Google expects increasing video in search ads
SAN FRANCISCO (Reuters) - Google Inc is infusing its paid search ads with video, product images and other features as the Internet company strives to refine its money-making capabilities in a tough advertising environment.
In a Webcast with investors on Wednesday, Google executives walked through a variety of innovations designed to make its search ads more relevant to users and more effective for advertisers.
"Our search ads have largely looked the same over the course of the past seven or eight years," said Nick Fox, a Google director of product management, referring to the text ads that appear alongside Google's search results.
Fox detailed various ways that Google is striving to liven up the ads. In August, he said, Google introduced a feature that allows advertisers to highlight multiple links to different products or brands within a search ad.
Fox also cited the forthcoming movie "Fame" and the Electronic Arts Inc video game "Tiger Woods PGA Tour 10" as two examples of advertisers integrating video directly into their search ads. He said Google can charge advertisers a fee when a user plays a video.
The portion of ads featuring videos and images is expected to grow, said Fox, though he declined to quantify the expectation.
The Webcast was Google's first in a series of "educational" briefings that the company will hold with investors in 2009 and 2010 in lieu of the traditional on-site analyst day event.
The company did not provide financial details during the briefing, focusing instead on enhancements and changes to the company's search technology.
The event comes as Google's revenue growth has slowed to single digits from the 30 percent to 40 percent clip it posted in 2008, and as the average cost per click -- the amount of money advertisers pay for a click on an ad -- has fallen year-over-year for two consecutive quarters.
"For a company that's doing billions and billions in revenue, these are small things," Merriman Curhan Ford analyst Richard Fetyko said about the improvements that Google described on Wednesday.
"They need consumers to start spending. That's the bottom line. That's when advertisers will increase their bids," said Fetyko, who has a buy rating on Google shares.
Google, which generated $21.8 billion in 2008 revenue, is the world's No. 1 search engine with a 67.5 percent market share in July, according to comScore.
In addition to new search ad features, Google executives discussed changes to its tools for advertisers to bid on search terms and to manage their ad campaigns more effectively, as well as improvements to its search engine to make it easier for Web surfers to find what they're looking for on the Internet.
The company also said it was developing features to make search ads more relevant on Internet-enabled cell phones, but did not provide details about where mobile ad revenue fits into the overall picture at Google.
"Mobile for Google been a small but very fast-growing segment that we think is going to be an important part of our monetization and search story going forward," said Susan Wojcicki, Google vice president of product management.
Shares of Google finished Wednesday's regular trading session up $5.35 at $463.97 on Nasdaq.
(Reporting by Alexei Oreskovic; Editing by Richard Chang)