Google's Revolution May Not Be Televised

The search giant has teamed up with EchoStar to change the culture of TV advertising. But it's unlikely to have the impact it has had online

by Catherine Holahan

First Google began selling video ads on YouTube. Now, through a partnership with EchoStar Communication's Dish Network satellite TV service, Google is extending its advertising reach to place commercials on your tube. The move makes sense for the search giant, which already dominates online advertising and has begun selling radio and print ads. The endgame is to become a one-stop shop for marketers looking to target audiences across all media.

But can Google revolutionize the way 30-second TV spots are bought and sold? Don't bet on it. What makes Google (GOOG) an online advertising force doesn't readily translate to the offline world.

No Keywords

Consider what makes Google so appealing to online advertisers: its ability to keep them from spending money needlessly on audiences unlikely to be receptive to a sales pitch. It does this by delivering ads related to information individuals are searching for online and then charging advertisers only when those individuals demonstrate an interest in their ad. Google's ability to do this better than peers translated into $10.6 billion in sales in 2006.

Offline, Google lacks the same extensive targeting ability. Marketers will be able to target specific audiences based on the network, the time of day the ad runs, and the geographic regions where the ad is shown. Marketers also will be able to buy ads based on desired audience, and Google will deliver the ads to matching networks in the appropriate time slot, says Keval Desai, director of product management for Google TV ads.

But marketers won't be able to show their ads only to individuals or households who recently have looked for their product online. "We don't offer keyword-based targeting," says Desai.

Not Much New to Offer

That could all change as TV set-top boxes become more integrated with the Internet, says Desai. Internet Protocol television (IPTV) devices such as the Apple TV (AAPL) will help advertisers use information collected by Web users to serve more relevant ads both online and on TV (see BusinessWeek.com, 9/13/06, "Apple's iTV: Bridging the Big Divide"). However, Google will have to avoid relying on surfing habits to the point that TV viewers' privacy is compromised. "User privacy is something we take very seriously," Desai says.

Without the extra targeting capability, it will be hard for Google to offer much more in terms of helping advertisers reach the right consumers than cable companies currently offer. Time Warner (TWX), for example, lets marketers remove target ads in the same way that Google is testing, says Time Warner spokesman Mark Harrod. Time Warner is also testing advertising that involves some of the interactive aspects that Internet ads currently offer. For example, it has tested ads with brands such as General Electric (GE) that let consumers click a button on the remote to see more of the ad and the company's offer. "Cable's TV network architecture is particularly well suited to offer advertisers better targeting and better measurement because of its inherent two-way capability," says Harrod.

Google will be able to track TV ads and charge advertisers only when a given ad is broadcast to a user's home. (It won't be able to tell, of course, whether the user is in the room at the time.) Here again, Google is not offering something entirely new. Cable companies have ad tracking, and third-party systems, such as ErinMedia and TNS Media Intelligence, track whether ads are served to actual set-top boxes, accounting for digital video recorders and changing the channel during the commercial breaks (see BusinessWeek.com, 2/6/07, "Ganging Up on Nielsen").