Google and Publicis Make Nice

Undercutting rumors of bad blood, the search giant and the Paris-based agency disclose a secret deal to craft millions of targeted, online ads

by Jennifer Fishbein

On his way to the World Economic Forum in Davos, Switzerland, Google (GOOG) Chief Executive Eric Schmidt stopped by the Paris headquarters of the world's fourth-largest advertising agency, Publicis Groupe (PUBP.PA), on Jan. 22 to exchange honeyed words with its chief executive, Maurice Lévy.

The two disclosed a confidential partnership already underway for more than a year in which they have melded Google technology and Publicis creativity in an effort to boost digital advertising. But with few concrete details disclosed, such as a timeframe or financial information, the meeting seemed more like a bid to dispel rumors of animosity between Google and advertising agencies in general—especially Publicis. Ad agencies are worried the online giant is poaching their fast-growing digital marketing business.

"There is no anticipation of Google being a short-term friend and a long-term enemy," Lévy said at an informal luncheon where he and Schmidt discussed their collaboration. The non-exclusive deal aims to draw more advertisers to digital channels by creating product-specific advertisements aimed at very precise audiences. The result, Lévy said, could offer clients "thousands of different ads tailored for each specific case."

A Hundred Million Ads

For instance, if a carmaker wants to publicize the auto parts it sells, instead of posting them all on a hard-to-find specialist Web site, Publicis could create ads for each part and load them into a Google system to display next to content or search results appropriate to each product. "Publicis is suddenly responsible for all this new revenue," Schmidt said. "The number of ads isn't one or two, but a hundred million."

The partnership will give advertisers more bang for their buck by boosting the efficiency and effectiveness in advertising, said David Kenny, CEO of Digitas, the Boston online marketing firm Publicis bought in January, 2007, for $1.3 billion. It also could raise the standing of both media titans as the big players scamper to grab a piece of the online advertising pie. Publicis owns agencies such as Saatchi & Saatchi, Leo Burnett, and ZenithOptimedia.

Google, of course, is already moving fast in that direction. On Apr. 13 of last year it outbid Microsoft (MSFT) to acquire online ad placement and tracking company DoubleClick for $3.1 billion, 20 times its estimated revenue (BusinessWeek.com, 4/14/07). Until then, Google had profited from tiny search-related text ads for businesses aiming to make sales. DoubleClick, though, handles banners, videos, and other such "display ads," which are often intended to promote brands rather than just prompt an immediate clickthrough transaction. So far, Yahoo! (YHOO) has dominated display advertising on the Web.

Talent Exchange Agreed

To continue moving beyond text ads, Google and Publicis plan to expand their use of graphical ads and reach new potential consumers via online video and ads on mobile phones. The agreement also includes a talent exchange in which dozens of Google and Publicis employees worldwide will work at each other's offices. "There are no books or manuals of how to do these things," Schmidt said. "It's all Google learning how to do it."

The announcement from Google and Publicis is strikingly reminiscent of a targeted advertising deal revealed last week by Munich-based search startup Proximic. The German company is pairing up with Yahoo! Shopping and eBay's (EBAY) Shopping.com to create context-specific ads for the two sites' combined inventory of 50 million items (BusinessWeek.com, 1/17/08).

Google's Adsense inventory is reportedly much smaller now. But Schmidt's use of the phrase "hundreds of millions" suggests the catalog items and other digital ads added to Google's arsenal from Publicis could vault the King of Search once again into the lead. "We are speaking about changing the paradigm of our industry," Lévy said.

Fishbein is a reporter in BusinessWeek's Paris bureau .