There’s a reason Google did its “mother of all reorgs” last week into Alphabet (we love the URL), and it is all the turmoil in the advertising business. Desktop search is over, and display ads have been replaced by mobile video and native advertising. Other than by being the biggest server of ads, how does Google play in a mobile video market on the scale to which it has previously become accustomed? And even if it could play, does anyone have any patience left for ads? One recent industry article opined that in this highly targeted era advertising, which was invented to reach a mass market, would probably go away.
Google wants to be the last man standing if that happens. In search, Google has a slew of apps replacing it on mobile. In video, Facebook and other competitors are quickly arising to compete with YouTube. But even if Google had a chance to win in the current advertising environment, would it choose this arena in which to compete? Not if its motto is still “don’t be evil.”
In the past couple of years, advertising has metastasized from a benign presence that consumers tolerated in exchange for free content to a toxic hypergrowth of bots, fraudulent impressions, spam, malware, takeovers, trackers, and retargeters. It is so universally hated by the audiences brands want to reach that 25% of users in the US and closer to 40% in Europe are now running ad blocking software.
Last year such software cost the publishing industry $22 billion in lost revenue, according to a study by Adobe and Page Fair, a startup that, to oversimplify things, blocks the ad blockers. Things will continue to get worse for the next little while, too, until the ad industry and the publishers make peace with their audiences by ceasing to run poorly targeted, poorly created ads that slow down page loads and threaten the user experience. When you can run Ghostery on a major newspaper site and see two dozen ad trackers on any given page, you can be sure the audience has been driven away.
Many different initiatives, from the Electronic Frontier Foundation’s Do Not Track program to educate consumers on how to use the DNT option already in most browsers to the Trustworthy Accountability Group’s industrywide effort to clean up the advertising supply chain, have begun to take hold. On a parallel path is the IAB and MRC effort to educate advertisers on buying for viewability, which has also gained momentum this year.
Google’s founders, Larry Page and Sergey Brin, both of whom are still active in the company, do not want to stand by and watch the spitting match taking place among all the stakeholders in the online advertising market. They’d rather skate to where the puck is going — self-driving cars, life extension programs, the Internet of Things. At present, these things may not be as lucrative as advertising, but they’re a very good bet for Alphabet’s future.