Google’s One-Two Punch

A new Interactive Local Media Advisory looks at Google’s moves over the past week to continue its march toward becoming a one-stop shop advertising powerhouse across all media. They include of course the massive DoubleClick acquisition and the deal with Clear Channel.

The paid search market where Google hangs its giant hat is maturing. Like any maturing industry where overall revenue growth begins to slow, it increasingly becomes a zero sum game where growth must come from shifting market share among competitors. This effect is compounded in the SEM world by the newly launched and quickly developing Microsoft adCenter and Yahoo! Panama. And rising SEM prices across the industry will drive many advertisers away from PPC and toward investment SEO and organic traffic generation (Citysearch’s acquisition of Insider Pages is an example). Data from TKG’s annual forecast support this.

Not wanting these factors to weigh too heavily on its overall performance, Google continues to diversify by entering new playing fields. This is partly driven by the company’s burden of having to sustain steep revenue growth in order to maintain and justify its orbital valuation (although this isn’t deserving of pity, as far as burdens go). The company today announced first-quarter earnings results in which revenues and profit showed strong quarterly growth at 63 percent and 69 percent, respectively (more from ClickZ).

The moves over the past week are clearly in line with Google’s long-term diversification plan and a need to appeal to a wider segment of advertisers, both online and off. Beyond diversification, capability across all ad formats and media will create synergies, cross selling opportunities and economies of scale. We see no end in sight for Google’s continued moves into various ad formats, across various media (a focus on versatile formats being key, as Matt Booth pointed out earlier in the week. The trick will be for Google to avoid antitrust scrutiny, which has already begun to happen, pushed by (ironically) Microsoft.

Monday’s announcement covers radio; Google has begun to blaze a path in newspapers; and display advertising from DoubleClick will sit under all of these efforts and serve as a bridge to bring in more national advertisers that are interested in display ads (Yahoo!’s territory), online and off. What’s the next big area of development for Google? Television. Stay tuned for that.

A deeper analysis is in the Advisory, and in next week’s Local Media Journal.

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