Google Inc. Tightens Its Grip on Advertisers

Even as the digital advertising space heats up, the online giant irks many marketing customers by changing its search results options.

Aug 20, 2014 at 7:30PM

In what is quickly becoming an all-out battle to secure the ever-growing digital advertising dollar, it would seem the last thing industry giant Google (NASDAQ:GOOG) (NASDAQ:GOOGL) would want to do is upset its marketing customers. Though Facebook (NASDAQ:FB) ad revenue falls well short of Google's, the social media company commands an increasingly large piece of the online ad pie, particularly mobile advertising.

A recent Google acquisition and a new, improved ad results tracking feature is more like what you'd expect from the search leader as it addresses competition from Facebook and others in the digital marketing space. That's why a recent announcement from Google, one that very few marketing department heads seem enamored with, is a bit puzzling. Is now really the time for Google to throw its digital advertising weight around?

Not anymore, you can't
Marketing leaders, as a rule, like as much control over their ads and campaign parameters as possible. Which makes perfect sense, considering that the marketing department is held accountable for results. But Google's new AdWords feature, which will become a requirement for advertisers by the end of next month, does away with its "exact match" capabilities, essentially forcing advertisers to live with "close variants."

Close variants are Google's way of expanding a marketer's search results to include close misspellings and plural variations of a campaign key word chosen by the advertiser. That's all well and good, and many Google ad customers are already using this feature. It widens results, thereby increasing the number of ad views and, presumably, return on investment, or ROI.

But there's a problem with axing exact match options: many advertisers don't want to cast a wider net. Shrewd marketers like to ensure the search matches they get during an ad campaign are specifically what they're looking for, not every close call. Google's response to customers that want to maintain complete control of their ads? Tough. Come late September, no more exact matching alternatives for anyone.

Steps in the right direction
Facebook is gaining a bigger foothold in the digital ad space but isn't doing so by cranking out more ads and alienating its 1.32 billion monthly average users. Instead Facebook uses its reams of user data, coupled with in-house cognitive computing capabilities, to better target its customers. Improved results translate to higher ad costs for the company. Facebook also boasts a suite of tools for marketers to continually track an ad campaign's results.

Not surprisingly, Google also has features that give ad customers the ability to monitor results, and recently announced a new AdWords tool called "Website Call Conversions." As the name implies, this new functionality allows marketers to track and identify calls following a prospective customer's ad click. In what has quickly become a much more competitive market, website call conversions and similar ad measurement functionalities can be a differentiator, particularly for the control-conscious marketing pro.

Google's recent acquisition of photo analysis specialist Jetpac is also in line with providing advertisers with enhanced targeting capabilities. Jetpac boasts a cognitive computing technology that analyzes Web photos and is able to extrapolate information, whether the picture was tagged or not. It's no secret that both Google and Facebook are targeting the mobile ad space, and Jetpac could help give Google's mobile ad ambitions a boost.

Final Foolish thoughts
A recent report from eMarketer demonstrates just how important ad targeting is, particularly for mobile users. Nearly half the mobile device users surveyed said the reason they didn't click on a particular ad was "because they just weren't interested in the offering." In other words, mobile folks aren't averse to clicking on ads, but only if they're relevant to them.

The importance of target marketing is understood and accepted by advertisers, for both online and traditional ads. Perhaps that's why much of the reaction to Google's force-feeding close variant search results to its marketing customers has rubbed so many the wrong way. Only time will tell whether the tweak to AdWords dramatically alters Google ad customers' results.

One thing is certain: Google is showing its ad customers who's really running the show. But with so many digital advertising alternatives like Facebook chomping at the bit, wresting control away and upsetting your advertisers seems counterintuitive, at best.

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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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