Google’s Awkward Tussle with Madison Avenue

/ Apr 10, 2013

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There’s an ironic moment happening right now in the digital video industry and it involves Google: the tech giant was going to revolutionize advertising and be autonomous from Madison Ave., but years later, that same company is now vying for their love money in a very traditional way. Whether Google wants to admit it or not, it needs the established ad industry going forward.

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In 2006 when Google purchased YouTube, much was made of Google transplanting its successful search-based advertising strategy onto the video sharing site. “[P]erfect match” printed TechCrunch at the time, with YouTube’s CEO Chad Hurley convinced Google’s ad platform would integrate “perfectly” onto the video site. Fortune senior editor David Kirkpatrick, who was originally skeptical of the idea that “the repeat-and-refine approach used for search ads could be extended to other media,” was eventually convinced it would work for YouTube. In fact, “Google’s managers now seem to believe they can do the same thing with print, radio and TV” wrote Kirkpatrick.

This lofty goal of democratising advertising was Google’s attempt at eschewing Madison Avenue and traditional media buyers, never mind that the traditional ad model has transcended every technological change — from print to radio to broadcast, digital, and now, mobile. Actually, it was less an eschewing and more of a big fat middle finger at the established ad industry.

So how did that work out for Google? Well, for starters, no big ad bucks equivalent to TV advertising have come Google’s way. It’s been more than five years since the purchase, and while Google will probably never admit their disappointment in the failed experiment, there are some very clear indicators all over the web.

The first indicator of Google’s failure to deliver on their advertising promise comes from the proliferation of networks like Machinima, Big Frame, and Maker Studios on YouTube who rely on Madison Ave ad types for their own ad rolls, not Google’s advertising. In fact, VEVO’s ad rates were already comparable to broadcast rates back in 2010.

The second indicator comes in the form of the $300+ million investment into premium content, which can be viewed as an olive branch to established ad agencies. Google has learned you can’t charge premium ad bucks for low quality content; Pepsi would rather advertise on a web series starring a mainstream celebrity than on a video of a dog on a skateboard, even if that dog on a skateboard has infinitely more views. Google needs to buff up its premium content not just to remain relevant but to make money, as brands want brand-safe spaces.

Third, if Google’s search-based advertising strategy was indeed working, why would Google bother trying to come up with a subscription model on YouTube? Subscriptions mean more money for content creators too, which then enables both the site and the creator to produce even higher quality content. I personally pay monthly for Hulu and Netflix because of the high quality content on there, but for YouTube with its content as it is now? I couldn’t justify it.

Fourth — which is really a continuation of the second and third point — is the trend of top YouTube celebrities actively trying to get their content off the video-sharing site, as all the riffraff brings down CPMs. There is a massive disparity between the premium content and the unprofessional, user-generated content (riffraff), which translates to CPMs being lowered for everyone across the board.

Being off YouTube also means these celebrities can charge higher ad rates on their own sites. (Google cynics say investing into Machinima may have been a preemptive strategy to protect itself should the top network move all its content off the site.)

Shows - Wonderly

The fifth and most telling proof of Google failing to deliver on its advertising strategy is, of course, their presence at the Digital Upfronts — or, the “Newfronts.” Years later, Google has come groveling back to media buyers, perhaps hoping Madison Avenue has forgotten Google’s bold claims about its search-based advertising model. They haven’t, though. Those in the know say they’d rather buy with Yahoo, AOL, and Hulu before they even consider Google; because those companies didn’t threaten to take their jobs five years ago. It remains to be seen if Google’s second year as a Newfront presenter will be enough of an apology.

The programming versus search debate will continue for years, but it’s not possible for Google to make a name for itself as a content provider and advertising giant without embracing old Hollywood and Madison Avenue’s media buyers. Embracing Madison Avenue might be a difficult task for Google, though, as it’ll require a cultural shift Google might not be capable of. Google is a hardware and tech company that loves its programmers, but judging by their treatment of their homegrown YouTube celebrities (or lack thereof), they don’t know how to manage or nurture creative talent.

They better figure it out soon (beyond outsourcing the problem to YouTube networks), and new products like Google Engage do show the tech giant is trying. Old Hollywood and Madison Avenue’s media buyers are evolving quickly though, and that window for big-dollar partnerships might close soon.

Here’s a fun infographic courtesy of Mashable on the History of Advertising on YouTube:

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