What Is Google Doing To Improve Ad Revenue?

  • Google’s Neal Mohan presents some key themes pertaining to its ad network, and ad-model during the Credit Suisse Technology Conference.
  • Google has developed various methods to display ads to a legitimate audience.
  • Mohan mentioned that programmatic ad-buying is starting to impact higher value-ads, a positive development for Google.
  • Google is rolling out various services to improve the overall quality of banner/display ads.

Google's Neal Mohan  (VP of Display and Video Advertising) has his work cut out, given the increasing competition in online advertising. At the Credit Suisse Technology Conference, he went into much greater detail about Google’s strategy on monetizing ad-space with the best results possible for users, publishers, and advertisers in mind. Admittedly, the presentation doesn’t articulate everything in the context of advertisers, or the industry, but from the context of what Google (NASDAQ:GOOG) thinks about the concept of advertising and what it can do to deliver betters results for its ad-partners and publishers.

The company’s ad-network business is the second largest business in terms of Google revenue (See Figure 1), and it’s the biggest of all ad-networks in the world. The business has had trouble in the past fiscal year, due to factors like competition and the mix-shift of eyeballs to mobile over desktop and laptop. CPC trends (See Figure 2) saw some stabilization in Q3, as seen in Google's Q3 earnings presentation, and I can imagine that Q4 will be a great quarter for the company, as advertisers tend to be more aggressive with marketing during the holiday quarter.

Google Revenue Chart
Figure 1: Google revenue chart

Google CPC trend (Google Cost Per Click  Trend)
Figure 2: Google

During the technology conference, Neal Mohan went on to explain that Google is working on ensuring that much of the page views generated by its websites are from legitimate eyeballs. Curbing down fraud, across its network of websites improves the conversion rate for marketers, and gives better insight into what is working, and what’s not working as far as advertising goes.

Quoted from Google's presentation transcript on Seeking Alpha:

comScore had a recent study I think that said that about half the ads on the Internet are never actually seen by human being. With stuff like that nothing else matters and so it’s been an area of aggressive investment for us to solve that problem not just for Google but for the entire working with partners across the entire industry. And so couple of things there, we acquired a company called Spider.io a few months ago that has deep expertise in impression and view spam, we’re building those capabilities into our entire stack. And the idea there is ensuring that all of our inventory YouTube the inventory available on our Ad Exchange et cetera, is as clean and as fraud free as possible.

This is a fairly important capability to keep in mind, because the amount of revenue that marketers are able to generate is contingent upon Google’s ability to serve up ads to an actual audience. In this case, Google is working to ensure that much of the ad-inventory is actually legitimate, which keeps Google’s ad-network more relevant in the mind of marketers.

Also, it looks better in terms of actual conversion rates, which directly translates into a higher cost per thousand impressions. So even on the programmatic advertising front, advertisers are likely to experience a higher rate of actual impressions, even if the same audience doesn’t actually interact with the ad. This makes advertising on Google more effective, and it explains why Google’s ad-network generates much more ad-revenue when compared to other networks.

Quoted from SA Transcripts:

On the publisher side we’re also seeing great results one of the most interesting things that we’ve seen over the last 12 months is that programmatic is no longer the per view sort of performance advertising inventory or sort of “remnant inventory” it’s really moving up the spectrum into more premium inventory. For example the amount of transactions conducted programmatically on our Ad Exchange at CPMs greater than $5 grew something like I think 55% year-on-year last year those of CPMs greater than $10 grew 60% year-on-year.

Interestingly enough, Google mentions that programmatic buying of ad-inventory has increased, and it seems that advertisers are willing to pay higher prices over programmatic, versus direct sales of ad space. This indicates that even the pricier ad-inventory is being picked up by programmatic platforms.

Neal Mohan goes on to explain that SMBs will be a much bigger priority going forward, and is offering tools so smaller advertisers can create better looking display/banner ads. This puts Google in a stronger position competitively, because now it’s offering an end-to-end solution for advertisers, from creative, to networking, and analytics.

This Google stock analysis video has more information about Google, ranging from revenue growth and profitability, to segmental growth trends, stock valuations, and more. To add to this, Google contributor is trying out an ad free experience for a small fee which could turn out to be a potential revenue source. Currently, Amigobulls has a buy rating on Google. The fundamentals of the business are relatively sound, as there’s no bearish trend in terms of fundamental metrics.

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Comments on this article and GOOGL stock

umesh.kulkarni
bullish
Very interesting to read that the most important innovation needed is avoiding frauds!
1 reply
Do share this awesome post