Google's effort to roll its advertising juggernaut beyond digital and into the world of print publications is struggling. And that may not be a good thing for the print industry.
In February, Google (GOOG) auctioned off ad space it had purchased in about two dozen magazines, from Martha Stewart Living to Road & Track. The auction -- the latest twist in a six-month experiment with buying and reselling print ads -- was open to thousands of advertisers. However, Google was forced to extend the auction by several days to lure more buyers.
The tepid demand became evident in some of the winning bids, which were recognized earlier this month. Nicholas Longo, CEO of CoffeeCup Software, which makes tools for creating Web sites, wound up paying just $4,000 for each of three half-page ads in Martha Stewart Living. It was a long shot: The magazine's rate card pegs the price of a half-page ad at more than $59,000. Neither Google nor Martha Stewart Living would say what Google originally paid for the space, but it didn't get a similar discount.
SPIN CYCLE. Google can certainly digest a loss of tens of thousands of dollars. The outfit's net profits jumped 267% in 2005, to $1.5 billion, almost exclusively on its thriving business of selling text ads next to Internet search results. A company spokesman acknowledges that demand was light for its print auction, but says Google did little to market the opportunity to its network of several hundred thousand advertisers. Its primary goal, he says, was to test the auction process for print ads. "We're pleased with the data we've gathered and will use it to inform future experiments we conduct on different aspects of the print process," says Google spokesman Barry Schnitt.
Investors, who have bid up Google's stock valuation to more than $100 billion, are expecting the company to successfully diversify its business. Google executives have often stated that they are seeking to expand Google's online advertising stronghold into various offline media, including radio, print, and television ads. In addition to its efforts to broker the sale of print ads, Google in January, 2006, acquired dMarc Broadcasting, which facilitates the sale of radio advertising.
The lackluster appetite for its February auction is just the latest challenge for Google's six-month foray into print ads. Late last year, Google conducted its first trial by purchasing and reselling ad space in a handful of magazines. Although the Internet giant lauded the trial's outcome, a BusinessWeek analysis found that 8 of 10 participating advertisers were disappointed with the results and probably wouldn't buy print ads through Google again (see BW Online, 12/12/05, "Can Google Go Glossy?").
INDUSTRY SKEPTICISM. Several more advertisers spoke with BusinessWeek following the story's publication, echoing similar sentiments. Carl D. Haugen, president of BluePenguin Software, spent $3,000 on an ad through Google, which ran in the November issue of Budget Living magazine. Haugen offered a 20% discount on its antispyware software to Budget Living readers, so he could better track the ad's performance. Over one month later, the ad had only generated $181.37 in sales, says Haugen.
Google's struggle to transfer its online success to magazines doesn't necessarily bode well for the publishing industry. Hundreds of publications have contacted Google about the program, with the hopes that the online giant can extend their reach to Google's army of smaller marketers who otherwise would not consider magazine ads. But the weak performance may indicate that the true value of a page of print lags its list price -- at least in the eyes of Google's advertisers, who are used to high-return search engine campaigns.
Even Longo, winner of the bargain-basement ad space in Martha Stewart Living, is somewhat skeptical. "If at these rates it doesn't work," says Longo, "it never will."