Google Increases Profits

When Google announced recently that its last financial quarter profits had surged upwards by 18%, many commentators – and even Google CEO Eric Schmidt – used this as an indication that the end of the recession was in sight. And so it now appears to be.

However, equating Google’s profits – and an increase in its revenue – with a fresh willingness to spend seems to be to regard Google and its customer base in the light of traditional companies and industries. Google is neither a manufacturer nor a service provider in the normal sense. It is really a facilitator. Its increased revenue stems from its core business, which is to bring prospects and sales functions together. As more people use search engines – and Google in particular – as their first step to research on the road to purchase, it is only to be expected that savvy companies and business owners make sure their products and services are easily discovered. That means more businesses invest in AdWords campaigns and SEO. That, in turn, means more revenue for Google.

Whether in recession or not, this is increasingly the pattern of behaviour that drives business. Off-line or on-line. Using the web is cost-effective compared to more traditional forms of marketing, so it is inevitable that a recession drives smart businesses to look at their marketing budgets and ensure they’re getting bang for their buck. Once companies see the success of on-line marketing affecting their bottom line, they’ll continue to spend with Google.

How are you planning to use the web for marketing?

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A piece in this morning’s FT reports that the internet rather than TV is now “the UK’s largest advertising medium”. The underlying data comes from a PwC report commissioned by the Internet Advertising Bureau.

Much of the FT’s report is concerned with whether lumping together paid search, email, and display ads is a fair way to measure but the key thing to note is really why the web is now the advertising medium of choice. One sentence in the report comes close to nailing it:

Online advertisers are able to discern more precisely than from other media how many people have seen a commercial and whether they have made an immediate purchase.

Advertisers are notoriously cagey about the metrics of ad campaigns, so the web’s transparency is a welcome change for most marketing departments. And yet, no level of transparency could compensate if there was no traffic. What’s important for businesses is that web users are expecting ads and choosing to respond when they want to. Instead of interruptions – as in a TV ad – web users are served ads that complement their browsing and searches.

This is such a huge difference. Look at the nature of web ads: the most successful (Google AdWords ads) are simply lines of text. It is the context rather than the content that defines successful web advertising and this is at the heart of why small businesses must develop a web presence that engages with their potential customers.

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