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Understanding Google’s Advertising Problem

March 25, 2017

“Why does Rice play Texas?”

President John F. Kennedy, the “Moon Speech” Sept. 12, 1962

If you’ve been aghast at the reporting on Google’s advertising problem, it’s important to distinguish which is more shocking–that they did it, that they got caught, or that anyone thought it serious enough to report on.  Because it is an entirely predictable problem.

We wrote about the problem on MTP starting around 2012 or so with our coverage of the beginning of “programmatic trading” (“A New Meaning for Real Time Bidding: An artist’s guide to how the brands and ad agencies profit from advertising supported piracy“) with a link to this graphic from Advertising Perspectives post titled “Are Ad Exchanges and Real Time Bidding the Next Big Thing” (http://www.advertisingperspectives.com/adblog/media-technology/are-ad-exchanges-and-real-time-bidding-the-next-big-thing/).  The 2017 answer to that rhetorical question asked five years ago is obviously “yes”:

 

The issue for Google is that ads are served to users and not to the websites that share the revenue.  As the Wall Street Journal reported today:

When marketers or advertising agencies buy ads from Google and other online ad providers, those ads are typically targeted to people with certain interests or demographic profiles. In other words, they are buying a target audience, not space on particular websites. It is up to Google to target ads at the desired people. Even when ads appear on sites and videos marketers don’t want to be associated with, there’s every chance they’ve been delivered to people matching the desired profile.

The problem for ad networks utilizing this method is that when it comes to advertising, the context is everything.  (That’s why hundreds of the biggest brands in the world are bailing on YouTube.)

Just because you can target the audience doesn’t give much value if the context is wrong.  Even though the brand may not technically be buying space on particular websites, Google is serving the ad to an ad publisher which is why ads for certain goods seem to follow you around from site to site in Google’s vast network.  (Which is also how Google knows who to share the revenue with.)

In the case of YouTube, Google is serving the ad to itself through its own network–so Google has about as much control over the context as it seems likely anyone could have.

Yet Google is telling brands (and everyone else who will listen) that it’s just too hard to deliver both targeted users and acceptable context.  So is everyone just supposed to give up and let Google make the money because winning is hard and Google has a monopoly on digital advertising?

Why does Rice play Texas?

(by Chris Castle)

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