Getting Vertical Key to Google’s Ad Success

Today, Google hosted an Industry Press Day at its New York offices, inviting mainstream and trade press to learn more about its efforts in five verticals: automotive, retail, financial services, entertainment & media, and healthcare. Several members of the SEW/ClickZ team were there, which made it possible for us to cover all five breakout sessions. See “Google’s Vertical Ad Honchos Talk Campaigns and Results” at ClickZ News for a wrap-up of what those sessions contained.

Tim Armstrong, president of advertising and commerce in North America, opened the event with a short history of Google’s industry-specific efforts, and the changing face of the online ad industry. He outlined three main factors that mark the new reality of Google’s ad model: the ability to market all products all the time, incorporating customer insights into marketing plans, and letting the economy drive ad efforts, instead of the other way around.

With performance-based pricing and more automated and dynamic ad creation, Google’s ad model has shifted from broad-based targeting to a model that harnesses consumer interest into small buckets. This fundamental change has allowed some advertisers to expand from advertising 8 to 10 products a year five years ago to more than 12,000 products today, Armstrong said.

The idea is to take an inventory of all of your company’s assets and create an “asset map.” When Google undertook this exercise internally, there was not a single person that could name all of Google’s consumer-facing offerings, he said. That’s how the company knew it was time to streamline its offering, and do a better job of articulating what was available to advertisers, he said.

Another key change in the industry is the idea of “letting customers into your meetings,” or using customer insight to drive marketing decisions instead of making decisions in a closed boardroom. Customers, through their search and other online behavior, can teach a marketer what features of a product are important, how they like to talk about a product, and how to connect with them, Armstrong said.

The third main change in Google’s advertising product strategy is the idea of letting the economy drive ad efforts, instead of the other way around. It’s what Armstrong calls “knowing the GDP (gross domestic product),” which involves localization of ads, and the creation of industry-specific ad programs. Back in 2000, Google created industry-specific ad sales teams at a time when naysayers thought they were over-investing in infrastructure.

That investment has paid off in spades, Armstrong said, with Google taking its place at the table with CEOs and CMOs, ad agencies, and other decision-makers in these industries that see search advertising as an integral part of their business model.

A typical ad cycle ten years ago might have consisted of blasting a message for six weeks, measuring and repeating. Today, campaigns are running all day, every day, creating an ecosystem that mimics what’s happening in the broader economy.

Advertisers are learning to be more open-ended with their ad budgets, letting customer behavior lead the way. For instance, instead of assuming that users might be interested in learning about a product during a certain six week period, an advertiser can let consumer actions – manifested through search behavior – show them when it’s the right time to push a certain product.

This is a key aspect of Google’s strategy, Armstrong told me afterwards. Since the goals of many advertisers are outside of the traditional direct response strength of text ads in search results, Google’s efforts to bring in more big brands include steering them toward ad units they are more comfortable with, such as video ads on YouTube or display ads on its content network, while stressing the new measurements and new levels of understanding afforded by search. In this way, advertisers can apply what happens in search to these other areas, improving their results across the board.

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