users would be interested in.

Also, one of Google's premises has always been to do things in a very natural way, and Blogger was a natural evolution for Google. One of the products that we have is called Google Groups, which are news groups. Blogger is a very natural fit with Google Groups. The ad model that we built, and the ad network, each work very well on both Google Groups and on Blogger.

So, one real net benefit of the Blogger acquisition for Google is that it's going to give more people around the world more opportunities to create content. We feel that's a very good thing for the Internet as a whole -- not just for Google or Blogger.

It also fits into our existing business model. Google's been profitable for over eight quarters in a row now and we feel that Blogger is a natural fit with what we already do. Blogger has a very strong focus on users, and it's going to have a very strong focus for the advertising community, as well.

As time goes on, will Google become better known as a search engine or as an advertising network?

Google will always be best known as a search engine. Frankly, the ad network -- and the other things that we've been doing that are related to search -- have grown organically out of the search technology. Google still views search as a massive problem to solve and something that will really help users across the world get more information quickly.

We still see a very big opportunity to continue to build search into a very viable medium. The ad network is something that is a bonus benefit that's come out of our focus on search. As our focus on search continues to grow, hopefully the ad network will continue to grow, as well.

Google is a very humble company in terms of what the future opportunities are. We're excited for the future, but we definitely work hard everyday to make sure that the Golden Goose -- our users -- are happy and that our advertising community is happy.


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