Google's Animated Response

Isn't it ironic that on the same day that graphical ad guru DoubleClick (Nasdaq: DCLK  ) accepted a buyout offer at a discount to its market price, hotshot Google (Nasdaq: GOOG  ) decided to beef up its graphic ad presence by announcing a new animated ad platform?

Sure, to DoubleClick's credit, the stock had been moving higher on buyout rumors before Monday's deal was made public. Still, why is Google treading into the perilous territory that found a dot-com hero like DoubleClick -- which once saw its stock fetch as much as $130 a pop -- settle for $8.50 a stub?

Because it can? That would be the pompous answer. After the company's practically perfect first-quarter report last week, questioning Google is a lot like questioning New England Patriots coach Bill Belichick about this past weekend's NFL draft. You can't argue with success.

Then again, isn't Google straying too far from its fields of green?

If you're like me, you have probably come to love Google AdWords. Unlike banner ads that have unfortunately evolved into more intrusive forms of graphical marketing like pop-ups (you know you hate them), interstitials (wait for the content you wanted, just wait for it), and rich media (congratulations, you are the millionth visitor to hit Britney Spears in the face with a pie!), Google's text ads rock. They're silent yet descriptive, and because they are also perfectly targeted, they are brilliantly effective.

Last year, Google started giving its third-party publishers the option of running static banner ads instead of its traditional text ads. If you surf around, you will notice that few publishers have taken Google up on that offer. Four or five relevant text ads in a single ad block just make more sense than one pitch with eye candy.

Because publishers get paid by the click, and those sums are the result of the publisher's share of what Google collects from bidding sponsors, it just hasn't made sense to burden visitors with colorful marketing. While Google is now experimenting with charging graphic ad sponsors by the impression instead of by the click, content and search sites might still need a little more convincing before they break from the text ads that have served all three parties -- Google, sponsor, and publisher -- so well in the past.

Most contextual advertising innovations have been great. Allowing sponsors to target geographically is fantastic. Google is now even letting sponsors single out the specific third-party site where they want their ads to appear. That's awesome. But why the animated ads? I mean, they work -- you will find plenty of vibrant ads here at fool.com -- but Google's been doing just fine by sticking to the contextual, and that's where you have the perfect balance of high-margin profitability coupled with consumer acceptance. It's why Yahoo! (Nasdaq: YHOO  ) acquired Overture. It's why InterActiveCorp (Nasdaq: IACI  ) is scooping up AskJeeves.com (Nasdaq: ASKJ  ) . It's why Microsoft (Nasdaq: MSFT  ) is making sure that MSN.com doesn't get left out of the paid-search loop.

Google, you don't need to go for the animated response. Let companies like DoubleClick and ValueClick (Nasdaq: VCLK  ) fight it out on the graphical front. You move so much faster when your ads are standing still.

Why the hesitation over animation?

  • This is why DoubleClick said "I Do" yesterday.
  • This is why Google shorts have been saying "I Due" for months.
  • Learn about Google's potentially fatal flaw.
  • Check out our Rule Breakers newsletter service for more ultimate growth stock ideas.

Longtime Fool contributor Rick Munarriz feels that Google shouldn't try to chip off its old ad block. He does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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