What does Google get out of Google+?
To take several steps back, there are essentially two ways advertising networks like Google can sell online inventory: contextually and demographically.
Google have an incredible contextual advertising model in Adwords. A Google user searches for a keyword and they’re served an advert in the context of the information they are looking for. Contextual advertising is perfect for Google’s search results pages because it's extremely easy for advertisers to see the value. For Google, that market is huge but there’s little room for growth. There’s a finite number of search result pages they can monitize (although that finite number is in the billions) and there’s an upper ceiling to what advertisers will be willing to pay for clicks on search ads.
The downside of Google’s 90% search market share is that they have very little room to grow in the search ad market. To make more money from Adwords they either need to display adverts more prominently on search result pages so ads get more clicks, or they need to attract advertisers to spend more on mobile advertising, which is the largest growth area in search (more on this later). Market growth in developing countries is years away from providing a profitable ad industry for Google to grow into.
So for Google to continue growing and satisfying the demands of their shareholders they need to grow their non-search advertising network, the “Google Display Network” – these are adverts served by Google which appear on publisher sites all over the internet. Google have millions of sites on their display network, but much of this advertising inventory remains unsold. Google need to make the display network more valuable for its advertisers and that’s a real challenge. Online display advertising is almost as old as the web itself but it's notoriously ineffective. Web users have learnt to ignore display ads (aka banner ads) on websites and even if they notice an advert, they’re rarely click on it, meaning Google ads, which are traditionally sold on a “cost per click” basis, are only performing at a fraction of their earning potential.
Much like TV or outdoor advertising then, the main purpose of display advertising is to build brand awareness. The likes of Coca Cola don’t advertise on prime-time TV in the hope people will see the ad and visit their website or immediately rush out and buy a can of Coke. They advertise to reinforce their brand so when you’re in the supermarket wondering whether to buy Coke or Pepsi, you go for the Coke. Super-brands like Coke have the deepest pockets for brand advertising, but they also have the least need for Google’s core Adwords product because they’re rarely interested in driving website traffic – after all, when was the last time you went to Google and said:
"I’m thirsty, I’ll Google 'Carbonated soft drinks' and buy a can of something online."
Google need a product they can sell to this type of advertiser, but historically their display network has failed to attract brand advertisers because Google have used contextual targeting for display ads in the same way they do search ads. So for example if you’re reading an article about a car you might see adverts for car dealers or if you’re reading a travel article you might get ads from hotel reservation websites.
So how do Google make their display network more appealing to those big brand advertisers with the million dollar budgets for running banner ads?
Moving away from context and towards demographic targeting
For Coca-Cola, online advertising isn’t so much about where their ads appear but rather to whom they’re shown.
Campaigns are based around key demographic audiences like “18-25 males”, “sports fans”, “mums”.
The old-fashioned way of buying media, both online and offline, is to reach your key demographics by targeting advertising at the media you know they’re interested in. So you see beer adverts during the football and ads for makeup in the pages of gossip magazines. That kind of audience segmentation is fine on what is a relatively small scale like print and TV, but how do you scale it up to a million websites all with different niche audiences and content? This is the challenge Google face.
The solution is actually quite simple. Instead of targeting advertising at the media and trying to work out what sort of people are going to be interested in this sort of content, insteadyou target advertising at the individual user. That way if I’m an 18-25 male you can show me beer adverts wherever I am online, that might be the sort of place you’d expect me to hang out online like a car website, FHM.com or Sky Sports news but it could just as easily be somewhere you wouldn’t expect to find me online like a parenting forum or somewhere where everybody goes, like Facebook or Twitter.
As more media moves online, it becomes harder for advertisers to reach their audiences by second-guessing their media consumption and behaviour.
This is the core value of Facebook (and to some extent Twitter’s) business model and the reason their platform is valued in the billions. When you join Facebook you give away all that juicy demographic information which advertisers want to know. Age, gender, marital status, sexuality, interests – Facebook lets advertisers reach the exact demographic they want by filtering who see’s their adverts using information from their public profiles. The catch is that Facebook only has one website and their adverts aren’t particularly prominent or effective, but if you were to combine the demographic targeting potential of Facebook’s ad platform with the flexible ad formats and millions of websites on Google’s Display Network then you’ve got a brand advertisers dream formula. Striking visual ads, shown only to the exact demographic they were designed for, and with a virtually unlimited inventory of sites to advertise on.
So where does Google+ come into this?
I’m guessing you’ve probably already figured this out. When you sign up to Google+ and fill out your profile you give Google all that sweet demographic information they so desperately crave.
Whether you use Google+ as a social network or not really isn’t especially important to Google. When they launched the platform most people assumed the goal was to sell advertising on Google+ pages and that will almost certainly happen as time goes on but honestly, would Google really have invested so heavily in Google+ just to get some extra page views? Why bother when they have the Google Display Network which already has all the advertising space they could ever sell. And if they actually wanted you to use Google+, don’t you think they might of tried a little harder to make it a stand out product rather than just a stupid Facebook clone?
If you want to see how committed Google really are to social networking just checkout their own social media activity. This thread on the official Googleplus Google+ account about the release of vanity URL’s got hundreds of responses –
Did anyone from Google+ bother to reply to anyone? Of course not. Google+ is not a social network, it’s a demographic research tool.
I actually like a few of the features of Google+, but the reality which anyone could have seen as soon as it launched is that Google were never going to lure Facebook users over to Google+ as their main platform without offering something different. The core metric for the success of Google+ then is not how much it's being used, but how many people have signed up and logged in.
But I hear you cry, if people aren’t using Google Plus as a social network then they won’t login, and if they don’t login how do Google use their profiles to direct ads at them?
While it would probably be easier for Google if people did use Google Plus as a social network, it's not essential. There’s plenty of other ways Google can get you to sign into your Google+ account and that’s what we’re starting to see in the convergence of Google products under the Google+ umbrella – Gmail, YouTube, Chrome, Android, Nest and every other Google product will be accessed via your Google+ profile. Google+ is just the fibre that runs through Google’s network connecting users and ultimately allowing your online activity to be tracked whether you’re searching, browsing, emailing, watching or networking.
So in the future Google can sell network wide brand advertising packages to big ticket advertisers with precise demographic targeting making online a more natural extension of larger media buys. For example if as a media planner I’m buying a front page ad on a Newspaper and a prime time TV slot on the same day I can also carry that brand experience through to online using banner ads on millions of Display Network websites, video ads on Youtube and even in-app or ads on mobile websites. What’s more, when Google move into TV (which they inevitably will in some form) TV adverts and online activity will be linked via your Google+ account. It all fits together nicely.
The role of Google+ in mobile
I mentioned at the top, the other growth area opportunity which Google still has is the mobile space. Mobile advertising has not been nearly as quick to react to the surge in smartphone usage in the developed world as you would have expected. This is largely due to demand. Advertisers aren’t crazy about reaching an online mobile audience because right now, most people aren’t convinced that mobile advertising can even work, let alone what it's going to look like.
For Google to become the key player in the mobile ad space they need to prove two things to advertisers:
The first point is already addressed. By forcing Google+ logins on mobile devices Google can sell ad inventory across its display network on a demographically targeted basis.
The second point is more complicated and, in my opinion, speculative. Something you hear a lot in the online advertising community when when people talk about the value of mobile advertising is that “people research on their phones, then finish their purchases on their desktop”. So for example I might use my phone to research Christmas presents for my wife when I’m on the train, but I’ll actually complete the purchase later by finding the item again on my desktop.
This makes a lot of sense in theory, and is something I personally do a lot, however it is at this stage still theoretical. Because it's near impossible for a website I’m buying from to connect my original visit on my phone to my final visit on my desktop, traditional web analytics would mis-attribute that sale to whatever marketing channel I eventually used to find the site on my desktop and complete the checkout. If however I was logged into my Google+ account on my phone when I originally found the product and was also logged into the same account on my desktop when I brought it later Google could tie those two visits together and tell the advertiser that this mobile advert led to this sale on a separate visit.
This part of the article actually isn’t speculation: Google have already started to roll out this feature in the form of a new feature of its Adwords platform called “estimated total conversions” where Google attempts to attribute conversions back to clicks on search adverts which happened on another device. They do this by using data from people who are signed into their Google accounts on both devices but it's only “estimated” because only a small number of visitors can be tracked reliably via account logins at the moment. The more people they have logged into their Google accounts when they search on phones, the more accurate these numbers will be and the more Google can use this data to encourage advertisers to spend more on mobile.
What about devices?
As we’ve seen in Nexus, Chromebook, Glass and most recently Nest. Google are getting serious about their position as a hardware company in the world of next generation, connected devices. I actually believe this is as much about Google being responsible to its shareholders by diversifying its business interests as it is about them wanting too take over the world or spy for the US government. Right now Google’s stock is intrinsically linked to the global ad market and its share of search engine usage worldwide, which is where the majority of its revenue comes from. If the ad dollar weakens or search competitors like Bing get their act together (unlikely as it may seem) Google’s seemingly unstoppable revenue stream would be seriously impacted.
Devices, whether they’re in our home, our pockets or on our faces provide an opportunity for Google to reach users in more places, potentially making money from the hardware sale, the software or apps it runs and the advertising you consume on it. Google Plus will inevitably become the ID card used to access all parts of Google’s digitally connected world, which is probably as much scary for the conspiracy theorists out there as it is exciting for Google engineers.
So no, Google Plus is not just a social network and no, it's not neccesarily a failure just because the kids are still Facebookin’, Instagrammin’ and Tweetin’ selfies instead of Google plusin’ them!
Disclosure - I work for a business which sells Google Adwords advertising and have a commercial relationship with Google in this respect. However all views expressed in this article are my own.