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Google Set To Expand Newspaper Ad Program

By Sara Kehaulani Goo
Washington Post Staff Writer
Wednesday, December 27, 2006

For some of the nation's newspapers, Google's offer was too good to pass up.

This fall, the search-engine company proposed to show how it could help newspapers sell print advertising to the hundreds of thousands of small merchants who buy Internet ads from Google. Advertisers would go online and bid on the excess ad inventory of daily newspapers, giving them a much-needed revenue boost.

Now, two months into a test with 100 advertisers and 66 newspapers, Google executives say that its pilot program has exceeded their expectations and that they will roll out an expanded version in the coming months. The top five participating newspapers are getting several bids a week from advertisers, the company said.

"The volume [of ads sold] is tripling where we thought it would be," said Tom Phillips, director of print ads at Google. "I think we'll have real impact next year" on newspapers' bottom lines, he said. "We open the medium to a whole new class of advertisers."

But to hear newspaper executives and analysts tell it, the outlook is more cautious. They said Google has brought in new advertisers, such as small companies outside their distribution areas looking to build more awareness for their products. But Google's online ad technology is so new that it remains unclear how much it will help newspapers, they said.

Todd Haskell, vice president of business development at the New York Times Co., which is participating, said that the product has the potential to drum up new business from small advertisers but that the Times does not foresee letting go of its direct relationships with its largest advertisers.

"We think it's a wonderful way to introduce advertisers to the New York Times and print overall," Haskell said. Once the program gets going, he added, "we'd look to up-sell and migrate those [smaller advertisers] to bigger programs and better positions [in the paper] and move them out of the Google system. And we've been very upfront with Google about that."

Google's newspaper project is part of its larger effort to transform advertising in traditional media. The company has launched a similar test selling ads on dozens of radio stations across the country. It also has experimented with ad sales for magazines, though after a couple of unsuccessful tries, the company indicated that the program was on the back burner. Google is also interested in selling TV ads.

In some ways, what Google is trying to do is similar to what other ad brokers and agencies have done for years -- buy unsold ad space in newspapers and resell it to last-minute buyers. In the newspaper experiment, for example, Google is selling only small display ads -- not color or full-page ads, which bring in the most money. In some cases, Google bundles a few small ads into one larger space. There is no indication to the reader that Google helped place the ad.

What differentiates Google is its large network of online advertisers, many of which have never purchased a newspaper ad but will be able to soon with one click. Most newspapers' ad sales teams have focused on their biggest and highest-paying customers in recent years, and Google's experience suggests that small advertisers could prove valuable, too, if their volume is high enough.

"Newspapers have priced a lot of small advertisers out of the newspaper," said John Morton, a newspaper industry analyst. Google's plan "might be a way to bring them in," he said. "But it's early. We just don't know how much or for sure whether it's going to work."

Google's online system allows advertisers to choose the newspaper and the section, such as Food or Sports or Business, and where they want the ad to run, and then place a bid for that space for a particular day or series of days. The newspaper reviews the bids online and decides which, if any, to accept.

Ed Peterson, executive vice president of sales and marketing for Intelius, a Web company in Bellevue, Wash., said his firm is placing ads through the program and has been pleased with the results. The company, which offers background checks for companies and consumers, has grown its business primarily using online advertising with Google. It sees newspapers as a way to expand further.

"They've taken the print world and allowed us to manage it in an Internet way," Peterson said. His firm is running several ads a week in the Seattle Times, the Chicago Tribune, the San Jose Mercury News and the New York Times. It is planning to run ads in The Washington Post, which also is participating.

The tricky part, he said, is that it has been a little more difficult to gauge the effectiveness of newspaper ads than Internet ads, which invite people to click on them. "The great thing about the online world is you know immediately" how effective your ad is, Peterson said. But since the newspaper ads have run, he said, Intelius's call volume has gone up and its Web site visitors are buying more frequently. "For us, that points to effectiveness," he said. "You can do some basic math, and you can point to: 'I ran this ad in this region on this day, and how do our numbers look?' -- those kinds of things."

Google's test concludes at the end of January. After that, participating newspapers and Google will refine the program and decide how to go forward.

Owen Youngman, vice president of development at the Chicago Tribune, said Google's experiment has brought several new advertisers to his newspaper, although a few other Tribune Co.-owned papers haven't seen as much activity.

"We've been viewing it as a vehicle for small advertisers," Youngman said, calling it "an interesting research and development project."

For now, Google is taking no commission for brokering ad sales, though it intends to do so later. Such finer points of how a business relationship might work between newspapers and Google have yet to be worked out.

The participating newspapers and Google "have deferred the complicated negotiations," Youngman said.

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