Don’t Be Evil Nate
When Nate Elliott moved to London, this is the going away present we got him.
He doesn’t normally like things that Google do. Yesterday he tried to explain why the improvements in Google’s Adsense for Content network were bad.
His basic argument is that because contextual ads are worth less than search ads, they may as well give up.
I don’t disagree that ad networks are a bad business proposition, but company’s like Yahoo and Google, with significant sources of proprietary traffic, can use them to add some icing to the financial cake. Should Google or Yahoo have ad networks? Yes. Should anyone else? Unless you are in the top few sites for your category, then probably not.
But Nate did not disagree with ad networks, he disagreed with Google’s announcement.
The two important consequences of the announcement are:
1) Advertisers have more control. This lessens the "trust us, we’ll figure what you should pay with smart pricing" company line to date. Marketers can bid on the value of each individual property rather than make an average bid across the network. Will it be incredibly complex to execute without technology? Of course. But c’est la vie.
2) Publishers are rewarded (or punished) for their audience. Sites previously got compensated on the average quality of the network rather than their contribution to it. The announcement moves toward the goal of each site being rewarded on their own merits. Nate says that most big publishers wont accept CPM. Bullshit. They already do. Google pays the bigger guys on a guaranteed CPM. Pricing inventory on a per impression basis shifts more of the risk to the advertiser and away from the publisher. Given the choice of being paid on a CPM basis versus a CPC, all else being equal, every publisher will choose CPM.
Ironically, Nate’s last line "Low quality inventory, low quality clicks. Add it up for yourself." belies his very argument. Sure it is low quality, but it is not negative quality. However limited, there is an opportunity. For all the talks of cannibalization, there is still a glut of cheap remnant inventory. Direct sales forces are not that productive yet. So for at least the next few years, there is an opportunity. If Google continues to empower Marketers and Publishers with more transparency they have a chance of being the leader in this marginal opportunity.
The new version of AdWords isn’t perfect but it is certainly a big leap from where they are today. It won’t work for every publisher and advertiser but it will work for some. The next next version will make an even greater impact. Google needs to do a better job with transparency (e.g. payout %) and control (for both advertisers and publishers). AdBrite and BlogAds, to name a few, have done a good job to these ends. The only way Google will improve on transparency and control is if competitors gain traction and force their hand.
This release is another step up the stairway. It’s not about where the puck is but where it’s going. It will be very interesting to see where things go from here.
Noah