Google Confirms Plans To Put Display Ads On Google.com

The most pressing question for Google (GOOG) shareholders is what product will drive the company's next growth boom as the search product cycle ends. Most likely candidate? Not sexy mobile or video. Just boring old display ads.

Google has been serving display ads on other sites for years, and the DoubleClick acquisition will accelerate that effort. Third-party display ads will only make a small contribution to the bottom line, however (10-20 cents on the dollar). So the key question here has been whether Google would deign to put display ads on its own sites.

We've argued that a full load of display ads on Google.com could add $3-$4 billion in annual revenue. Many SAI readers considered this estimate too optimistic, and it might be, at least over the next couple of years. But $1-$2 billion seems easily achievable.

Most importantly, Google itself is now talking explicitly about display ads on Google.com. It will start small--placing display ads on, for example, image search results. But we imagine that display ads will gradually spread throughout Google.com over the next few years.

Here's Marissa Mayer (from Bloomberg, via John Battelle):

Matching graphical-display ads with image searches ``represents a large opportunity, and there's lot of potential for advertising revenue there,' Marissa Mayer, a Google vice president, told Bloomberg Radio today. At the same time, the company must ensure such ads don't drive users away, she said...

``We haven't found a proper way to monetize image search to date,'' said Mayer, who oversees search products. ``You may see us roll out an ads-image search in the future, but when we do you'll know that's because we found a way that ultimately enhances user happiness with the product.''

Google calculated in 2006 that it was giving up as much as $200 million a year by not including text advertisements with its image search results, and that figure has probably increased since, Mayer said. Trials showed that text ads drove people away from conducting image searches, and Google dropped that idea.

Display ads may work better with image searches because they seem more natural to people looking for pictures, Mayer said. While the company has done mock-ups of how it might present the ads, it hasn't tested them on users, she said....

``DoubleClick's strength in display advertising and their work in brand advertising we think ultimately may mean we'll have a better set of options in terms of image ads to run on image search,'' she said.

See Also:
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