In 2007, advertising companies fear Google. While traditioinal advertising revenues this year have been flat at best and declining in some important segments such as local, the search engine’s ad services posted strong gains, mostly on the strength of sales to small business.
What is it doing right? Harvard Business School marketing expert John Quelch points to 5 of the search giant’s successful strategies including that advertisers pay Google based on performance, not promise.
Even though Google sucks up just 3 percent of advertising dollars spent in the US, advertising companies need to go to school on this formidable player. But the point for ad companies, says Quelch, is to look at Google not as a competitor but as a pioneer into the future of advertising. “The main reason why ad agency executives should not be concerned is that Google is great news for advertising, and that will become more apparent in 2008.”
Here’s the payoff. Although the average US consumer spends one-quarter of their time with media online, only 6 percent of overall advertising expenditures went to online search and banner ads. “This gap has to close,” says Quelch. “Google promises to lead this transition, and in 2008, smart advertising firms will learn to follow.”
