LAGUNA BEACH, Calif.--Many industry executives expect sales growth of online brand advertising to outpace advertising related to Web search in the coming years, begging the question: How will search giant Google keep pace?
Here at Piper Jaffray's Global Internet Summit, a three-day confab of media executives and investors, a Google executive was posed a similar question, cast in the light of less-than-stellar results from the company's display advertising product so far.
"It's (in its) very early days," said Sheryl Sandberg, Google's vice president of global online advertising sales and operations. "When we think of display advertising, we think it's a space...that's beginning to grow."
Piper Jaffray analysts expect global search-advertising sales to grow by an estimated 40 percent this year, to US$13.6 billion. In contrast, global brand ad sales are expected to be US$11.7 billion, up 25 percent for the year. After 2007, however, sales growth will begin to favor display ads, such as banners on Web pages, over search, according to Piper Jaffray analysts and ad executives attending the conference.
That's a dramatic shift for search, given its triple and high double-digit growth rates since 2002.
After the dot-com bust, targeted search ads revived the languishing online advertising market because search engines like Google and Yahoo could connect interested buyers with sellers at a relatively low cost. Google in particular became an online titan of search-related ads for it's simple, relevant results, deriving billions in annual revenue at the exclusion of other ad formats like display, or brand ads.
But with the rise of video consumption online, Internet brand advertising in the form of video will benefit, executives say. For example, TV commercial advertisers already are formatting 30-second spots for broadcasts online at sites like NYTimes.com or YouTube.
Another driver of brand advertising online is coming from consumer-package goods companies, such as Clorox, which are allotting more of their ad budgets online and away from traditional markets, ad executives say.
Elizabeth Ross, president of Tribal DDB West, a major ad agency, said that companies like Clorox aren't interested as much in search-related advertising because they don't want to compete with Wal-Mart Stores, for example, to advertise a household cleaning product. Rather, they're more interested in bolstering their brand name in the online forum.
That doesn't bode well for Google, given that search rivals Yahoo and Microsoft offer advertisers a wide range of display or brand advertising opportunities.
Still, in a measure to diversify its revenue, Google has begun selling advertiser image ads, which are displayed on its publisher partner sites. And according to Sandberg, Google recently introduced a "click to play" advertising service that lets brand advertisers pay fees when visitors click to play a video ad, which are often construed as brand ads.
Google is also thinking of experimenting with other kinds of display ads, Sandberg said.
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