Google’s 1Q09 earnings presentation left little doubt about where the company’s headed for the next year or so, and it’s in the direction of optimizing its role as the world’s most efficient marketing and sales channel. Google executives repeated the mantra that a key reason Google was able to outperform most advertising-supported businesses was that its customers saw it as “a sales channel, rather than a marketing expense,” making it much more resistant to marketing spending cuts typical of recession behavior.
This positioning is about to take a leap forward as Google rolls out support for a technology known as ShopAds from Adgregate Markets (see Mediapost coverage). Ecommerce banners have been a long-sought Holy Grail of Internet entrepreneurs, but have generally been stymied by security issues. (For one thing, phishing attacks become much more effective when the perp’s URL doesn’t appear in the browser’s protected address field.) VeriSign has added its imprimatur to the transactions, but it’s probably safe to say that the security issue has not been laid to rest.
At the same time, Google CEO Eric Schmidt suggested during the earnings call that YouTube was looking at transactions as well, although he was a bit contradictory about timing: "We do expect over time to see micropayments and other forms of subscription models coming as well, but our initial focus is on advertising…we’ll be announcing additional things in that area literally very, very soon." Signing up studios such as Sony Pictures, CBS, MGM, and others to YouTube distribution will clearly bring pressure to accelerate viewer-paid models for long-form video content.
Then there’s the rising chorus of voices from the publishing world calling for the reconstitution of the “pay wall” around online news content (see, for example, Washington Post coverage). In his speech to the Newspaper Association of America last week, Eric Schmidt downplayed the idea that a micropayment solution for publishers was around the corner due to prohibitively high transaction fees, but said that “much work was being done on that technology to bring costs down.”
Right now, embedded transactions in standard display banners looks like the best bet. Simple back-of-the-envelope calculations suggest the yields on such units could dwarf today’s sinking display CPMs. Publishers need to resist the urge to gripe about Google or fret about pay walls and focus on how they can maximize their piece of that pie.