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Tuesday, January 10, 2006

Analysis of Advertising Industry from IT Angle

"Google started as an engine for understanding content," - Tim Armstrong, Google's VP of advertising sales.

Media services company; ZenithOptimedia estimated that global Internet advertising revenue will near the US$20 bil (RM 76 bil) by 2007.

Internet advertising provides companies with a global audience while reaching specific targets. - Crid Yu, Head of sales Google Hong Kong.

The Ads Industry Fears Google:

  • Google customer billings = US$6 bil (RM 22.8 bil)
  • Google is charging marketing firm like Carat Americas(largest independent media services company in north america) US$50k (RM 190 K) per month to use Google's ads buying system.
  • Google's recent earning US#381.2 million (RM 1.44bil) in profit. nearly six times that of ad-dependent Washington Post Co, for instance.
  • Google's share price closing at US$417.70 (RM 1,587) since December 2005.

TheStar, in.tech, December 22, 2005.

Who is Affected ?
1. Media companies -

1a. Carat Americas
- Because advertisers can now directly access to Google's ads service. According to David Verklin (CEO of Carat Americas):

Advertisers are spooked by the idea of relying entirely on Google to deliver their ads and want independent ways to shop around for the best price and the greatest exposure.

This is of course the middle man job.

2. Advertising consultant -

2a. aQuantive's system; top independent supplier of ad-buying tools (analysis tools) for advertisers' use to buy ads online. Google recently had put them into the hot fire by announcing plans to provide such tools for free.

"There is an inherent conflict of interest there," said Brian McAndrews, CEO of aQuantive Inc.

Contradictory, at the Malaysia shore, Internet advertising earn many praises from industry goers.

1. DDB International Malaysia.
2. Tyraco S/B
3. Arachnid S/B

They all feel that ads analysis features offered by online advertising services, such as Google Adsense is of highest significant in terms of value-add to their business. But actually, I couldn't find any comprehensive analysis tool from Adsense, perhaps only for premium users.

The benefits of Online Advertising (in Malaysian point of view):
1. Internet has increasing number of users. Broadband adoption rate increases from 1.35 to 1.64 in 3rd quarter 2005.
2. E-Commerce rate increases.
3. Ads numbers can be tracked.
4. Low cost production.
5. Follow-up opportunity.
6. Online advertising in Malaysia is still very small, thus opportunity for entrepreneur still very large.
7. Younger generation audience.

What is happening actually ?

I am not from the ads industry, but I have always wonder what is happening at the back of this industry. Based on these facts, it is known now that..

Media services company uses Google to help their client with online advertising.

What options to they have ?

They could actually produce own advertising channel, following the footstep of Amazon and CBS.

CBS is charging US$400 mil or RM1.52 mil for one 30 second commercial on CSI(Crime Scene Investigation).


With these type of figures, we understood that middle man would still needed, particular in high-value advertising deal. For instance, a brand manager wouldn't take full responsibility of such investment, unless she has a lot of experiences. A wise one would usually hire consultants(famous one) to bear to responsibilities in case sales outcome don't rise to expectation. Nobody wants to be the marshal to call the shot, who should be doing that ?

Therefore, the statement made by March Leibowitz; Google's director of strategic partnerships:

"There's is this notion that Google has a grand devious master plan to put ad agencies and publishers out of business. We see ourselves in a symbiotic relationship with them."

Contradictory, it seems that the biggest problem with media companies and advertising consultants are not Google's uprising, rather it is costing problem. People have the tendency to request for free consultancy or steal the idea and implement it via in-house branding team. Recently, Malaysia's advertising industry proposed to charge pitching fees for customers where the deals fail to happen, similar move was undertaken by Thailand. According to them, they sell ideas for a living and it cannot be shared. This seems to have some indirect conflict with weblogging as well, where personal ideas are just published like that. Even though weblogs are not taken seriously by many, it may one day change the way we live.

It is also apparent to me, though ambitious, that weblog can shake the very foundation of conventional media industry when the quality of contents improves. When such time has arrived, perhaps those influential weblog might be acquired by those who are freaking out. This is to suggest that if you want to develop a business which would be eventually acquired by giants such as Microsoft, Google and etc, you may want to think about doing things which will affect their revenue interest.

Move foward:
While the existence of middle man for the ads industry is still pretty much justified, technology have to move on. Conventional TV commercials can only go as far as a fire hose, where everyone gets wet, including people who don't want to. But when there is a need for more explanation, it fails indefinitely. Video-on-demand and follow-up service pretty much become importance with rising popularity.

Thus, we just need more advertising channels.

"It took radio 38 years and television 18 years to reach 50 million people but the Internet only took four" - Chin Weng Keng, Arachnid S/B - The Star In.Tech, December 22, 2005.

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