Google's Search for Ad Dominance

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Google makes the bulk of its money today by placing short text ads alongside search results on its own site and on a network of thousands of other Web sites. But it has much bigger ambitions to expand into all kinds of ads on the Net, as well as radio, television, and print. Ad Planner could be a prime vehicle for Google to move beyond search advertising. Despite the continuing growth of that market, Google already owns at least 75% of it, so to keep its own growth humming, it needs to move into online display and video ads.

Not a Surefire Success

In the process, however, Google could wreak havoc on the increasingly central audience measurement market itself. Within hours of Google's announcement, comScore's stock plunged almost 23%, closing at 21.45 a share on June 24, as investors assumed Ad Planner would knock a hole in its revenues. That's unlikely in the short term, according to several online ad industry experts. Indeed, investors pushed comScore's stock back up a bit, by 7%, the next day, after realizing their overreaction. For one thing, the Google service is invite-only for now. And given the ad industry's insatiable appetite for data, Ad Planner in all likelihood will become just one of many tools in the arsenal of media planners. "It's not a zero-sum game," says Todd W. Greenwald, analyst with the boutique investment bank Signal Hill Capital Group.

What's more, Ad Planner is no sure winner. Google has a habit of tossing out new services with abandon, not all of which succeed. At this point, Ad Planner is more limited than the comScore and Nielsen services, and Quantcast recently released a similar media planning service. Analysts say Google's service doesn't provide as much detail on users as comScore's, for instance, and doesn't yet link to offline databases such as retail loyalty-card lists.

As a result, it's likely to appeal at first mostly to small and midsize ad agencies that don't yet use more sophisticated services, says David L. Smith, CEO of digital media planning and buying firm Mediasmith. Moreover, some ad agencies, already suspicious of various Google services that appear to encroach on their territory, have no intention of depending on a possible competitor for their data. "How much more of the fox guarding the henhouse do we need?" says R. Michael Leo, CEO of online ad services firm Operative. "I do not see agencies and media companies accepting measurement data from the same people selling them ad inventory."

Not right away, anyway. But Google has the resources, the will, and potentially the richest trove of data to offer advertisers and agencies. Ultimately, for all their misgivings, media buyers may find themselves unable to resist the lure of solid data on where their most promising customers are. If so, Google will be another relentless step closer to remaking the ad industry in its image.

Hof is BusinessWeek's Silicon Valley bureau chief.