Google and the MTV/ XM / MySpace Generation

Eric Schmidt, Google CEO, is betting that advertising will be a hit on the Internet even beyond search.

That’s why his company has launched a flock of new ad initiatives in the last two weeks, he told an audience at this year’s Search Engine Strategies meeting in San Jose CA. Those new drives—all either in the agreement stage or in early testing—are intended to “give people more ability to target places where their ads can go”, he said. “These are big expansions of new content that we think are going to be very successful for our advertisers.”

Those expansions include a deal signed with XM Satellite radio at the beginning of August to place audio spots for Google advertisers onto XM’s non-music programming. Marketers will be able to place those Google ads automatically using dMarc, the ad insertion platform that Google purchased last January. That program should be up and operating by the last quarter of 2006.

Then there’s the agreement Google announced on Sunday with MTV Networks. Under that deal, Google will distribute some of its video programming to Web sites and blogs on Google’s AdSense network under an ad-supported business model. Google will insert the video ads into the content, in a major step beyond the text-based and graphical ads that the AdSense publisher network now delivers.

Finally on Monday, Google floated news of an agreement to provide search functions and pay-per-click search advertising to MySpace.com and a handful of other sites operated by Fox Interactive Media, the Web arm of Rupert Murdoch’s News Corp. The multi-year deal will make Google AdSense the exclusive distributor of text-based pay-per-click ads to MySpace.com and some of Fox Interactive’s other media properties, which include Fox.com, Foxsports.com, AmericanIdol.com and gaming network IGN.com. Google will also have first crack at display advertising inventory on those Web properties and will replace Yahoo! as the search engine on MySpace.

Taken together, these deals have been read as signs that Google is interested in expanding its ad model beyond text and banners—despite reportedly indifferent results from a test of print ads earlier this year.

Schmidt confirmed that Google is indeed looking to be part of the new-media advertising future on the Web.

“These are big expansions into new content that we think are going to be very successful for our advertisers,” he said. “we think radio is going to be a very good medium. And it’s obvious that much of the world’s video will be repurposed onto the Web or developed for the Web. It’s also obvious that people who own those copyrights have a proper need to monetize them. So we announced with MTV the ability to take video ads, target them into video streams and deliver them to third parties, the way our AdSense network does.”

And MySpace represents almost 100 million users spending “hours and hours a day” on the site, Schmidt said. “That’s a whole new category of people whom we think advertisers will want to reach. It’s an under-monetized opportunity for advertisers to reach an audience that they’re not reaching already.”

According to Hitwise, almost 10% of Google’s search traffic is already referred from MySpace. Having a Google search box on the MySpace site will pretty certainly increase that volume while allowing MySpace to keep those users on-site and available for viewing ads.

The agreement calls for Google to guarantee a minimum in revenue-sharing payments—as much as $900 million from 2007 to 2010, according to press reports–in return for guaranteed traffic volume from Fox Interactive.

In June, Fox Interactive chief operating officer Peter Chernin announced that his division was looking to bring in a search partner to monetize the power of MySpace’s popularity. The site had 45.8 million unique visitors in June, a year-over-year increase of more than 280%, according to Nielsen NetRatings.

The deal also gives Google a potential test bed in which to study social networking and consumer-generated media, and how those two trends interact with traditional search. Rival Yahoo! has made more inroads with image search Fickr.com and social tagging site del.icio.us, both of which it owns. Microsoft too has its own MSN Spaces (now Windows Live Spaces) social network.

Fredrick Marckini, CEO of interactive marketing firm iProspect, agrees that advertisers will need to find a way to reach the denizens of MySpace.com and other Web community sites such as Facebook, and that Google’s deal with MySpace may open up opportunities those marketers will find valuable.

“MySpace is its own ecosystem, its own world,” he says. “As much as you need to have a Web site on the Internet, you need to have a plan for MySpace. That plan is not necessarily having a MySpace page, but it is always engaging with that community somehow. For the right brands—sneaker companies, music companies—it strikes me as an important place to be found and to grow a community around your brand and your product.”

In his discussion at SES San Jose, Schmidt sidestepped questions from moderator Danny Sullivan about the measurability of ads in some of the new media such as radio, given that Google’s success was built on a highly measurable ad medium, pay-per-click marketing. Will ads in those other media get the same metrical advantage that has made search marketing an ad staple?

“These are early days for these problems,” Schmidt said. “We’ve all been in this [search] business for six or seven years. Targeted, measurable radio ads are starting now. Targeted, measurable video ads on the Internet are starting now. At Google we’ve thought about doing targeted, measurable ads on real television. So we’re thinking about using our targetable advertising system for every form of advertising.

“Why would we do that? Because it’s a big opportunity to provide greater value to advertisers. It’s an even bigger opportunity to provide greater value to end users.”