Google Expands Newspaper Pilot Program

Summary

As expected, Google has expanded its newspaper ad pilot program and has made it easier and more visible to AdWords advertisers. The program has shown success, as we noted back in December, and represents one of the many flanks in Google’s march toward covering all media and all formats. The latter charge was emboldened by its DoubleClick acquisition (still facing congressional antitrust scrutiny), and various media continue to be brought into the fold through partnerships such as ClearChannel (radio). The newspaper effort specifically launched to resell print ads across 50 U.S. papers and has now been extended to 250. We expect more to follow.

Analysis

Newspapers with falling ad revenues will likely accept Google’s new source of ad dollars whole-heartedly, while some advertisers will appreciate the invitation to advertise in a print medium, previously out of reach. The effort specifically chops up full-page ads into smaller ads that are more affordable for a subset of businesses that might have had a long-standing desire to advertise in print but couldn’t afford it.

Newspapers, meanwhile, have always had the capability to do this, but from a sales channel perspective, it isn’t as attractive (opportunity cost) to go after a fragmented base of smaller businesses interested in smaller ad spends. Sales reps instead devote their attention to the car dealers, furniture showrooms and big-box retailers of the world.

Google’s self-provisioning ad campaign setup, on the other hand, makes this possible and essentially adds a sales channel for newspapers, albeit inferior to their own physical sales asset (an important and core strength, like Yellow Pages). Regardless, it opens up a new addressable market segment to newspapers at a time when they need it most.

Indeed, headlines of newspaper publishers’ woes continue unabated. The latest is Tribune Co.’s statements this week that the Los Angeles Times experienced one of its “worst quarters ever” in ad revenues and cash flow.

New Advertisers: For Better or Worse

The chopped-up ad revenues, however, could present a slight downside for newspapers that tie up with Google’s effort. Creating these affordable chunks of inventory essentially breaks up whole-page ads into a patchwork of smaller ads, characteristic of the pages that fill smaller free metro papers or readers.

Some papers could feel this will open the floodgates to questionable advertising or an overall look and feel that is below their level of “class.” However, the terms of the “bid-ask” marketplace allow publishers to accept the ads before they are sold. And overall, the positives outweigh these drawbacks in that this has proved to be a great way to dynamically place remnant inventory late in the publishing cycle, which is otherwise backfilled with house ads. In any case, newspapers aren’t really in a position to be turning away advertising.

In addition, Google is hoping this conversely adds appeal to AdWords and gets advertisers to use Google Analytics more often. These elements all tie together nicely if you think about it: Google Analytics can be used to arm advertisers with the knowledge of certain geographies that could use a boost in sales, and a corresponding print budget allocation. We’ll see what else comes of it. But for now the effort makes a lot of sense.

Meanwhile, Yahoo! continues to develop its “amigos” newspaper consortium. Though it similarly makes inroads to the newspaper world, this setup is much different from Google’s effort. Yahoo!’s efforts instead live entirely online and will work toward beefing up its own content across its network (Yahoo! News, HotJobs etc.) with newspaper content, while conversely providing newspaper publishers much-needed online functionality, technology assistance and online know-how. We’re also bullish on this effort and will continue to watch closely.
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Related TKG Reports: White Paper: Newspapers 2.0 Part 4: Building Online Newspapers in a Web 2.0 World, Advisory: Newspapers Team Up Online To Nab National Advertisers