Asking advertisers: What's the right amount to spend?
...Google is a $3 billion player in hyper-targeted ads via its business selling AdWords and AdSense. Also coincidentally, [CEO] Schmidt's stirring vision of the future in which technology drives economic liberation places Google more or less at the center of everything.
It's tempting to overstate the significance of all things Google, and it has been overstated, many times. We have seen much of this movie before -- the nearsighted geek outlining the technology-enabled, blue-skied future that's ineradicably linked with that geek's business. (Although it most plausibly starred Bill Gates, many other actors auditioned during the dot-com boom.) The thing about Schmidt and Google, though, is that Google's offerings actually -- how do you say this? -- work well. Old Media executives who didn't profess boredom at Schmidt's speech -- he's not the most dynamic performer, but this is a crucial part of the act -- expressed something like quiet terror.
Of course, entire established media and marketing forms don't disappear overnight. And there is a pretty big boneyard of once-dominant tech names ranging from Atari (ATAR ) to Wang Laboratories. Google is a product with zero switching costs; if a different and better search site comes up tomorrow, there's nothing stopping a mass consumer migration.
So Google isn't invincible, and the realistic fear isn't that TV and newspapers will vanish. The realistic fear is that ad dollars will shrink an additional 10% or 20% as their long-held value is assaulted by a worthy adversary. Google provides an automatic return-on-investment measure for a marketing world increasingly obsessed with ROI. If someone clicks on a company's link, it pays; if someone doesn't, the company doesn't. This comes as corporations are demanding better accountability for their massive ad spending.
At the conference, execs from some of the most traditional companies (who control some of the biggest marketing budgets) described big shifts away from traditional media. Wachovia (WB ) Chief Marketing Officer Jim Garrity said his research on ad effectiveness would sadden broadcast TV execs but gladden employees of Yahoo! (YHOO ) and -- yup -- Google. Joseph V. Tripodi, a good-humored old-school salesman, is Allstate's (ALL ) chief marketing officer. He told me Allstate's spending on "nontraditional media" -- from the Internet to sponsorships -- increased from 5% to 25% of its marketing budget in recent years.