The Bankwatch

Tracking the consumer evolution of financial services

Google – can I count on you ?

I have always been skeptical about online advertising.  I avoid it like the plague, and while I recognise I may not be the average, I also know I may be the view of things to come. 

Google Analyst: “Worst Economic Environment In Our Collective Lifetimes” | Techcrunch

Google’s stock price closed yesterday at $291, the first time it has dropped below $300 since 2005. It’s 44% off of its 52-week high of $725. Most analysts think its cheap and getting cheaper – the average price target is still over $500. Former analyst Henry Blodget, however, thinks it could fall to $200 (I prefer the bullish version of Blodget myself).

I have been skeptical about advertising as a model online.  It feels to me like a square peg pressed into a round hole.

The data suggests Google may be less powerful that people thought – June 2007

The perversity of online advertising

Internet advertising – gaps in the advertising model

Relevance to Bankwatch (and startups):

Austin Hill made this classic statement today at StartupEmpire

“Advertising is not a business model”

Enough said.  Its a great way to attract revenue, as you adjust, dip and dive through the competition, but its not a business model.  Business models require paying customers – period.

PS – I live and die by Google – I love them – I pay for Google Apps.  But their advertising is irrelevant to me. I worry if they will be there for me 😦

Written by Colin Henderson

November 13, 2008 at 23:38

Posted in economy, Marketing

6 Responses

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  1. i agree that advertising should not be how you intend to make money. i am a firm beliver of selling a product or service. preferably both. too many people lose faith in a startup because their adsense doesn’t make them enough money to cover their development cost (software).

    sir slur

    November 14, 2008 at 07:08

  2. I said this 9 years ago about the dot com boom, and I think it’s just as relevant today: For all these start-ups to succeed, online advertising will have to account for a greater percentage of GNP than financial services and healthcare — combined.

    Ron Shevlin

    November 14, 2008 at 09:32

  3. I think that if you asked Google they wouldn’t say their product is advertising. Their product is search. They’ve just found a way to make money off of adwords and the like, but the service they provide is the search itself. It so happens that they’ve stumbled on a way to generate substantial amounts of revenue from contextual ads — which is not the same thing as traditional web advertising, obviously — which lets them subsidize their other offerings. I think they could easily go to a more overt freemium model for their online services like gmail or google docs, which presumably would satisfy the idea of a more traditional business model, but they don’t have to.

    I share your opinion of online advertising, but as you said, we’re not the norm. There’s a difference between “appeals to you” and “appeals to the masses.” This is the only possible way I can rationalize the existence of reality TV and Miley Cyrus.

    Dan Dickinson

    November 14, 2008 at 09:45

  4. Google has paying customers, all the clients that pay for their ads to be shown.

    Advertising by using Google’s text ads is much more effective then most other ways to advertise on the net.

    And I agree with Dan – Google’s product is search and by offering highly relevant search results they offer an attractive environment for advertising.
    Wether they will be around in a few years depends on if they continue to offer the best user experience in search.


    November 14, 2008 at 10:08

  5. @Dan … thats it. We can’t account for the masses, the ‘miley cyrus’ stuff.
    I remain curious though whether the cyrus people are actually making purchases after they click. Is there a boomerang effect if [huge if] it turns out people are clicking and not buying.


    November 14, 2008 at 23:34

  6. Colin,

    Sure, lots of people click and don’t buy, but I don’t imagine it’s any bigger a percentage than the similar numbers generated by ‘traditional’ marketing.

    Dan Dickinson

    November 17, 2008 at 11:06

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