Posts filed under ‘online advertising’
As Google expands its lucrative ad network to new markets, industry watchers increasingly believe the search giant will buy its way into the nascent market for advertising inside video games.
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Google has reportedly looked at acquiring AdScape Media, a small company, founded in Ontario and now based in San Francisco, that specializes in so-called in-game ads. Google did not return calls seeking comment, and an AdScape spokeswoman declined to comment on the talks.
Though an industry insider who asked to remain anonymous said negotiations had stalled, such an acquisition would allow Google to take on old foe Microsoft, which last year acquired a similar but larger company called Massive. In-game ads, however, are one place where Microsoft would have a rare advertising advantage over Google thanks to thriving sales of its Xbox 360 gaming console and a long list of gaming titles.
“Google would be playing catch-up against some significant entrenched providers,” said Michael Goodman, a program manager at research firm Yankee Group Research. “The biggest challenge for them is they might see themselves closed out of the Xbox as a platform to serve ads to.”
In-game ads may sound like a niche, but it’s a growing one that reaches a choice demographic for advertisers. A recent Nielsen Entertainment study found that men aged 18 to 34 are spending more time playing video games (12.5 hours on average per week) and less time watching television (9.8 hours per week). About 6 million U.S. households have at least one “power gamer,” someone who spends as much as 20 hours per week and $50 per month on games, and there are more than 15 million active players of casual games, which are free ad-supported games such as Tetris or cards, said Michael Cai, director of broadband and gaming for Parks Associates.
“It’s not a pimply faced teenage kid playing video games in the basement anymore. It’s people with a lot of disposable income,” said Jeff Berg, content editor at the Interpublic Emerging Media Lab think tank. “It’s a natural space for Google to move into if they can do it effectively.”
The dollar value of this market isn’t nearly as small as many people would think. Parks Associates predicts that game advertising revenue will grow from $120 million in 2006 to $200 million this year and $300 million in 2008. Yankee Group forecasts in-game ad revenue to reach $732 million by 2010. Buying AdScape wouldn’t get Google a lot of new customers, but it would get the company technology, Goodman said. “Google already has significant relationships with advertisers, but they would have to build up relationships with game publishers,” he said.
“Google is the king of search ads, but they aren’t that dominant in brand advertising.”
–Michael Cai, director, Parks Associates
Over the last 18 months, the search giant has been rapidly moving into new ad markets such as print and radio, using its automated online ad-delivery system to provide a way for advertisers to reach new customers via offline mediums. Google purchased radio advertising provider dMarc Broadcasting for just over $100 million a year ago and has been conducting radio ad delivery tests.
While it’s hard to imagine virtual world games like World of Warcraft being a great advertising vehicle for Coke or Pepsi, plenty of games could be ideal, such as sporting titles.
“For example, we take Nike’s (ads) they’ve used for print or television and implement that straight into the games across our sports titles,” said Justin Townsend, chief executive of in-game advertising firm IGA Worldwide. The ad is delivered over the Internet and can be changed depending on which advertiser has purchased the ad rights, he said. The ads are targeted geographically, so players in Germany, for example, will see a German version of the ad. Because Google’s greatest success has been in contextually targeted ads rather than display ads, it might be better suited serving ads that appear alongside casual games, which are sold over the Web, Cai said.
“The question is whether Google is interested in getting into a new media form–gaming, and whether they are looking beyond search and trying to address a new ad business–display advertising,” he said. “Google is the king of search ads, but they aren’t that dominant in brand advertising.” But is the gaming industry ready for Google’s automated kind of advertising?
“It’s not clear,” said Jonathan Epstein, chief executive of Double Fusion, a competitor to AdScape, IGA and Massive. “It doesn’t mean it can’t get there, but when you look at how markets evolve it’s always the specialists that drive innovation and focus in the market.” Eva Woo, vice president of marketing at AdScape, said her company has a technology that allows advertisers to interact with consumers without interrupting the game, something that could appeal to Google. If a gamer opts in, AdScape’s Real World Virtual World Gateway will deliver messages via SMS or e-mail from the advertiser, Woo said.
When the game detects that a player has reached a certain level in the game or that a player is having problems getting beyond an obstacle in the game, for example, the advertiser could offer hints, rewards or coupons. “We’ve been developing this (advertising) technology for five years,” she said. “We have one patent issued and 15 patents pending.”
A risk for Google, of course, is getting shut out of Microsoft’s growing Xbox market, and the question remains whether gamers will rebel against publishers who allow advertisers into their gaming worlds.
“Male gamers playing core games don’t mind ads if they help make the gaming experience more realistic rather than disrupting their gaming activity,” Cai said.
By Elinor Mills
Google‘s fourth-quarter revenue rose 67 percent and profit nearly tripled on continued strength in its cash cow paid searc business.
Handily beating analysts estimates, net earnings for the quarter ended December 31 were $1.03 billion, or $3.29 a share, including one-time items such as stock-based compensation, compared with $372 million, or $1.22 a share, during the same quarter in 2005. Excluding those items, earnings were $997 million, or $3.18 a share. Total revenue for the quarter rose 67 percent to $3.2 billion, compared to $1.92 billion a year ago. Excluding traffic acquisition costs, or commission paid to content partners, revenue was $2.23 billion.
Analysts polled by Thomson Financial were expecting Google to post earnings per share of $2.92 excluding items, and revenue of $2.19 billion, excluding traffic acquisition costs. Paid search represents nearly all of Google’s revenue. The company is expanding its advertising platform beyond the Web into radio and print.
“We paid over $3 billion in 2006 to our partners and this is a figure that we expect is going to increase as we ramp up our video, radio and print programs,” founder Sergey Brin said in a conference call with analysts. Asked about whether the company plans to help companies advertise on television, Chief Executive Eric Schmidt said: “We have already said that we are experimenting with traditional television advertising…There are many reasons to believe that the targeting technology we have invented can apply well, that advertisers will pay much higher rates for ads that are targeted.”
As for YouTube, Google suspects content creators will take advantage of the direct link to fans that the video-sharing site provides, said Schmidt. “We can connect the copyright owner with the user,” he said. “We’re pushing for a model where the people who produce the content get some revenue back.” In addition, Google is working on audio and video fingerprinting technologies to protect copyright holders, he said.
When it comes to search, paid clicks on ads on Google’s network and its publisher partners’ Web sites grew more than 60 percent in the aggregate, according to Chief Financial Officer George Reyes. While things look rosy for Google, its largest search rival posted more modest fourth quarter results. Last week, Yahoo’s earnings were down more than 60 percent from a year ago.
Web traffic to Google grew 24 percent in the fourth quarter from the same period a year earlier and Google accounts for more than half of all Web searches, according to Nielsen/NetRatings. The company is expected to capture two-thirds of the search advertising revenue this year, according to eMarketer.
Google shares, which closed at $501.50, dropped as much as 2 percent in after-hours trading after the company failed to make so-called “whisper numbers” on the street that were slightly higher than the estimates that they beat. The stock has risen nearly 18 percent over the past year, about the same amount that Yahoo’s has fallen.
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In November, we officially closed our acquisition of YouTube, and since then we’ve received a number of questions about what will happen next. The summary is that Google Video and YouTube will continue to play to their respective strengths. But here’s a bit more detail:
Google’s strength — and its history — is grounded in search and in innovating technologies to make more information more available and accessible. YouTube, meanwhile, excels at being a leading content destination with a dynamic community of users who create, watch and share videos worldwide.
Google search results already include links to content that’s hosted on YouTube. Starting today, YouTube video results will appear in the Google Video search index: when you click on YouTube thumbnails, you will be taken to YouTube.com to experience the videos. Over time, Google Video will become even more comprehensive as it evolves into a service where you can search for the world’s online video content, irrespective of where it may be hosted.
This is part of Google’s overall goal to give you the highest quality search results possible. For example, some users who do a Google search for Martin Luther King, Jr. may want to find websites about him. Others may want to see images of him. And others may want to watch video footage…
YouTube, as we’ve stated previously, will remain an independent subsidiary of Google, and will continue to operate separately. Google will support YouTube by providing access to search and monetization platforms and, when/where YouTube launches internationally, to international resources. YouTube co-founders Chad Hurley and Steve Chen and the rest of the YouTube team will continue to innovate exciting new ways for people to “broadcast themselves.”
Earlier this week, we announced one example of innovation in monetization and distribution with a new AdSense video test. We’ll be working with a wide set of content providers, grouping together high quality video content from providers with high quality ads and offering them as playlists which publishers can select from and display on their AdSense sites. (There’s more about the test on the AdSense blog.)
Today represents just the first step in our plan to bring you a comprehensive video search and content platform. We’ll provide ongoing updates as they unfold.
Yahoo closed the books on a tough year yesterday, reporting that its sales rebounded in the fourth quarter from an especially sluggish third quarter and promising investors that it would soon turn on technology that it hoped would close the widening gap with Google.
Its fourth-quarter profits were down from a year ago when it had investment gains, however, and it predicted only modest improvements for this year, suggesting that Yahoo would continue to struggle to keep up with Google, its Silicon Valley rival.
Yahoo executives were upbeat enough, however, that Yahoo’s shares rose by 5.8 percent, or $1.57, in after-hours trading, to $28.53. The price had fallen 46 cents, to $26.96 in regular trading.
Of most significance to investors, Yahoo said it would begin the second phase of its long-delayed search advertising system, called Project Panama, on Feb. 5. On that day, it will start displaying advertising on search pages in the order in which its computers estimate it will make the most money.
Search advertisers bid the price they are willing to pay each time a user clicks to visit their Web sites. Yahoo now shows the highest bid first, a method that analysts say earned it only 60 percent as much on each search as Google’s more sophisticated formula. Terry S. Semel, Yahoo’s chief executive, said the company would reap the rewards of the new system — but slowly.
“The first time we see any benefit will be at the end of the second quarter,” he said in an interview yesterday. “Every quarter thereafter we will start to get better.”
Mr. Semel said Yahoo would not see the full impact until 2008, when the system will be expanded to international markets.
In the fourth quarter, Yahoo earned $268.7 million, or 19 cents a share, down from $683.2 million, or 46 cents a share, in the period a year earlier. In the fourth quarter of 2005, Yahoo’s earnings were buoyed by $408 million in accounting adjustments relating to the sale of its Chinese unit and some tax changes. Excluding those adjustments and some expenses related to stock-based compensation, Yahoo’s fourth-quarter income in 2006 was $296.5 million, up 15 percent from the prior year.
Yahoo predicted another slow year of growth. The company’s revenue, after deducting payments it makes to Web sites that display the ads it sells, was $4.56 billion for 2006, an increase of 23 percent over 2005. (The growth was slower than the company had predicted at this time last year.) For next year, it predicts net revenue of $4.95 billion to $5.45 billion, an increase of 8.6 percent to 20 percent.
It also expects the growth rate in operating cash flow, a measure of profitability, to slow as well.
By contrast, Google is expected to announce next week that its 2006 net revenue was up 85 percent, to $7.45 billion. And analysts expect its net revenue to increase 48 percent this year.
For the fourth quarter, Yahoo reported revenue, excluding payments to other sites, of $1.23 billion, up 15 percent. Yahoo’s revenue was slightly higher than analysts’ expectations of $1.22 billion. Its per-share earning of 19 cents in the quarter was well ahead of the 13 cents expected by Wall Street.
As Yahoo has fallen further behind Google, there has been increasing criticism of Mr. Semel’s leadership as slow, indecisive and unfocused. In response, last month Mr. Semel fired Yahoo’s chief operating officer, Daniel L. Rosensweig, and reorganized the company’s management, placing responsibility for advertising sales and some other business under Susan L. Decker, formerly the company’s chief financial officer.
In a conference call with investors, Ms. Decker said that Yahoo planned to rebuild its business of selling advertising for other sites, both text ads related to Web searches and graphic banner ads. In recent years, Yahoo has lost its early lead in the search ad business to Google. And while it is still the largest seller of display advertising on its own site, AOL’s Advertising.com unit has become the largest network selling graphical display advertising for other sites.
Mr. Semel said the Panama system would allow advertisers to buy both graphic and search advertising at one time, something that Yahoo had not allowed until now.
“Large advertisers want to talk about display advertising and search at the same time in the same meeting,” he said.
Mr. Semel said that Yahoo was buying advertising space on other sites on behalf of its large customers, using an advertising marketplace run by Right Media.
Yahoo is looking to sell ads on other sites in part because the growth of its own user base is slowing. Yahoo increased its user base in 2006 by 16 percent, to 423 million people worldwide, but the growth rate of users in 2005 was 22 percent. Yahoo’s users are looking at more pages than they did a year ago, but the company’s advertising revenue for each page displayed declined, it said, mainly because of its lagging search ad technology.
In the United States, Yahoo’s revenue grew to $1.15 billion in the fourth quarter of 2006, an increase of 8 percent from the quarter a year ago. By contrast, the company’s strong business in Asia helped its international revenue grow at a 25 percent pace, to $558 million.
Company: Mochila, Inc.
Location: Headquartered in New York, NY
Launch Date: Founded in 2001
In the company’s own words, what is it? Founded in 2001 as a publishing automation software company, today Mochila is an online content marketplace for publishers, editors, creators and advertisers. Designed to be first to market, Mochila leverages the power of the Internet to facilitate the acquisition and sale of high quality content that includes articles, photography and soon video and audio.
Mochila‘s executive team and advisors are distinguished media and technology veterans who have observed a shift in the publishing landscape, including huge growth in certain sectors. Last year approximately 16.8 billion words and 1.8 billion photos and graphics were sold over wire services such as the Associated Press, Bloomberg, and Reuters. Combine those numbers with audio and video sales, and the world spent just under $2 billion on syndicated news content last year. This market is expected to grow to $3 billion by 2008. Additionally, niche publications will spend nearly $3 billion on outsourced content. The explosion of blogs, web sites, and online newsletters promises to further fuel market growth.
Responding to the evolution of publishing, Mochila provides a resource for selling and acquiring content in ways that can greatly enhance efficiency and revenue. Founded on principles of trust and integrity, Mochila builds value, protects licensing rights and offers safe access and convenience to all who join.
Mochila is a technological breakthrough for the publishing world, combining rock solid data and license management capabilities with advanced search engine and e-commerce technologies. Created to be first to market, Mochila allows content to be an asset that can be monetized with greatly expanded revenue potential for everyone who participates in the new media marketplace.
Outside quote about company: “Quigo’s Adsonar platform offers unparalleled control and transparency for pay per click advertisers and content publishers, so it truly is the right fit for Mochila’s transparent content-syndication marketplace,” says Henry Vogel, Quigo’s Chief Revenue Officer.
* first global online media marketplace for print, audio, video, and photo content
* offers simple but powerful tools for content sellers to set licensing rules
* offers Mochila AdMatch
Keith McAllister, Chief Executive Officer
Benjamin Chen, Chairman and Chief Technology Officer
Carolyn Bekkedahl, VP Business Development
Jason Oliver, VP Marketing
Tushar Patel, VP of Engineering and Technical Operations
Bill Lindsey, VP Architecture