June 4th, 2007

Google Is An Ad Agency Competing With Madison Avenue

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What does an ad agency do? It brokers ad sales, right? So is Google an ad agency? I mean in the traditional sense of being the middle man between advertisers and media companies, not as a media company selling ads directly, as Google does with AdWords. You tell me:

Glam Media Inc. plans to announce today that Google Inc. will begin brokering advertisements on Glam’s fashion and lifestyle sites and some of the more than 300 blogs and sites affiliated with the company.

The agreement is part of Google’s efforts to broker advertisements for high-end sites such as Glam, as the Internet giant tries to lure big-brand advertisers to purchase ads through its online system and expand aggressively in selling graphical and video ads.

Under the multi-year deal, Google will sell some of the video ads and graphical display ads such as banner ads that appear on Glam’s sites, including its flagship Glam.com.

Sure sounds like an ad agency to me. Google is not only trying to broker ad sales, as a traditional media agency does, it’s also trying to broker the creation of ad creative, as a traditional creative agency does (via SEO Book):

Creating your video ad is the first step to launching a video campaign. Using the Google Ad Creation Marketplace, you can find a video production professional to create your custom video ad, at whatever budget you set.

Madison Avenue should be afraid — very afraid. Online advertising is all about scaling the infinite complexity of thousands of media channels and thousands of micro targeted ad messages — yeah, like AdWords and AdSense. Sure, it’s going to be much harder for Google to pull this off with video and brand advertising, but in order for Madison Avenue to compete it’s going to have to be completely dismantled and rebuilt.

Of course, Yahoo and Microsoft (and let’s not forget WPP) are also competing with Madison Avenue — and with Google to become the ultimate vertically integrated media and advertising company.

But the game is all about scaling — and when it comes to scaling, Google will be hard to beat.

  • "What does an ad agency do? It brokers ad sales, right?"

    Stop by the next 4-As confab and float that one.

    Google knows tech and can move fast -- two things Madison Avenue doesn't do well -- and that has allowed them to make a bundle in online ad placement. But there's a much larger media world that they aren't a part of and a lot more to advertising and marketing than CPCs.

    There's a cultural chasm between Silicon Valley and Madison Avenue and the geeks won't be able to jump it. Pocket protectors just don't work with Prada suits...

  • still another reason that being in the middle will get you KILLED...

    you either fly under the radar and remain niche and highly lean and mean - and create a unique audience (as in the case of my print publication)

    or

    you are you huge...dominating by being the biggest and the most badass!

    Being in the middle is worst feeling...not small enough to weather the storm and not big enough to take on the googles/microsofts of the world...

    small can be good...

  • I have argued for some time that Google is really an ad company not a search company. Ultimately, they make no money off of search. If all that search traffic went somewhere else, they would probably still broker the ads because they've really innovated in the space and continue to do so. When was the last time they really innovated in search?

    I do believe that Madison Avenue can compete. Or at least other firms can. Google is no longer as nimble as it once was and creative, ambitious, hard-working entrepreneurs within other companies with nothing to lose or in startups can give them a run for their money, just as Google did to others only a few years ago.

  • What does an ad agency do? It brokers ad sales, right?

    lol. I never saw that in an Agency pitch deck before. I think they like to think they 'build brands' but your point is well taken. Google is competing with the media arms of Agencies for sure.

    On a side note, it should be interesting to see how pure play interactive agencies do. They have always had a model that was based on retainers or project work and have never had the media model that agencies are now struggling with.

    Any bets on how soon Google buys a big Interactive Agency? (or do they already own one and I just missed it?)

  • While I agree with your premise that Google is a juggernaut that will ultimate eat the galaxy, I think there is a nuanced, but significant, difference in the role of an advertising agency, a media buying service and an ad sales broker or representation firm. While Doubleclick provides them with many client creative and media buying clients analogous to a traditional Madison Ave. firm, Adsense and the video brokerage service you point to serve a different function than those of a traditional adv. agency -- they are "sales rep" businesses. While Google can -- and will -- absorb or enable every aspect of advertising that can be commoditized and scaled, there are certain things about advertising that can't scale: the most obvious one being the inherent conflict of interests that prevent one agency from being the primary agency for competing advertisers in one category. Also, having worked several years at an advertising agency, I can also note that often the steady flow of revenue into an agency is often related to grunt-work related to one-off design and production projects like producing all the collateral material needed for some regional sales meeting. The revenue to ad agencies isn't always the neat "media dollars" that can be handled by brilliant algorithms and simple interfaces. That said, I still agree with your underlying premise that Madison Ave. as we now know it is toast.

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