The latest players to see a fearsome competitor lurking behind Google's meteoric rise are publishers of tightly targeted magazines.
Earlier this month at the annual conference of business-to-business group American Business Media, Pat Kenealy, CEO of tech publisher IDG, warned attendees about a foe he believed was underestimated. Google, he noted, could notch $2 billion in advertising this year -- some analysts found this low -- and said that tech-related advertising made up around 10% of that total.
The killer advertising app for Google -- as well as its search competitors like Yahoo! -- is its AdWords service, which allows marketers to buy paid-link placement next to searches conducted around keywords they identify. Marketers use AdWords to reach consumers with tightly targeted messages as consumers seek tightly targeted information, which is a decent thumbnail description of business-to-business publishing's model.
Google does not break out what percentage of its ad revenue comes from paid search, but analysts and observers believe it accounts for the lion's share. David Hallerman, senior analyst at research firm eMarketer, projected paid search ad-related revenues will reach $3.2 billion in 2004. (A Google spokesman cited the "quiet period" before the company's planned IPO and said the company couldn't comment on advertising and competitive issues.) Google's own ad revenues, according to the prospectus for its initial public offering, rose 187% in 2003 to $916.6 million.
Some close observers of the media landscape say it's not just b-to-b publishers that face threats. "They are taking ad dollars away from b-to-b and consumer-magazine companies," said Reed Phillips, managing partner of media investment banker DeSilva & Phillips, and whose company advertises via AdWords.
Chicken Little pronuncements about how new media will magically make portions of established ones disappear are as old as radio, but in the specialized world of trade publishing there's at least some precedent for new technologies displacing modes of business. A staple of the trade publishing world, pre-Internet, were high-priced newsletters that justified their price tags by aggregating obscure content for highly specialized audiences. The Internet itself made it simple for those seeking such information to do that on their own, and such newsletters took a serious hit. And while the sky may not be falling, even those who insist targeted magazines are safe concede that search engines have significantly changed the playing field for information.
"Google has created a revenue stream from being the card catalog or the newsstand, not the magazine," Mr. Kenealy said. Those he addressed at the ABM convention "have spent less time than they should looking at what search does to the seeking and finding of specialized information."
Others see the matter more bluntly. "If Google can slice and dice [information]," said one b-to-b publishing executive, "and give highly qualified users to very targeted advertisers, then what do you need a trade publication for?"
This executive and others saw consumer-enthusiast titles -- those aimed at lovers of bicycles and knitting -- to be less at risk. These titles depend more on "image" advertising, which Google has yet to fully exploit. Two executives also said that such titles tend to offer more of an editorial personality than the average trade title, thus giving the reader, in one executive's view, "a much less information-only paradigm." But in the years-long ad downturn for magazines, it's hard enough to find big-name consumer titles that substantially increased editorial budgets, much less consumer enthusiast titles, which must typically keep a tighter hold on costs.
"One of the questions about [paid search advertising] is not will they have raw numbers, but will they wind up having results and response?" asked Jack Kliger, president-CEO of Hachette Filipacchi Media U.S., which publishes consumer enthusiast titles such as Boating and Popular Photography.
One former trade publishing executive, though, pointed out that paid-search links find consumers when they are seeking information to make a purchase, which may not be necessarily true if they're simply reading a magazine. "That is not the entire process of influencing a purchase -- there's still room for context," the executive conceded.
The bigger question, the executive added, was how much context was left in some tightly targeted magazines.