Driving Ad-Tech

In 2010, Google announced that they were working on developing self-driving cars. Their public strategy mentioned safety and efficiency. A common reaction was “Of course Google is going doing that. It’s a technology company.” Which is partly right, Google is a technology company, but one that is deeply focused on advertising.

Almost 90% of Google’s income comes from its advertising platform, AdWords. A significant proportion of its other businesses exist to support the ad platform in one of three ways: Cost — minimising AdWords operational cost, Efficiency — maximising profit received per ad view, and Reach — growing the number of people that are exposed to the ads.

Minimising the Operational Cost

Google’s entry into the Cloud Computing market is a perfect example of a cost reduction strategy. Google has many datacentres around the globe to make services like YouTube and Gmail available, but running these datacentres full of computers just for itself ends up being wasteful. Google only needs its computers for the busy hours in the day and in the remaining time the computers sit unused. By selling the unused computer time to other businesses, Cloud companies — like Google — are able to reduce the cost of running their main business.

Maximising Ad Efficiency

AdWords works by charging for leads, so it is in Google’s interests to maximise the proportion of ad views that result in a visit to a product purchase page or a phone call to a business. One example of Google improving the effectiveness of their ads was through the introduction of personalisation to their search results page. This change meant that adverts were more relevant to the individual and therefore were more likely to be clicked.

Reaching New Markets

Google have broadened the reach of their ads several times. To name a few:

• Google Maps targets specific businesses to which their location is critical to attracting customers; these are businesses like restaurants and cafes.
• Android means that Google Maps and Google Search have an increased reach now and in the long term as the mobile market outgrows all others.
• StreetView, the feature in Google Maps that lets you virtually navigate city streets, has the potential to be another way to generate revenue. That is if Google were to act on their patent to have click-able buildings and changing billboards.

This brings us to the self-driving car project, lead by Sebastian Thru, a co-inventor of StreetView. Instead of taking pictures of streets every 5 metres, the aim this time is to get people from A-to-B without anyone driving.

To be successful, the safety of passengers and pedestrians, as well as the perception of safety are critical. The technology required needs to reliably detect people on the pavement, crossing the road or getting out of a car. So it is not so far fetched to suggest that the same technology combined with face identification — such as that available in Google Image Search, could let a Google car track the number of people that see it.

On its own, this isn’t very useful, but remembering that Google is an advertising company can lead us to imagine ways of making money from this technology. For example, Google could enter the side-of-bus advertising market and provide an ad view based pricing model. This is light years ahead of the way that physical ad space is currently valued.

Indeed, businesses are becoming more scrupulous with their ad spend, demanding evidence from advertisers that their adverts are being seen and resulting in sales.

Should Google get involved in the physical advertising market, then small local businesses could be the biggest winners. They could finally afford marketing opportunities that were previously only available for large businesses. For example, a local coffee shop could run an advertising campaign on a bus only while the bus was within 5 minutes walking distance from their premises.

Google’s cars will drive people around, but ads drive their business.