I’ve been very skeptical of Google’s Print Ad program since its inception. So I’m hardly surprised by the news from BusinessWeek that the program is a dud (thanks to David Utter for passing on the article):

Carl D. Haugen, president of BluePenguin Software, spent $3,000 on an ad through Google, which ran in the November issue of Budget Living magazine. Haugen offered a 20% discount on its antispyware software to Budget Living readers, so he could better track the ad’s performance. Over one month later, the ad had only generated $181.37 in sales, says Haugen.

The reason for this failure is simple: print is NOT a direct response medium — print advertising CANNOT function with the same closed-loop ROI efficiency as Google’s online Ad Words program.

This is, of course, more disastrous news for the print publishing industry, but that’s an old story at this point.

What interests me is how this impacts Google’s offline growth prospects specifically and the future of advertising generally — that’s because Google’s offline growth is pegged to a complete reinvention of advertising. This is from an Adweek article (sub required) about Google’s ambitions for advertising:

In the company’s view, it’s not just the less-than-accurate targeting, the kludgy buying process and the fuzzy analytics of most current advertising models that leave much to be desired; it’s how marketers go about allocating their money, prebudgeting way too far in advance and making decisions that aren’t necessarily based on ROI.

To work at Google is to dream big. So this isn’t just about refining current models, it’s about the whole enchilada. “In our minds, there really isn’t a difference between online and offline,” says Tim Armstrong, vp, advertising sales.

Transforming advertising into an efficient, disciplined, profitable practice is both right and inevitable. But given the that offline advertising, from an ROI perspective, is still in the dark ages, the real question is how long will this take:

Armstrong, like Sorrell, knows the gap between advertising as it exists today and advertising as Google imagines it is big, by any measure. “We clearly see this as a 10- or 20-year business,” he says of Google’s hopes for helping transform the industry.

That’s a refreshingly realistic assessment, but one that doesn’t bode well for Google’s PE ratio, at least so long as they stake their near-term growth on advertising. Google took the right approach to print advertising, trying to bring market efficiency and accountability to the system. But the medium itself is so broken that Google was bound to fail.

As media and advertising stumble down the road to an all-digital future, Google is as well positioned as anyone to win, but it may take longer than investors are willing to wait.

The Adweek article made an interesting comparison between Google and WPP Group, one of the big ad agency comglomerates:

At a summit earlier this month sponsored by WPP Group search firm Outrider, WPP CEO Sir Martin Sorrell rattled off a downbeat, side-by-side comparison of his holding company and Google. With $6 billion in revenue and 5,700 employees, Google had a market cap, even after some recent declines, of about $100 billion, he estimated. “Poor little WPP,” he said, with its 17,000 employees and its $9.8 billion in revenue, having a market cap of $15 billion. “The market is saying something about our model, and it’s a little bit depressing,” he concluded.

The market was right in this assessment when Google’s growth was driven by its success in revolutionizing online advertising. As Google looks offline for its next wave of advertising-driven growth, it’s coming face to face with the “depressing” model of traditional advertising and the long, hard slog of transformation.