May 31, 2006 11:34 pm

Google looks at moving into ‘branded’ ads

Google is studying ways to enter the online display, or ‘branded’, advertising business as part of a push into potentially big new online markets, and hopes to launch its first experiments in the area over the next year, company executives said on Wednesday.

However, they added that some major new forms of online advertising, such as video, were likely to take considerable time to develop, as the company looks to build on some of the characteristics of its search-based advertising, such as being able to target ads narrowly and measure response rates. Also, early efforts to place adverts into print magazines had proved disappointing, they added.

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The discussion of the internet search company’s advertising plans came as Google executives held an unusual conference call with Wall Street analysts. Arranged so that analysts could put questions directly to the company’s senior management, it marked the latest sign of Google’s efforts to overcome an early reputation for arrogance and a disregard for shareholders.

Eric Schmidt, chief executive, used the call to dismiss suggestions that Google would consider acquisitions as a way to build its ‘traffic’ online, but said that it expected to seal more alliances with other websites, echoing the partnership reached late last year with AOL. Talk of mergers or alliances among the big internet companies has been rife, fed in part by the announcement by Yahoo last week of a broad partnership with Ebay.

Google hopes to sell online display advertising over the next year, Mr Schmidt said, though he added that the company still had a long way to go to develop an effective system.

“There’s demand for branded advertising product in every country and in every market and from every kind of customer,” Mr Schmidt said. “It’s a question of whether our system, which is so highly measurable, can really handle that . . . We have not yet come up with an approach that meets the kind of measurable . . . based advertising that we’d really like to put our brand and our name behind.”

While Google is almost wholly dependent on the keyword advertising linked to its search engine, branded advertising is estimated to account for about half of Yahoo’s marketing services income.

The Google CEO also said that video ads, and eventually a move into TV advertising, were likely to take some time to develop as the company tries out different models to find the most effective approach.

“My prediction here is that it will be multiple strategies, multiple attempts before we find the exact combinaton,” said Mr Schmidt. “My guess is that for each of these new major media initiatives we will have a few cycles of trying to find the right combination of advertiser product, targeting product, and business model and partner model that really takes off.”

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