Google. Firstly, let’s get one thing clear: I love Google. Well, one half of Google, the half that perfected the search engine, made email better, mapped the world and developed a truly wonderful mobile ecosystem. That is the Google I admire, respect and, yes, love.
But the other half of Google, dare I say it, I loathe. And, unsurprisingly, that’s the money making bit, the advertising business. And it’s for one reason: its complete lack of respect for competition.
The way Google operates its advertising business reminds me of when a player has a ‘lucky run’ in Monopoly. It gives them a whole load of property and cash, and everyone else is playing catch up, trying to avoid landing on Park Lane with two hotels. At that point, the game no longer is any fun.
The player with all the cash also changes. They become arrogant, try to change the rules and end up buying up everyone else. And then the game ends because no one else wants to play. Right now, Google has gone from one of the players that everyone supported, liked and respected, to becoming arrogant and a little scary. It believes its importance just a little too much.
Right now it is clear Google doesn’t want to just be a player in the global digital advertising game. It wants to own the whole digital marketing chain, and then move on to other channels, most notably TV. And it wants to change the rules as it goes, making it almost impossible for anyone else to play. And we, the advertising industry, are knowing accomplices to this, and the public doesn’t get a choice. They have to just go along. Blindly.
Take search, which makes up 85 percent of Google’s revenue (ten percent comes through display ads, and the rest is made up of technology, but it makes nothing from Android and nothing from Google Glass). It got everyone hooked on paid search, which works brilliantly but is like a slot machine because the more cash you put in the more you could get out, and we loved Google as it never messed with the organic side. It built the algorithms, but allowed SEOs the world over to build strategies that drove traffic to websites at a fraction of the cost of paid search, and gave us all the tools we needed to understand that traffic.
Until recently, when it decided to stop. Now anyone that searches Google while logged into a Google account (around 90 percent if early reports are to be believed) is protected by Google’s privacy settings to ensure that SEOs can’t work out what keyword drove that user to our website, which now means that most SEOs are working blind, or have to use time-consuming workarounds, or use paid search data. And all this in the same week that Google backtracked on a promise and announced it would feature people’s photos in ads to endorse products. The irony.
And this is the tip of the iceberg. Every week Google changes a policy or a setting that means that companies need to tip more money into AdWords. A clear demonstration of what an organisation can do when they have no competition, and no regulation.
Dominance on display
The display side of its business is even more incredible. Google not only owns the way advertisers serve ads on the internet through its DoubleClick business, but it also owns much of the inventory through the Google Display Network, and the platforms publishers use to monetise their inventory through AdSense. And when you start to look at the ad exchange business, which internationally is the method that most agencies use to run their display business, the situation is even more farcical.
Ad exchanges bring search technology to a display buy, allowing advertisers to bid on digital ad impressions based on the user, not the environment. In the UK and the US it is estimated that over 30 percent of display inventory is transacted through ad exchanges and this is growing every year. Through acquisitions it now owns the largest DSP (the technology that allows advertisers to buy inventory), the SSP (the technology that allows publishers to sell inventory on the exchange) as well as most of the inventory through the Google Display Network.
And then you factor in that Google owns the largest web analytics platform in the world, Google Analytics. Apart from a handful of large corporates, almost every website in the world, from bloggers to Air New Zealand, and everything in between, uses Google Analytics to track their websites, especially their digital advertising spend. And yes, it is like asking the fox to guard the hen house.
And there is much more. Google also sells tools that will enhance your search spends, container tags to put all your web tags in, web testing tools, bid management tools and more. And they clip the ticket at every level.
Too big, too strong, too fast
In a nutshell, right now we are in a new age of advertising where one company owns and controls 90 percent of the global search business, is a dominant player in the display market, the video and mobile display networks, display advertising optimisation and yield management, and has future proofed itself by controlling the emerging ad exchange business, as well as being the company tasked with analysing all this data through Google Analytics.
There is literally no part of the digital advertising ecosystem that Google isn’t dominant in. And that is a scary prospect, especially when you look at the aggressive methods that Google uses to dominate the local market.
The way Google operates its ad business always leaves me feeling cold. It uses the innovative, exciting company it portrays to the market (see the intolerable movie The Internship) to sell advertising solutions. It portrays Googlers as super-smart people who will help transform your online business. I will happily say that Google engineers, of whom I have met a few, are right at the top of their game. They really are geniuses. Their sales people, are, well, sales people. They have no interest in Google, they just want to make money. And Google is letting them get away with it.
"What I am suggesting is that agencies, advertisers and local publishers start talking more, with the simple goal of helping local publishers develop advertising solutions that ultimately keeps more money here in New Zealand, rather than ending up in a black hole somewhere in Ireland."
They are told to portray themselves as digital consultants who are independent of the ‘evil’ ad agencies and sit on a wealth of data that will help drive your business forward. It’s amazing, however, that the data always suggests the best way of driving your business forward is by spending more with Google. And it’s amazing that these seemingly smart individuals develop the Google hive mentality and actually believe their own hype.
Agencies and clients alike need to stop believing the world according to Google. I’m not saying its data or the work it does on consumer path to purchase isn’t of interest, but it needs to be washed with a healthy dose of cynicism.
Cash in the crosshairs
Google wants your entire budget. First it targeted search, and now many of the big companies in New Zealand spend in excess of $1 million each year in search. Globally, some companies spend that in a day. It then turned its attention to display, using its vast inventory pools to drive down the cost of display advertising—and drive more advertisers to spend more on their networks than with premium local publishers. It invented new metrics that helped underline its point that quantity beats quality, and local publishers have been playing catch up ever since.
It has bundled mobile and video advertising into its networks making it very difficult for other organisations to make a dent in these markets, especially as it controls the vast majority of video inventory thanks to YouTube and the fact that over 50 percent of the global mobile population use Google’s Android mobile platform.
Coming to a screen near you
TV ad revenue is next. And you wouldn’t want to bet against it. It has created a myth that by using its platforms and analytical systems that advertisers can generate huge efficiencies in the ad spend by targeting people behaviorally, demographically and psychographically. And it will use this as TV advertising enters the next stage of digital delivery, where people can log-in to their TV via the web. The company that owns this will control the future of TV advertising. And Google is front-runner at the moment, by a country mile.
So, if you believe me and we are headed towards a dystopian future where Google dominates the advertising industry, what can we do as an industry to ensure there will always be viable alternatives? This got me thinking about choice. Kiwis love a New Zealand success story. They love to buy local, and would much prefer to buy a Kiwi made product over one made overseas. But when it comes to advertising, the tide is moving from local companies like APN, TVNZ, MediaWorks etc. to the international players like Google, Facebook and the faceless ad exchanges and digital networks.
Think global, act local?
And why should we support Google? It pays almost no tax in New Zealand; for the last eight years there have been just three people at Google NZ but this year it has risen to nearly 20, the vast majority of which have been shipped in from India and Australia, all of whom are sales people, all of whom have huge targets to hit, and all of whom have taking money off press as their number one target. It is also based in a serviced office, and the majority of the work is actually done out of India or Singapore. The same goes for Facebook. Compare this to companies like TVNZ or APN, which generate money for the local economy, employ thousands and pay their tax.
All I ask is that advertising agencies offer clients a choice when they are building digital advertising schedules between adding to the coffers of internationals or supporting local business. Yes, these publishers do need to invest more in their platforms and infrastructure; they need to work more closely with agencies and clients developing solutions and cost structures that work for the new world of KPIs that clients set; and, most of all, they need to invest in innovation.
Local publishers need to learn from these multi-nationals; they need to take risks and stay ahead of the curve. If they continue to play catch up with the likes of Twitter, Facebook, YouTube and, of course, Google, then slowly revenue will dry up and they will close. I’m not saying this will happen in the next five years, but if they don’t innovate then decline is the only possible outcome.
Up the talk
So, just to be clear, I’m not saying that agencies should cease using Google products and services. I will certainly continue to use Google Analytics and DoubleClick Bid Manager as they are the best products in their class on the market and I will also continue to spend millions of client dollars in paid search, and in its video, mobile and display networks. But I want to spend more with local publishers.
What I am suggesting is that agencies, advertisers and local publishers start talking more, with the simple goal of helping local publishers develop advertising solutions that ultimately keeps more money here in New Zealand, rather than ending up in a black hole somewhere in Ireland.
Alex Radford has been working with Google in one way or another for the past ten years. He has worked as head of search at OMD in London, head of digital at Starcom in London, digital director at ViVaki and head of digital at Consortium. He has recently taken up the role of general manager, digital media, at Aegis Media New Zealand. These views are those of the author and not the views of his employers past or present. Google was asked to respond to some of these points but decided not to comment.
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