Google is planning profound changes to advertising model

16 Sep 2008

Google is understood to be planning major changes in how it delivers advertising, including alterations to its AdWords system, and also developing mobile ads customised to location and preference. New research suggests that advertising in the social media landscape could hit US$7.3bn in 2013.

As Google celebrates its 10th anniversary this month, the company’s search business encapsulates hundreds of thousands of advertisers with millions of products and services.

A crucial aspect of this is the company’s AdWords business, which endeavours to ensure correct ad placement according to keywords following a Google search, so that ads are delivered to the right audience in a timely and measurable way.

Google is making changes to its AdWords system in terms of how it calculates its Quality Score, and will calculate quality in real-time as a user performs a search.

Writing in a blog yesterday, the vice-president of product management at Google, Susan Wojcicki said that the company is moving to understand exactly what people are looking for, then giving them exactly the information they want.

“Timing is an important component. For example, when a person is looking for a specific item (like those table lamps I got a couple of weeks ago), the best ads will give more specific information, such as where to buy the item online and locally, along with other relevant information such as style, size, availability and pricing.

“Regardless of the timing, the best ads might include images, videos or other formats about products and services to provide the most relevant information to people to make their purchasing decision,” Wojcicki said.

She said that going forward, Google aims to customise ads based on factors like a person’s location or preference.“If you’re in a particular neighbourhood using your mobile phone to look for a specific type of restaurant or shop, ads from local vendors are likely to be very useful to you.”

Moving forward, Google will also be aiming to focus on simplifying the social web. Director of product management, Joe Krauss said that in the coming decade the web will become as effortless as chatting with family in the physical world.

“Social features will be embedded and around and through all variety of spaces and places on the web. Sometimes, you’ll go to a place because you want to see your friends, and sometimes the place you’re in will get better because you can bring your friends there. It will make it easier to strike up new relationships, new communities, new expressions of what your life is about. The web will connect people to the small moments that in many ways matter most.”

In related news, ad-funded social networks will provide the bulk of revenues in the mobile user-generated content (UGC) space by 2013, according to a new report from Juniper Research.

The report said that the total value of the UGC market – comprising social networking, dating and personal content delivery (PCD) services – will rise from nearly US$1.1bn in 2007 to more than US$7.3bn in 2013, with social networking overhauling dating to become the largest revenue-generating segment by 2009.

The report also notes the increasing importance played by advertising, which will account for nearly one third of total revenues in the UGC space by the end of the forecast period, and more than half of mobile social networking revenues.

“It’s clear that we have seen an industry-wide shift regarding the implementation of business models in this area,” said report author, Dr Windsor Holden.

“Whereas initially there was a perception that users would pay a small mobility premium to access social networks on their handsets, it rapidly became clear that to achieve truly mass adoption, it would be necessary to offer free membership and then to augment that with advertising and the sale of premium content.”

The Juniper report also observed that, while the iPhone had substantially increased public awareness of mobile content services, there was significant scope for improvement with regards to the marketing of such services within the industry as a whole. It also stressed the need for operators to reduce data costs outside of bundles to encourage casual use of social networking and dating services.

Juniper said the number of active users of mobile social networking sites is expected to rise from 54 million in 2008 to nearly 730 million in 2013.

The Far East and China region will be most popular in terms of mobile user numbers for mobile social networking and PCD throughout the forecast period, but the Indian subcontinent will become the largest region for mobile dating services by 2010.

There will be more than nine billion downloads from PCD sites by 2013, of which some 32pc will be ad-supported

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years