A lot of people think that Google (Nasdaq: GOOG) lives and dies with online success alone, and that this state of affairs will never change. I hate to have to tell you this, but you're all wrong.
The Wall Street Journal supports my position today by lifting the veil of secrecy from an advertising deal between Mountain View and General Electric's (NYSE: GE) NBC Universal unit. No, Google isn't going to carpet-bomb the Sci-Fi Channel and CNBC with obnoxious brand-builder ads, the way Yahoo! (Nasdaq: YHOO) yodeled all over your TV a decade ago. This deal goes the other way.
Google will sell advertising time on NBC's portfolio of cable channels nationwide, according to the WSJ report. The broadcasting giant is thinking about expanding the plan to cover local NBC networks as well. In a deliciously ironic twist, this includes MSNBC, in which Microsoft (Nasdaq: MSFT) still holds an 18% ownership stake. It's easy to imagine office chairs getting flung across some posh Redmond office.
As impressive as Google's online advertising power is, that's still a vanishingly small part of the overall ad market compared to traditional media: television, radio, billboards, brightly shrink-wrapped cars, and so on. AdAge says that only 6.8% of the nation's marketing dollars were spent on online marketing last year, whereas traditional channels like print and television spots composed 58% of the market.
That's why Google is pursuing all of these other marketing avenues as well. A diversified revenue stream is always a good idea, just in case some new upstart comes along to steal Big G's online thunder. Eventually, Web marketing just might be as traditional as a half-sheet spread in the New York Times (NYSE: NYT). All the same, those old tools may never go entirely out of style, and there's a lot of money still flowing through those staid old channels.
Now Google is taking its first really serious plunge into those dark waters. The AdWords keyword auction model should translate very nicely into bidding for media spots instead, and I expect traditional-media deals like this one to make serious contributions to Google's top line in four or five years. And you know how we Fools feel about long-term investing, right?
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