Kevin Newcomb reported earlier on Google’s earnings announcement, adding to the never ending string of news from the Googleverse – most recently including the massive DoubleClick acquisition, and the Clear Channel radio ad distribution deal.
It’s interesting to note how Google continues to invest in extending its advertising reach to include more formats and mediums. It clearly wants to become a one stop shop for advertisers of all sizes and in all mediums.
The vast majority of its revenues still come from search and the company has received some scrutiny for its forays into these other media, as Kevin Newcomb pointed out (not to mention the antitrust scrutiny it is starting to face for its level of control in the advertising world).
Another way to look at this is a diversification move. Google’s bread and butter paid search market is maturing. And like any maturing industry where overall revenue growth begins to slow, it increasingly becomes a zero sum game where growth must come from shifting market share amongst competitors. This effect is compounded in the SEM world by competition from the newly launched and quickly developing Microsoft AdCenter and Yahoo! Panama.
Add to this, rising SEM prices across the industry that will arguably drive many advertisers away from PPC, and towards investment SEO and organic traffic generation. Citysearch’s acquisition of InsiderPages is an example of this trend, and data from The Kelsey Group’s annual forecast further support it.
So diversification is arguably necessary for Google to appeal to new segments of advertisers and maintain double-digit revenue growth to, in turn, maintain and justify its stratospheric valuation. The display ad capability brought by DoubleClick will allow it to reach this end and, interestingly, enter Yahoo!’s territory (a possible countershot for Panama entering the SEM arena). Beyond diversification, capability across all ad formats and mediums will create synergies, cross selling opportunities and economies of scale.
There is currently no end in sight for Google’s continued moves into various ad formats, across various media. CEO (and now chairman) Eric Schmidt confirmed this in the earnings announcement reported by ClickZ’s Kate Kaye today;
“Our core business is driving our success,” said Schmidt. The prowess of its search ad business, he added, “continues to let us take calculated risks in new markets…and extend our business to new platforms and formats.”
A deeper look at these moves is in the works for a possible SearchDay article next week. Stay tuned.