Google AdSense, CPM and Image Ads

I am finally getting the time to comment a bit on the recent announcement of running site targetted image ads on a CPM basis through their network, which gets even more interesting in light of DoubleClick being sold. Why interesting? DoubleClick started out being a network of sites and they stopped doing that in the downturn, only leasing their technology. Of course their model was different in that they only sold CPM based ads for then high prices. Google has their auction and performance system which makes Google AdSense a system that gives you access to the sales channel of lots of customers (who acquire users). That gives Google a wonderful leg up. They can fill up the rest of the ad space with their sales channel access. Google has a wonderful leg up here.

Now they are also adding Flash banners and some smaller publishers like JenSense are already not too happy about that because they don’t really want flash banners on their site. What Google is doing is going into the branding business. As John says they are now competing with everyone out there. As I already commented on John’s post I see some problems with that.

The thing is that Google up till now allowed big web sites to get into a previously untabbed market that did not directly compete with their current offerings. These sites sold high priced CPM placements for branding purposes, requireing the high price because of the perceived value of their own brand and users. These prices might have been too high and they often were not sold out. But to not endanger their branding campaigns they would not allow low paid campaigns on their sites, which would be like selling below (their believed) value. Now Google is taking a direct assault on that market. That’s not good.

Of course Google might have the idea, possibly rightly so, that their system, which allows for the best price to be found for a performance advertisement, also can do that for a branding campaign. The problem is that it is not set up like this. In the current setup, as I understand it, the CPM based Image Ad will be run whenever it outbeats a mix of text ads that as a aggregate will earn a higher CPM. There is no way for the web site to say that an image ad should be for example 4 times the value of the text based ads for example. But they should be able to say that or something similar. Of course it is unlikely in my mind that the performance driven crowd that uses Ad Words will see so much added value in branding. They will measure the image ads the same way as they measure the other campaigns, which is total and utter nonsense.

The thing is that Google is overdoing it in their quest to make more money. They didn’t think this fully through it seems and they should have that capability as I hold them to the highest regard. They are now getting up against some of the major players out there. This will get even more interesting.