Today, Google announced that it will start using its advertising technology on EchoStar's Dish Network. The deal with the Dish Network will enable Google to take a piece of the $70 billion television advertising market. Google's revolutionary advertising technology enables the advertiser to either choose a network and time of day to advertise or allow the Google system to target specific demographic and geographic categories through its advanced software. Google's system is especially useful to advertisers because it is able to relay information about the number of ad viewers, time spent watching the ad, and other parameters. Thus, Google's entrance into the traditional television market is certainly noteworthy.
Google is an internet advertising behemoth, with a 65% revenue growth rate from 2005 to 2006 and profits in the billions. Its unique moneymaker is the auction system it uses to price its ads. The bidding process, coupled with Google's majority share of the search engine market, drive ad prices up to high levels on a constantly adjusted basis. As mentioned, its advanced software and targeting makes these prices worthwhile for advertisers.
Google's entrance in the television market foreshadows its ambitions to move into other more traditional media than the internet. Its entrance could change the face of advertising and TV marketing. The Nielsen ratings could languish as advertisers are able to get much more detailed, real information that could be crucial for a company's ad campaign. The improved targeting that is provided with Google's system has the potential to increase demand and marginal revenue curves, while keeping average total cost somewhere similar to previous levels. The targeting likely also reduces consumer search costs. If Google's TV service is effective and successful, it is possible, and perhaps likely, that it will find dominance in the TV market just as it has on the internet.
posted by Josh Bennett, Jeff Kerestes, and Charlotte Pool
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While the Google-Echostar Communications partnership will be useful for collecting data about advertising, it will only reveal a portion of the market. Dish Network, Echostar’s satellite TV provider, serves only one segment of the TV provider market. Because it uses satellite technology as opposed to cable, viewers may be more likely to live in rural areas. While they are able to access programming, they may not be able to access many of the products advertised on the Dish Network channels, defeating the whole purpose of the partnership. Thus, the data collected by Google is only relevant if the viewers watching the adverts are actually potential consumers of the featured products. In this article, the author mentions that Comcast and Time Warner, two cable TV providers, already work with Google for some of their online advertising. If Google is really going to make a difference in the advertising industry, then it must work more closely with these cable TV providers in addition to Echostar; this will be the only way to obtain a more accurate picture of the market as a whole.
Posted by Jessica Halper, Michael Ledwith, Drew Muir, Jake Carter-Lovejoy
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