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Rory Cellan-Jones

Google - about to overtake ITV

  • Rory Cellan-Jones
  • 17 Apr 08, 18:09 GMT

Over the last three years I've made frequent visits to Google's London offices opposite Victoria station - and every time I go back the search firm seems to have filled more space.

This week the funky offices and the free canteen were sparsely populated but only because just about the whole London workforce had gone off on the annual Google ski trip.google_canteen432.jpg

And what are most of the eager young Googlers doing? Selling advertising or talking to Britain's biggest brands about how they can move more of their marketing budget online.

Because it's easy to forget that as well as being an extraordinarily innovative firm, Google is also rapidly becoming Britain's biggest advertising business. The latest figures - released on Thursday evening - show how rapidly it is growing in the UK, earning $803 million (about £407m) in the first three months of 2008, about 40% up on a year ago.

Let's put that into context. Last year, ITV's net advertising revenue was £1.5 billion. So, even if you just multiply Google's earnings by four and assume no further growth this year, Britain's biggest commercial television business - the original "licence to print money" - is about to be overtaken by an American upstart which only arrived in the UK in 2001.

google_staff203.jpgYou could not ask for a starker example of the threat to traditional media from the online world.

Marc Mendoza - whose media buying agency is putting a lot of its clients' budgets online - tells me that Google now has about 80% of the UK online advertising market. It turns out he's referring to search, where Google has crushed all opposition, and of course there are other forms of online marketing.

Still, the latest figures I've seen put total UK online ad spending at around £2.8 billion last year, of which Google had nearly half. That's a stunning share, and with the acquisition of DoubleClick now completed, Google looks set to be bigger in display too. The company's founders were also sounding very bullish in their results conference call about their prospects in the mobile advertising market.

So who's got a problem with this? Microsoft, obviously - that's why it is determined to win its battle for Yahoo. With an infinitesimal share of online advertising, it is paranoid that the Google business model has more of a future.

But here in the UK, the internet service providers are desperate to shore up their wafer-thin subscription revenues with some advertising cash. That's why they're looking seriously at Phorm's web tracking software which promises to serve up targeted ads.

At an open meeting this week Phorm's chief executive was hammering home the message that there needed to be an alternative to Google.

All those young Googlers in their multi-coloured Victoria offices signed up to an edgy, radical business which was admired - even loved - by the rest of the industry. Now, though, Google has grown into the biggest kid on the block, and is eating everyone else's lunch. I don't think there's going to be much love flowing its way from now on.

Comments

  • Comment number 1.

    Best thing is ive rendered all of googles ads (and any other ad) useless with a nice Firefox plug in. This is similar to the way ive rendered all of ITVs advertising useless, i dont watch ITV!

  • Comment number 2.

    Yes, the online admen are not best pleased with that Firefox plugin....I think it's great!!

    The article itself explains why people should move away from Google as when you do a search your not getting the best sites back you're getting who's paid to be there. I actually make a point of not clicking any 'sponsored links',

    Its easy to stick with Google (I still do myself) but that's because of the other services Google supply free of charge(gmail for example) and that's how Google make their money by me coming back to their site everyday. One day I will switch my default search engine but Google don't need to worry for now ;-).

  • Comment number 3.

    There is actually no demand for targetted advertising - not one single person i have ever spoken to has told me that they wished they were sent more online adverts that were directly harvested from someone snooping on their online websurfing habits.

  • Comment number 4.

    Google may be the "fat cats", but they still give the best search results. And maps. And email service. And search history.

  • Comment number 5.

    Google are so successful at adverts because they understand both perspectives. Google understand the commercial need i.e. that the ad revenue pays for their existence, and the great tools they create. Google also understand that most people aren't really interested in the adverts when they use Google or other web sites, they only want some relevant adds when shopping. So Google make their adverts unobtrusive.

    Just like many other Firefox users I make use of the adblock add-on, but even if you use Internet Explorer, you can still get rid of the ads with the excellent and free IE7Pro add-on.

  • Comment number 6.

    Despite the internet, there will always be a place for advertising on television stations. I don't believe it is particularly affected by the growth of internet advertising (only to a minor degree) and is still the most effective form of advertising. So there's no need to panic.

    As for the amazing rapid growth of internet advertising; it had to come. As for those people who say it has no effect, one word, wrong! People may not go out and buy a product straight away because of an internet advertisement, but the advertisers will have got their message across, none the less.

    As for Phorm. What a frightening thought, that all your web browsing can be logged and used to better target you for advertising; but will it stop there? I very much doubt it. I only hope our politicians have the imagination to see further than the simple advertising argument and put a stop to this anti-privacy idea before it's started. Though my gut feeling is that they'll bend to the massive business lobby (and I bet the secret services would just love to get their hands on some of the data).

  • Comment number 7.

    One FINAL thought. If the growth in internet advertising is a threat to anyone, it's to the printing firms and the Royal Mail who currently produce and deliver direct marketing ("junk") mail. Internet advertising is just an online equivalent of that.

  • Comment number 8.

    Why does everyone persist in using Google. I much prefer the "old" Altavista with its command line search options AND no adverts !

  • Comment number 9.

    This article misses the point a bit. ITV is one very significant part of a very healthy commercial TV sector worth £4.5 billion last year. Search – of which Google is the undoubted king – was worth £1.6 billion last year. It may compete with ITV in revenue size but that says more about increased competition in the commercial TV sector – a good thing for viewers and advertisers – than anything else.



    Secondly, bednbored is absolutely right. Search is basically direct marketing by another name. It fulfils a completely different function from display advertising like TV which builds brands. Search is valuable but TV is proven by wise heads at PricewaterhouseCoopers, the IPA and others to be the most effective ad medium. It returns £4.5 million for every £1 million spent. Search can be seductive in the short term because it appears so accountable but brands will soon find that if they neglect their TV budgets they may see short term gains but their brand will wither and, if not die, at least fall asleep. Of course the best thing to do is to be smart and use TV advertising and online together – and to fund them from different budgets. This is a very important point at this moment because economic pressures are wrongly causing boardrooms to consider chopping or re-allocating marketing budgets. In fact the TV and online ad industries have recently joined forces to research how and why the two work so well together – results of ‘TV + Online: Better Together’ will be out in early May.



    Bednbored is also right to say that the growth of the internet is not affecting TV. It isn’t. People are watching more broadcast TV and TV ads than ever before – and we don’t measure their online viewing yet, although it is dwarfed by what we watch from the sofa. People even go online in their millions to watch TV ads even more – from drumming gorillas to play-doh bunnies. TV is helping the internet grow (witness the iPlayer, ITV.com, 4OD et al) and helps search to grow. It is crystal clear that if you put your ad on TV, people go online to find out more using search.



    I am, however, glad that your article resisted the temptation to compare internet advertising as a whole to TV advertising. Others have and it is very misleading. The internet is a technology with lots of different ad options including display, classified and, of course, searches. It is not a single ad medium. When the revenues for these distinct things are lumped together and used to compare to something like TV it is misleading as it isn’t comparing like with like. It’s like adding up the funds for everything that uses printing as its technology (from newspapers through to shelf-wobblers) and using that one figure or adding up all print media (magazines, papers, directories) and using that figure. Both figures would be monumental, vastly bigger than online and pointless. Comparisons may offer a guide to how a sector is growing but it is meaningless if you are interested in how advertising works.



    I must declare a vested interest here as I work in marketing for commercial TV.

  • Comment number 10.

    Google is a powerhouse that is getting bigger and better due to the fact they are a very positive forward thinking company. I work as the SEO Manager for customerstreet.com and Googles algorithms are just light years away in regard to all other major search engines, due to this they show the most accurate results on the SERP's (search engine results pages). I can only see Google grow even bigger as they are the one and only search engine that you need to worry about in regard there results pages as they have the market share of users (by a long way). Even better than that, Google offer people the ability to advertise via PPC (pay per click), you pay to have adverts on the results pages for your given keyword phrase (what someone types in to find your product(s)/service(s)). This will continue to grow as more and more businesses go online and they want to be found, competition will grow for each business online so thus will need PPC (Google advertising arm) or via website optimisation (natural listings) to get where they want their shopfront on the results pages.

  • Comment number 11.

    Wow Google sure are expanding very rapidly. 407 million in three months?? :-S If I had that amount of money I'd buy my own planet and rent out accommodation to space travelers lol. I wonder just how big googles going to get?

    www.nicholasfinnegan.com

 

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