I wrote in a previous blog that television and cable networks, major national magazines, and large advertising agencies would fight to the death to avoid adopting Google’s online auction model for selling advertising. Among the reasons for their dismissal of the computerized auction model were because major media and agencies couldn’t package low value inventory with high-demand inventory, because they would have to sell on a measurable, accountable cost-per-click (CPC) basis instead of a less measurable and less accountable cost-per-thousand (CPM) basis, and because agencies couldn’t get paid high fees for their creativity, as expressed in television commercials. Also, online auctions would disintermediate big-media sales forces and traditional advertising agencies, which the big media don’t want because their salespeople are the main drivers for creating additional value for their brands.
On the other hand, Google’s online ad system will attract more and more small national and local advertisers and will eventually disintermediate smaller traditional agencies and salespeople for smaller traditional media.
For example, a radio station in a medium-sized market typically gets well over 80 percent of its revenue from local advertisers and has six salespeople selling about 10 commercial minutes and hour, or about 1,700 commercial minutes a week, of which about 70 percent, or about 1,200, are realistically saleable. On the average, a salesperson can handle an account list of approximately 50 accounts, five of which are probably active (on the air) in an average week during the year. Doing the math, six salespeople times 50 accounts equals 300 potential accounts, 30 of which are on the air in an average week.
If the salespeople sell enough of the 1,200 salable spots at high enough rates, the radio station can make a profit. If a salesperson sells a commercial schedule to a local retailer, the salesperson has to administer and service the account. The salesperson has to write up the order, submit it to the station’s traffic department, either pick up the copy from the account or write it and subsequently submit it to the traffic department, call the account and tell it when its sports are running, and follow up and ask, “How did it go?” after the schedule ran.
The retailer doesn’t rally know how it went, because even if business is up, the retailer isn’t sure if it came from the radio schedule or a couple of newspaper ads or from increased street traffic. If the retailer asks a customer the retailer hasn’t seen before, “How did you hear about my store?”, the answer is likely to be, “I saw your ad on TV,” even though the retailer didn’t run a TV schedule. Up until a couple of years ago everyone assumed they learned everything from TV, certainly all advertising came from TV regardless of where they saw it. So, the retailer probably would tell the salesperson, “Oh, it was OK, business up a little but I’m not sure it was the radio.”
The salesperson replies, “OK, I’ll rework the schedule–put it in different time periods–and rewrite the copy. It’ll help if you give me a special offer just for the radio–something that is truly special that will motivate people to come in–that way if you sell the special items, you know the sales came from the radio.” So a cycle of re-scheduling and rewriting and special discount offers begins, which is very time consuming for both the retailer and the salesperson.
Enter Google’s Ad Sense program. To see how it works, I signed up Media Curmudgeon for Ad Sense. I went to the Google website, scrolled down to the bottom of the page and clicked on Advertising Programs, had two choices and clicked on Ad Sense, clicked to apply, filled out a form with the name of my Web site, submitted it, and got a notice that I would be notified in a few days if my site qualified. This process took me less than three minutes. Two days later I got an email that my site had been accepted and was given a link to sign on to. I went to the site, created an account, picked whether I wanted ad units or link units, selected my preferred ad layout from several options, chose a color palette for my ad, skipped a couple of options, and went to a box where code appeared. I was instructed to copy the code and paste in my website. This process took me about six minutes.
I went to my Movable Type site from which I manage this blog, clicked on the Main Index template, located the spot where I wanted a Google ad to appear, and pasted the code. I then saved and rebuilt my blog site (two clicks). This process took me about three minutes. As soon as the site had been rebuilt, I clicked on a View Site link–clicking on the View Site link and my blog opening up took about three seconds. I checked my blog, which was about how I had been wrong about Jack Welsh’s book Winning hitting the top of the non-fiction best seller list, and to my complete awe an amazement, a Google ad was on my blog and the ad was selling a two-day seminar with Jack Welsh! I was astonished with the speed with which Google had indexed my blog site, found the Jack Welsh tag, and served a relevant ad. I can also go to an Google site and evaluate the performacne of my Google ads, as can advertisers as well.
Getting a relevant ad on my blog took less than fifteen minutes. I got the size and color ad I wanted–all automated. This automated process of placing, buying, and evaluating the performance of advertising has allowed Google to handle about 200,000 different advertisers, most of them small businesses, and will allow it to have revenue this year of about $6 billion. Google had transferred the work to me and automated it, so as a publisher, I don’t need a sales force to sell my content. Google has transformed the way advertising is sold and is bought. Google is a disrupting technology that will change the way a lot of advertising is bought and sold in the future. One thing is certain–selling media will never be the same.
One thing that is not as certain is Google’s continued stock price of over $400. But after experiencing first hand its awesome, transformative technology in action, I might buy a few shares.