Digital Media

This was originally posted at ZDNet's Between the Lines.

Are the days of silly AdSense deals with the likes of MySpace and AOL over for Google? Bernstein analyst Jeffrey Lindsay seems to think so. The analyst upped his price target to $600 for Google shares on the theory that the economy is rebounding and the search giant's revenue per click ratio will follow. Meanwhile, Google's profit margins are likely to go higher.

(Credit: ZDNet)

And Google's ability to walk away from high-cost AdSense deals are one reason those margins are headed higher. Lindsay writes in a research note:

We also expect that Google will be increasingly prepared to walk away from unfavorable AdSense for search and AdSense for content deals in the future and this "mix shift" will also translate into higher margins. Rather than agree to revenue guarantees and exceptionally high TAC rates to partners such as AOL and MySpace, as it did in the past, we think Google will simply pass on these deals and allow a much larger share of this low margin and loss-making business to go to competitors such as Microsoft. This may result in some sensationally negative headlines such as "Microsoft scoops the Xyz deal from Google," but much of this business is either uneconomic or toxic or both. For example, consider Google's recent write-down of $726 million attributable to the "strategic investment" tied to the AOL AdSense for Search deal.

Lindsay's take is quite believable. Google has propped up MySpace financials in recent years with $900 million in guaranteed revenue through 2010 even though it has had trouble monetizing that inventory. The best move for Google may be to let a rival like Microsoft win a deal like MySpace.

There's a decent bit of evidence that Google is already being more selective. Time Warner indicated that it may buy Google's AOL stake back as the media giant plans to spin off AOL. And it's highly unlikely that Google will renew its MySpace deal on the previous terms, much to parent News Corp.'s chagrin.

Other odds and ends from Lindsay's research note:

An economic rebound in the second half will reverse negative trends in revenue per click rates. That rebound should give Google's fourth quarter revenue growth of 14 percent.

We believe that paid search is almost unique as an advertising format in that it has no formal contracts and is sold in a real-time electronic auction for search terms. As such, we believe that it will recover almost in real time as the economy improves --so much so that it will in many ways behave like a barometer of economic activity in key sectors such as automobiles and travel. The majority of display advertising does not have these same characteristics because it is sold by sales force and negotiating a new contract typically takes four to six weeks per client --generating a significant lag effect. As a result we think the rapid recovery will be almost unique to paid search businesses.

New CFO Patrick Pichette is bringing a new focus on expense control at Google and that discipline will translate into better profits.

Microsoft on Wednesday opened its PubCenter advertising service up for public beta testing, providing more of an alternative to Google's AdSense and Yahoo Publisher Network technology that places ads on publishers' sites.

All the services scrutinize the content on a Web site and place advertisements the service deems to be relevant to that content. As with ads on search sites, the advertiser pays only when a reader clicks on one of the ads, and revenue is shared with the publisher and the company operating the ad service.

Kevin McCabe, senior product manager of PubCenter, announced the move at the AdSpace conference Wednesday. People can sign up for the beta service at the PubCenter site, though it's only open to people in the United States at present.

Click-through rates on such services typically are far lower than for ads on search engines. But the technology still is significant, particularly during the recession, in part because advertisers can bid for keywords and limit their investments only to areas where they see a return.

Via LiveSide.net

People are constantly registering new Internet domains, and Google is trying to ensure a good chance its online services show up on the pristine Web real estate.

The company on Wednesday announced a collection called Google Services for Websites that people can put on their brand-new Internet domains even if they don't have lots of technical expertise.

The services let Web site operators add Google ads and two Google search tools, Site Search and Custom Search, using a control panel that Web-hosting companies can offer. The ads come through AdSense, which scans text on the Web site and presents what Google's algorithms determine to be the most relevant advertising, with the site operator and Google sharing any resulting revenue when people click on the ads.

It's smart for Google to try to hook impressionable new customers on its services as they arrive on the Net. And the company is offering incentives to Web hosting companies to offer the services beyond just the idea of helping customers do something useful with their site.

"Web hosters who participate can enroll in the Google Affiliate program which allows them to get referral fees for every customer who creates Google Site Search," said Nitin Mangtani and Dave Kim of Google's enterprise search team in a blog entry.

Google is joining a $5.75 million investment round in Pixazza, a start-up that hopes to profit by overlaying photos on the Web with links that let people buy the products in the images.

The Mountain View, Calif.-based company is now launching the technology for general use by advertisers, Web publishers, and the network of self-appointed but screened specialists who identify the products in the photos, said Chief Executive Bob Lisbonne. The company is starting with the apparel industry but plans to expand to home design and furnishings, travel, electronics, and sports starting later this year, he said.

Pixazza overlays shopping tags on photos; hovering over them with a mouse shows merchants selling those products or ones that are related. (Click to enlarge.)

(Credit: screenshot by Stephen Shankland/CNET)

Lisbonne likens Pixazza's technology to a photo-based version of Google's AdSense, which analyzes text on publishers' Web sites and displays what it deems to be relevant ads. AdSense is used widely by publishers to generate income from their Web sites without having to hire an advertising sales force.

Given the similarity to AdSense, perhaps it's not a surprise the search giant responded when Pixazza sought funding. Google employees have been spotted with Google Ventures name tags, but it's not clear whether the Pixazza funding is part of that project. Google is cagey about Google Ventures: "This is a project we're working on, but we're not ready to share any details right now," spokesman Andrew Pederson said.

Other investors in the round include August Capital and CMEA Capital, the company said. Individuals who've funded the company include angel investor Ron Conway, former eBay Chief Operating Officer Maynard Webb, and Facebook Chief Financial Officer Gideon Yu, the company said.

The company will use the funds for research and development and for sales and marketing, Lisbonne said.

Lisbonne and Chief Technology Officer James Everingham have deep Internet roots. Both worked at browser pioneer Netscape Communications, and Everingham recruited more from that background for the company's technology team. Everingham also was CTO of LiveOps, a company that offered call center technology with a network of more than 20,000 independent remote operators handling the phone calls.

Crowdsourcing for profit
Pixazza employs fewer than 20 people right now, but as with LiveOps, its business is designed to expand with the cooperation of many people who aren't actually employees. Pixazza is using a vogue concept called crowdsourcing in which a company benefits from often small amounts of labor contributed by the enormous quantity of people who can be enlisted over the Internet.

In Pixazza's case, people can sign up to tag photos that show on the Web sites of publishers using the Pixazza technology. Initially they can't add tags or take other actions without approval, but those who prove themselves adept gradually gain more privileges.

Why bother trying to figure out which purse, sunglasses, or patent leather high-heel sandals some celebrity is adorned with? Money is one incentive.

When a person views a photo, clicks a tag, goes to an advertising merchant's site that sells a product, and buys it, that advertiser pays a share of the revenue to the person who tagged the photo, to Pixazza, and to the Web publisher.

Thus the appeal to Web publishers, Lisbonne argues.

"This is an effective way to generate incremental income. They can do that without any additional screen real estate," he said. Added Everingham, the necessary JavaScript code publishers must add to their Web sites slows down page-loading speeds only by about a fifth of a second.

Pixazza has been beta testing the technology since this fall. Publishers who've been testing the technology include LaineyGossip.com and I'm Not Obsessed. Participating advertisers include Zappos, Bluefly, Eluxury.com, Shopbot.com, Overstock.com, and Macy's. So far the company has an inventory of more than 2 million items.

The company will expand beyond apparel starting later this year, Lisbonne said. Apparel and fashion is "a category in which there's a large number of e-commerce merchants in place and where there are hundreds of relevant Web site publishers we can approach," he said. "It's a straightforward place to get started."

Pay for play?
As Google has shown through AdSense and AdWords, which shows ads next to search results, there's money to be made in determining exactly whose ads get shown next to products.

Pixazza has its own strategy to let advertisers spend money to make money. They can offer more money or other incentives to the crowds tagging the photos, Everingham said.

"If I'm a crowdsourcer and see 10 different versions of the same product, and I see one (advertiser) pays a higher commission for me to choose, not only the publisher, but the crowdsourcer will make more money," Everingham said. "We want to keep everybody in alignment."

Google is testing expandable ads that take up greater real estate when clicked on by site visitors.

(Credit: Google.com)

Google is expanding its AdSense program--literally.

The Web search giant announced Wednesday in a blog post that it is pitching advertisers on the use of expandable ad units, those adverts that start out as banners or square ads and launch larger ads that cover much of the Web site's content. However, Google says that unlike the most annoying variety, these expandable ads won't enlarge on their own or with a simple mouse-over; users will have to click on the smaller ad to get the larger ad.

Many users may find expandable ads annoying, but as Google points out, the format could be valuable to both advertisers and customers when used to show movie trailers, video game clips, or other images that require greater emphasis on detail.

Google said that advertisers are automatically eligible to use the expandable ads if they have added AdSense code to their site's source code and enabled image ads. Google also noted that the program is currently available only to specific advertisers in the U.S. that can bid on specific ad placement.

Google reminded advertisers that earnings will be based on whether they use cost-per-click ads (CPC) or cost-per-thousand-impressions (CPM) ads. CPC expandable ads will generate earnings when a user clicks through to the advertiser's landing page--not when a user simply clicks to expand the ad. Google has created an FAQ page with more information for advertisers.

The expandable ads aren't likely to make a Google earnings skyrocket, but because they require user interaction to expand, they also aren't likely to create animosity from consumers.

AdSense for mobile search lets others use Google's search engine, sharing the branding and the ad revenue.

(Credit: Google)

Continuing its effort to stake out turf in a fast-growing area, Google on Tuesday announced the ability of mobile phones to show Google-supplied advertisements through a program called AdSense for mobile search.

Google sells ads next to its own search results through a service called AdWords, but the newer development involves a separate service called AdSense that lets publishers show Google-administered ads on their own sites. Google launched AdSense for mobile phones in 2007, but now it's seeking testers for a hybrid offering that involves others using Google's own search engine.

With it, mobile phone makers or mobile network operators can use Google's search engine and search results, sharing in revenue that comes from the accompanying search ads, Yury Pinsky, product manager of Google's mobile team, said in a blog post Tuesday.

The search can be co-branded with others' Web sites, Google said, implying the company is willing to share but not to let its brand vanish altogether.

Google dominates search for computers, but the company and rivals such as Microsoft and Google are scrambling to stake claims in the mobile market, where increasingly sophisticated phones and networks now permit correspondingly better Web browsing. It's a major new area of growth for advertising companies.

Yahoo has thrown in the towel in Europe for Content Match, an advertising partnership program that let people put Yahoo-selected ads on their Web sites.

"Yahoo Europe is closing Content Match as we do not wish to invest further resources in developing this product," Yahoo said in a statement Wednesday. "We have other products which, in the current climate, are attracting a growing proportion of advertiser spend and we would like to focus our efforts on these. These include Sponsored Search and Display, including Direct Response solutions."

Content Match competes directly with Google's AdSense program. In both cases, the companies share the ad revenue with the publishers. Using such programs has become a way for bloggers to make some money off their sites--and also a way for people to try to game the system by.

Yahoo's European operation told partners the program would be shut down March 31. The U.S. Content Match program is not being shut down, Yahoo said in its statement.

(Via Search Engine Land.)

It will surprise no one that Google accounts for a lion's share of the ad server market. However, it may come as a shock that Microsoft holds only the equivalent of a lion's paw.

Attributor, a content-tracking company, analyzed ad server calls across 75 million domains in October. According to the data Attributor released this week, Google--through DoubleClick and AdSense--accounts for 56.5 percent market share.

Meanwhile, Microsoft's equivalent figure hovers at 3.8 percent. Yahoo came in behind Google with 9.7 percent. If Microsoft and Yahoo ever end up combining forces, they still wouldn't touch Google.

A server call, by the way, is the "moment when a Web site requests an ad to serve up to a user. The study examined whose ad code was on that page," according to AdAge.com.

Here is Attributor's breakdown of the ad server market, as of October.

(Credit: Attributor)

DoubleClick and AdSense are definitely playing to different markets, according to Attributor's figures. DoubleClick dominated with larger sites, while AdSense did so for smaller sites.

It's not all good news for Google, though. Back in Janary, when Attributor last took a look at ad server calls, Google's AdSense and DoubleClick accounted for 69.7 percent share. That's a drop of more than 13 points.

Google didn't lose out to Microsoft or Yahoo, though. They also lost share. Instead, Google lost little bits to a lot of other players, including AOL and Revenue Science. The latter shot into the top five with 6.7 percent market share in October.

Google has taken its popular Google Trends and launched a spin-off product called Google Insights for Search. Geared toward advertisers, it's a tool to track a particular search term's popularity across the Web and geographic regions of the world.

For Google, this can help boost advertiser confidence and potentially win its program some new converts who would've otherwise been skeptical regarding how effectively they could target an online ad campaign.

With Google Insights for Search, you can search for a term to track how much it's been googled over time, where on a "heat map" it's most popular, and what the top "related" and "rising" searches for the term are.

Results can also be filtered by geographic region, time frame, or category. Let's say you search for "spears," and most of the results on Google Insights for Search deal with some trashy pop star. But you happen to be the owner of a small business that creates replica medieval weapons, so that's not the sort of spears you're looking for. You can narrow your search down to a single field--"industries," say, or "recreation," and hope you see fewer instances of Britney and Jamie Lynn.

Here's another one: search for "spaghetti," and you'll get a lot of results about people seeking recipes. But narrow it down to the "lifestyles" category, and you'll see that most of the search results that Google Insights provides involve the Church of the Flying Spaghetti Monster.