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Friday, June 13, 2003

Confirmed: Google to Phase Out CPM-Based "Premium Sponsorships"

Currently, Google offers two forms of advertising: Adwords, which is billed on a cost-per-click basis, and Premium Sponsorship, which is quoted on a CPM (cost-per-thousand-impressions) basis and is aimed at high-volume, high-budget corporate advertisers.

Today, Google VP of Advertising Sales Tim Armstrong made it official: no new Premium Sponsorships will be accepted and existing sponsors will not be able to renew at the end of their terms. This means that the program should be history by year end.

Official reasons for the decision? The number one reason, and we have no reason to doubt it, is the focus on relevancy. Premium ads may not have been quite as relevant as Adwords. With all advertisers competing on a level playing field (with more relevant ads being rewarded with higher positions, assuming equal bids), one might expect more relevant results to show up on the page.

Return on investment was also typically lower with Premium Sponsorships, Armstrong admits. The typical refuge of sellers of advertising is to claim that most of the benefit of high-cost ads lies in "branding." It's nice to see Google steering clear of this sort of rhetoric. Even larger companies are being encouraged to start thinking in terms of generating measurable actions with their campaigns. Insofar as Google is trying to articulate the unique benefit of search engine advertising, they set themselves apart from the platitudes of interruption marketers.

There are probably other reasons for the change, though. One is Google's culture. The methods of CPM-oriented ad salesmen, and the messages they convey to potential advertising clients, may be markedly different from the usual product-focused, technology-focused culture in the company. The return to "just Adwords" is a reconfirmation of Google's engineering culture which "iteratively" releases product upgrades and tests cool features with the complicity of users and customers. Obviously, sales staff will continue to maintain strong relationships with high-budget advertisers, but instead of catering entirely to those advertisers' preconceived notion of what advertising should do, now the onus will be on Google to advocate the benefits of cost-per-click advertising - or what Armstrong today referred to as "ROI advertising."

According to Armstrong, large ad agencies were not, at first, "attuned" to cost-per-click advertising, so they clamored for CPM-based programs which would mesh better with their billing systems, sales methods, and established practices. "Google's CPM program has been training wheels to get large advertisers on board with 'ROI advertising,'"argues Armstrong. "These same customers are now applauding the move to cost-per-click."

Amongst the set of forthcoming features that are going to be aimed at saving time for high-budget advertisers - many of whom may be launching new Adwords campaigns in the coming months - is a better "bulk keyword" functionality which will make it easier for larger advertisers to manipulate their accounts without the slow response times associated with the current online interface.

Imagine: Google telling people in suits how to think. Maybe they really do have too much power! :)

Posted by Andrew Goodman




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