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Tuesday, May 24, 2005

Advertising 2.0? Old News.

Guess Gary's never read my AdWords Handbook? Those of us who do this for a living have been talking about the wide-ranging potential of AdWords-style auctions for years. Companies like VerticalNet and other vertical auction pioneers were exciting to analysts in their first wave because they offered opportunities for inventory to be sold at whatever price point made sense. When that principle carried over into search advertising, companies like Google and Yahoo went from marginal to highly profitable. That trend may continue as the principle plays out in various ad formats.

As the head of a competing contextual ad service (Quigo) recently told me, Doubleclick failed at this because they were only good at selling the inventory that was easy to sell. They did a terrible job of monetizing remnant inventory for their publisher partners. Not so for Google. Google is doing a fantastic job of it. So much so that a huge number of minor websites are using the system to generate mostly low-CPC ad revenues, and not a few larger publishers are doing the same.

"Junk" ad inventory is easier to sell when you have a platform that facilitates this. And high-priced inventory isn't compromised either, due to the auction system. This principle is now emanating out into the content space, and more are finally taking note of it now that Google is allowing publishers and advertisers to communicate more directly (buying and selling space at a site level).

Here's the odd paradox, though. From Day One, Google did such a good job of helping publishers get paid for their remnant inventory, they did a poor job of forging relations with larger publishers and with big advertisers who want specific media buys in prestige locations and are willing to pay more for it. The recent changes to the content targeting program are a belated recognition of the high-CPM ad market that needs to be treated with more care. Quigo, a key competitor of Google's and Yahoo's in the contextual ad-serving space, built a platform that does a better job of this. In some sectors, such as automotive, Quigo has also done a better job of convincing publishers and advertisers that prestige content needs its own auction. More on the exciting Quigo story soon.

Posted by Andrew Goodman




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