Kevin Heisler is an analyst at JupiterResearch, New York, and an expert when it comes to the recent M&A activity in the industry. Shar VanBoskirk is a senior analyst at Forrester Research Inc., Cambridge, MA, who has been following recent M&A activity closely on her blog. Each analyst spoke separately with associate reporter Giselle Abramovich.
DM News: How will these M & A activities impact the way that marketers do business?
Kevin Heisler: For advertisers, optimization of online advertising, budgeting and agency selection are now more important than ever.
Acquisitions by Google (Doubleclick) and MSN (Aquantive) are game-changers. The recent rash of acquisitions obligate each marketer in some way to change his or her strategic planning. Any marketers who don’t reexamine the way they do business are short-sighted.
Shar VanBoskirk: I think overall, they bring a level of gravity to the online medium. Marketers see $3 billion and $6 billion dollar investments going into online and they start seeing the medium as more legitimate.
I think they are starting to think: “If the online medium holds billons of dollars of promise to Microsoft and Google, maybe I should boost my investment in it too in anticipation of a great payoff.”
DM News: Is Google too powerful?
Shar VanBoskirk: Isn’t it the first Spiderman movie where Uncle Ben tells Peter Parker, “With great power comes great responsibility?” Google is definitely daunting and is only continuing to grow into more and more media. But to date, I’ve not seen any indication from them that they are “not to be trusted.”
I actually think consumers are pretty savvy and also very unloyal. They can easily find out when or if they are being taken advantage of. And, they can easily switch from one provider to another (in any industry) when dissatisfied. So, I think the market will determine when Google is too big, or no longer trustworthy.
As long as Google assumes the responsibility associated with its position – that is it continues to respect consumer privacy and provide good and relevant services to marketers and consumers, it is not too powerful.
Kevin Heisler: It’s a question of perspective. Eric Schmidt would answer “no.” Microsoft has made it clear the answer is yes. If you ask a music industry or telcom executive, the answer would be, “No, not compared to Apple.” If you ask a newspaper executive, you might have to pose the question on the unemployment line.
Google’s power doesn’t come from technology; it comes from people. It’s derived from Google’s share of searches, its human network. The number of searches is finite, so acquisition will ultimately be the only way to grow quickly and profitably.
DM News: Can you talk about the search marketing industry in terms of the disappearance of yet another publisher-agnostic platform?
Kevin Heisler: As my European colleague, Nate Elliott, has said, it isn’t about anti-trust. It’s about trust. There’s inherent value in independence. Google and MSN will have to work hard to earn the trust of advertisers. The big three don’t have a monopoly on online advertising, but they are fast approaching cartel status.
The next big issue on the horizon will be privacy of corporate data – and how much advertisers are willing to share with the big three. Put another way, it’s about monopolizing user data – not monopolizing online advertising.
Shar VanBoskirk: I think this just means that marketers have to be more diligent about making sure they are getting objective value from their publisher partners. It has never been a guarantee that marketers were getting the most value or profit from any given publisher.
DM News: What do you think that the big three are trying to do here?
Shar VanBoskirk: They are each trying to create a one-stop-shop for all online marketing needs…and ultimately a one-stop-shop for all on and offline marketing needs.
It is a huge hassle to have to manage multiple vendors, multiple media buying partners, multiple publishers and publisher networks. And, collecting data to use to measure ad effectiveness and refine future programs across all of these sources is virtually impossible. Google, Yahoo and Microsoft are all trying to create an easy environment where advertisers can easily create and manage integrated online programs.
Kevin Heisler: However, I think it’s clear they’re on a path toward vertical – and to a degree – horizontal integration: the creation of one-stop shops for buying, selling and optimizing advertising. Think of the oil industry owning oil wells, refineries and gas stations. They’re the manufacturers, middlemen and retailers. While they don’t own the downstream buyers, they do have a firm grip on the industry. If the current energy crisis has proven anything, it’s that vertical integration is the most efficient way to make profits in good times or bad.
