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The Honolulu Advertiser
Posted on: Tuesday, May 23, 2006

Video is next new thing in Google ads

By Michael Liedtke
Associated Press

The Mountain View, Calif., -based search- engine company hopes video will help it retain its lead over the competition.

Associated Press file photo

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SAN FRANCISCO Google Inc. will begin distributing online video ads for the first time this week, continuing the Internet search-engine leader's effort to diversify beyond the static written messages that generate most of its profits.

The video expansion, announced late yesterday, will affect thousands of Web sites that rely on Google to post ads related to the surrounding material on a page. For instance, a news story about housing might prompt Google to display an ad for real-estate agents.

Google isn't allowing the video ads to appear on its own Web site a heavily trafficked destination that produced 58 percent of its $2.25 billion in revenue during the first three months of this year.

Despite that restriction, Google's push into online video advertising represents a significant step for the Mountain View-based company as it explores new ways to propel its rapid earnings growth. Google began distributing graphical ads two years ago, and during the past year has been dabbling in print and radio marketing.

None of the new initiatives so far have paid off like the austere blurbs that Google has been distributing across the Web since 2001. Those commercial snippets, usually consisting of a sentence or two, have accounted for the bulk of the $13.6 billion in revenue that has poured into Google during the past 4 1/4 years.

Bolstered by Google's success so far, the company's stock price has more than quadrupled to create $90 billion in shareholder wealth since its August 2004 initial public offering.

Google's shares gained 93 cents yesterday to close at $370.95 on the Nasdaq Stock Market.

As consumers spend more time on the Internet at the expense of traditional media, major advertisers are becoming increasingly interested in building their brands on the Web.

Unlike small advertisers, large companies generally demand much more sophisticated marketing vehicles than the bland approach popularized by Google's text-based ads.

"A certain segment of advertisers have told us that they want richer and more engaging messaging capability," said Gokul Rajaram, product management director of Google's AdSense program.

The appeal of Google's video ads might be dampened by controls that will prevent the messages from automatically streaming across a Web page. Google instead will display graphics promoting video ads that won't be played unless a viewer clicks on a play button.

The activation feature could discourage many advertisers from signing up for the new video service, said Jupiter Research analyst David Card. "This isn't going to be a game changer for Google, but it gives them a much richer palette."

Google believes its format will lure advertisers looking to experiment with different videos for a relatively inexpensive price before deciding which clips should air on television, Rajaram said. The video ads distributed by Google can last for as long as two minutes.