Google Tunes Ads to TV

EchoStar deal aside, Google's bungled attempt in the radio ad space still lingers.
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Add one more media market to the already-long list

Google

(GOOG) - Get Report

is going after.

On Tuesday, Google unveiled a new partnership with satellite television provider

EchoStar

(DISH) - Get Report

. The two companies will work on creating an automated system to buy, sell and deliver television ads over EchoStar's national network.

Google had been testing television ads with local cable companies, and the national deal with EchoStar marks a ratcheting up of the search giant's ambitions when it comes to that lucrative market.

Large advertisers spent $65.4 billion on TV ads in 2006, according to TNS Media Intelligence. And Google is hoping that the formula of automation and accountability that served it so well online will translate to a home run with TV as well.

"With Google TV ads, the entire process is automated -- from planning the campaign to uploading and serving the ad to reporting on its effectiveness," the company reportedly said in an email.

"Like our AdWords advertising program, Google TV ads are bought using an auction model and through a single online interface that is already familiar to agencies and advertisers," it said.

But Google will face a number of obstacles in attempting to replicate its Internet success on the tube. In fact, its foray into the television space may end up resembling its fumbled attempts to be a player in the radio advertising business more than anything.

And while the company is aiming for the ambitious goal of being a one-stop shop for all a marketer's needs, it is much more valuable in some media than in others.

Standard & Poor's analyst Scott Kessler sums up the sentiment of opportunity and skepticism that characterize Google's latest move. "We think this is an important development as Google pushes into more traditional media advertising, and we see significant opportunities for the company," he wrote in a research note Tuesday.

"However, we have been skeptical of Google's efforts in this area: For example, we do not think it has garnered much traction in the radio segment, despite notable initial interest and material company investment."

Indeed, Google's fumbled efforts in the radio advertising business could be more indicative of the road ahead in TV because the two media are similar -- and much different than online advertising.

For starters, Google cannot offer advertisers nearly as much transparency into user behavior on radio or TV as it does online. That's because there is no action users can take over those two media that replicates the click-through that characterize its online ad system.

Google's data may be helpful to advertisers -- it can, for example, let television advertisers understand which ad viewers tend to stay tuned until the show's end and put more money behind it -- but it cannot approach the value that Google offers online.

Tune In, Turn Off?

Meanwhile, Google's mantra of transparency, which is appealing to advertisers, could turn off broadcasters. As Google's struggle to find enough ad inventory to sell in radio illustrates, transparency can cut into the profit margins of a broadcaster. Newspapers have taken a similar stance.

Though newspapers will give the search giant scraps they cannot move themselves, they've been hesitant to turn over their prime real estate.

With online advertising, Google sells ads against its own search results and is therefore free to make the rules. But when it hopes to sell ads among content that another company owns, the situation gets trickier. Often the publisher stands to make less -- not more -- money because of Google's entrance into the market.

Though EchoStar will be opening up all of its spots to Google, other TV stations that command higher rates may be much more resistant.

Transparency into a viewer's behavior may also be unwelcome by television broadcasters. Ratings -- the current standard for pricing television ads -- underscore how wide a broadcaster's reach is and emphasize the power of the medium. Advertisers are told about how many million households they can reach by purchasing expensive TV spots.

It's unclear why broadcasters would want to present data showing how many viewers are actually changing the channel during the very spot that advertisers are paying for.

Google's aggressive bid to push into new advertising markets is understandable given its heavy reliance on search ads. And investors are likely to welcome any new streams of revenue.

But the company may be better off taking an incremental approach and focusing first on the new, tech-heavy markets that play to its strengths.

Slugging it out in mature markets such as TV, radio and print diverts resources from booming businesses such as video, mobile and rich graphic advertising. And while Google is pursuing the newer fields, it is hardly without competition.

Old media companies are attempting to

cut into video advertising,

Yahoo!

(YHOO)

is off to an impressive start

with mobile ads, and

Microsoft

(MSFT) - Get Report

is angling to be a player in the graphic space by

attempting to acquire DoubleClick.

Google is taking a step in the right direction by getting into new media markets. It just doesn't have to complete the journey overnight.