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  • +1 Button on AdWords: Paying for What You Could Get for Free?

    Before Google unleashed its new social network Google+, it launched the +1 button, which appears on content sites across the web, in Google search results, and on Google’s AdWords ads. Now that the button appears in the Google+ stream as well, it’s likely that the +1 buttons everywhere will get clicked more.

    What if you don’t want the feature on your ads though? Do you have a choice? Perhaps you feel like it could lead to more clicks that you don’t want to pay for. One advertiser shared a story with WebProNews about just such a scenario, and discussed his struggle trying to opt out of the feature, which has so far been unsuccessful.

    Should advertisers be able to opt out from having +1 buttons on their search ads? Tell us what you think.

    First, here’s how Google explains the +1 button in relation to AdWords:

    When making decisions, people often turn to those they trust for recommendations. Now with the +1 button, people can recommend your site’s content or ads to their friends and contacts right when their advice is most useful – on Google search.

    Let’s say you own a hotel in Madrid. Brian is having a lovely stay at your hotel, and visits your site to look up local attractions. He sees the +1 button you’ve added to your page, and clicks it to recommend your business to his friends and contacts.

    When Brian’s friend Ann plans her trip to Spain, she signs in to her Google account, searches on Google, and also sees your hotel’s ad – plus the personalized annotation that Brian +1’d it. Knowing that Brian recommends your hotel helps Ann decide where to stay during her travels.

    “I was informed by a standard email presumably sent to all AdWords advertisers advising of +1 and explaining that AdWords would be visible within the +1 social network, meaning that if Bill clicks on my advert then all of Bill’s +1 friends are also shown my advert and therefore invited to click on it also,” Jon, an AdWords advertiser tells WebProNews.

    Jon’s business is a campground, and he claims to have strong geographic and language preferences, and his AdWords account set so that his ads only appear on search engine results. “I am an ex IT consultant and very Internet savvy,” he says. “I fine tune my AdWords campaigns.”

    “I don’t want to have my adverts shown on the +1 network,” he tells us. “The principle reason is that I only want to spend money reaching totally virgin customers. The reason for this is that campers are social animals, and as soon as Bill finds a great campground he will tell all his camping buddies. I don’t need help from Google getting referrals via this mechanism. Once Bill knows I am content to wait until Bill tells his friends verbally or via email, that does not cost me a dime.”

    “The other objection is that Bill may have friends in other geographic locations who may speculatively click on my advert as exposed to them via Bill and the +1 network, whereas previously I could limit geographic scope on my AdWords campaign,” he adds. “And Bill is intelligent enough to know which of his online buddies lives too far away to find my campground of interest – and anyway I am not paying for Bill’s verbal or email recommendations.”

    Jon pointed to the hassle he has had trying to opt out of +1’s on his ads. “Last time I looked there was no ‘+1′ opt out on the AdWords users’ control panel – I expected just to login and tick the appropriate ‘NO’ box and all would be cool (I was still irritated that I was opted in by default, but hey they are trying to make money aren’t they?).”

    “Nope – you have to hunt around documentation to find a buried ‘opt out form’. By buried I mean that Google clearly don’t want you to find it easily,” he says. “You have to read FAQs and things first.”

    The form looks like this:

    Opt Out form for +1 Button on AdWords

    “When I tried the form it didn’t work. It failed to give a confirmation page and instead indicated a field error by stipulating ‘required field’ in red, but unfortunately this was next to the very tick box that I deselected to indicate that I wanted to opt out,” he says. “I worked in IT for 15 years and I can design a bug free form in my sleep but Google engineers needed two attempts over two weeks with me sending screen shots and verifying that I had tried multiple browsers and so on.”

    “After about two weeks of Googles ‘experts’ working on the issue they got the form working so I was able to indicate that I wanted to opt out,” he continues. “Then I followed up by indicating my lack of confidence in this whole setup with the Google guy who has been handling my case and asked when I was going to actually hear anything . You see, the opt out option is not a ‘right’ or an immediate thing – it is a ‘REQUEST’.”

    Jon claims a Google employee told him:

    Hi Jon,

    I spoke with the PM responsible for this and he re-iterated the following:

    »Submitting this form is not a guarantee that your campaigns will be opted
    out of social features.” This is clearly stated on the submission form
    itself.«

    If his request were to be granted then you would be contacted as also
    explicitly stated on the form.

    >From the form: “We will review these requests and may contact you at the
    e-mail address provided.” – notice it says may, not will.

    “So you see I have only managed to get on the waiting lists to be ‘CONSIDERED’ for opt out, and apparently I can only be sure that I will be contacted if my ‘REQUEST IS GRANTED’,” Jon says. “May I reiterate here that I am ‘requesting’ the right to decide how my advertising revenue is spent. I know my customers and I believe that the +1 network will deliver only what I get for free right now but at a price.”

    “I am not against +1 or its incorporation into AdWords, but I am really annoyed that Google has first of all opted me in by default, then provided me with a buggy opt out mechanism that takes two weeks to fix, and then tells me as if a royal speaking to a subject that what I consider to be a ‘DEMAND’ is actually a ‘REQUEST’, and that I ‘MAY’ be contacted if they decide to ‘GRANT’ me the right to decide how my money is spent.”

    What do you think of Jon’s story? Should opting out of this feature be a right or is it simply Google’s right to handle this feature of its product how it sees fit? Tell us what you think in the comments.

  • AdWords Express (Formerly Boost) Launched for U.S. Businesses

    Google announced the launch of AdWords Express, which was tested with a small number of local businesses under the name Boost last fall.

    The product is aimed at local businesses who aren’t already using AdWords. “AdWords Express helps potential customers find your website or Place page, and gives you a quick and straightforward way to connect with them and grow your business,” explains AdWords Express Product Mangager Kiley McEvoy. “You simply provide some basic business information, create your ad, and your campaign is ready to go.”

    “After you sign up, the campaign will be automatically managed for you,” continues McEvoy. “AdWords Express will figure out which searches should trigger your ad to appear and displays it when these searches happen. Your ad will be shown in the Ads section of search results pages—on the top or right hand side—and in Google Maps with a distinctive blue pin. Customers can see your ad whether they’re searching on laptops or mobile phones.”

    @google
    A Googler    AdWords Express – a fast/simple way for local businesses to start advertising online in <5 minutes http://t.co/PbDIcRQ 21 minutes ago via web · powered by @socialditto

    According to the company, AdWords Express automatically optimizes ads to get the most out of the campaign and the budget.

    To use the product, the only thing you need is a mailing address, which you can make private. You don’t even need a website, as your Google Place Page can serve as your landing page.

  • Should Bing Make Paid Search Ads Blend Into Organic Results?

    Emily Kirk, a Rimm-Kaufman Group analyst spotted a feature Microsoft is testing with Bing: paid results in the middle of organic results. Yep.

    Ordinarily on Bing, paid ads appear above and below organic results, and they’re easily identifiable in a blue box:

    Bing Search Ads

    The test feature eliminates the blue box and sticks them in the middle of the results, making them far less distinguishable as ads, though there is still a an “ads” label off to the right.

    Bing Ad Test

    Image credit: RKGz

    Barry Schwartz at Search Engine Land obtained the following statement from Microsoft, “We’re constantly testing and experimenting on Bing, and with that, we carefully measure user engagement and reaction to these changes. We have nothing further to share at this time.”

    I’d be very surprised if this moved from testing to become an actual feature, because there would be a fair amount of negative publicity I think. It’s become pretty well established throughout the industry that paid search results should be very clear to the user. That said, perhaps Microsoft considers the small “ad” label to be sufficient.

  • Is Your Paid Search Campaign Cannibalizing Your Organic Clicks?

    Is Your Paid Search Campaign Cannibalizing Your Organic Clicks?

    In case you’re wondering if your paid campaigns are cannibalizing clicks from your organic search results, the answer is: not so much. That is If you take Google’s word for it anyway.

    Google says its statisticians have run over 400 studies on accounts with paused paid search campaigns to gain some insight into how paid search affects organic clicks for websites.

    “In what we call ‘Search Ads Pause Studies’, our group of researchers observed organic click volume in the absence of search ads,” Google’s Quantitative Management team said in a post on the Google Research Blog. “Then they built a statistical model to predict the click volume for given levels of ad spend using spend and organic impression volume as predictors. These models generated estimates for the incremental clicks attributable to search ads (IAC), or in other words, the percentage of paid clicks that are not made up for by organic clicks when search ads are paused.”

    “The results were surprising,” the team added. “On average, the incremental ad clicks percentage across verticals is 89%. This means that a full 89% of the traffic generated by search ads is not replaced by organic clicks when ads are paused. This number was consistently high across verticals.”

    Hmm. Sounds like you should really be spending money paying for Google ads…at least according to Google.

    David X. Chan, Yuan Yuan, Jim Koehler, and Deepak Kumar explain in the report:

    In order to determine the incremental clicks related to search advertising, we quantify the impact pausing search ad spend has on total clicks. Indirect navigation to the advertiser site is not considered. Each study produces an estimate of the incremental clicks attributed to search advertising for an advertiser. To make comparison across multiple studies easier, we express the incremental clicks as a percentage of the change in paid clicks. This metric is labeled \Incremental Ad Clicks”, or \IAC” for short.

    IAC represents the percentage of paid clicks that are not made up for by organic clicks when ads are paused. Conversely, when the campaign is restarted, the IAC represents the fraction of paid clicks that are incremental. Since we do not assume a positive interaction between paid and organic search in our analysis, the IAC estimate is bounded at 100%.

    The team does acknowledge that it has not conducted enough studies to determine the impact of seasonality on the results.

    The full report can be read here (pdf).

  • Where Google Makes Its Money

    WordStream has put together a rather interesting infographic showing where Google makes its money. “We did some research on what are the most expensive keyword categories in the world to figure out where (specifically) Google makes their billions in ad revenues,” WordStream Founder Larry Kim tells WebProNews.

    Below is what they came up with.

    Where Google Makes its Money

    They managed to turn the infographic into an ad, but the data is still interesting.

    To come up with this, WordStream compiled data from its own trillion-keyword database along with the Google Keyword Tool to determine the top 10,000 most expensive English-language keywords over a 90-day period. Then they organized the list by categories.

  • Facebook Blocks Google+ Ad From User

    It appears that that trying to advertise your Google+ profile on Facebook may not be the best idea if you wish to continue to run ads on Facebook. Michael Lee Johnson tried to do just that, and says Facebook suspended all of his campaigns. Johnson sums it up in a message to WebProNews:

    I’ve been over in Greece for the last couple of years, taking some time out due to back problems i endured in September 09, relaxing, reading, coding, debugging – the usual. – When I came back I didn’t really know anyone that wasn’t a personal friend. – Because Google has lots of tech folks and people that i wanted to network with, I’ve been trying to think of how I can maximize my follower-count… so basically I posted an ad on Facebook to people who speak English who like Google products… 20 minutes later my ad was approved… an hour after that… my ad was disabled along with my other campaigns and I’m no longer allowed to run ads? – it’s all pretty bizarre. Facebook must be running scared or something? – Facebook obviously understand that competition is irrelevant given the right strategy. – I’d be scared.

    On Google+, Johnson said he received the following mesage from Facebook:

    Your account has been disabled. All of your adverts have been stopped and should not be run again on the site under any circumstances. Generally, we disable an account if too many of its adverts violate our Terms of Use or Advertising guidelines. Unfortunately we cannot provide you with the specific violations that have been deemed abusive. Please review our Terms of Use and Advertising guidelines if you have any further questions.

    The ad simply said:

    Add Michael to Google+

    If you’re lucky enough to have a Google+ account, add Michael Lee Johnson. Internet geek, app developer, technological virtuoso.

    You can see it in his post.

    “It’s ridiculous,” Johnson said, later adding, “I’m only banned from the advertising platform – fortunately.”

    This is a very interesting move from the world’s dominant social network. That’s for sure. It also follows the company’s blocking of a friend import feature on Google+ (though people have been finding work arounds). It’s clear that Facebook really doesn’t like the idea of Facebook users using Google+, and it does look like they’re a little worried.

    Google+ is still in invitation-only status, and Google CEO Larry Page announced in the company’s earnings call on Thursday that it had already surpassed 10 million users. I doubt that growth has slowed much since then.

  • Google Q2 Earnings Released

    Google Q2 Earnings Released

    Google has released its earnings report for the second quarter.

    The company posted a record over $9 billion in revenue for the quarter, up 32% from the same period last year. Not too shabby. More precisely, revenues were $9.03 billion for the quarter. Last year, Q2 revenues were $6.82 billion.

    Google’s own sites generated $6.23 billion, leaving AdSense partner sites generating $2.48 billion. That’s an increase of 20% from the same period last year. This is very interesting considering Google’s launch of the Panda update earlier this year, which affected the search visibility of a whole lot of webpages with AdSense ads on them. Apparently it didn’t hurt Google’s income too much.

    Paid clicks on Google sites and AdSense partner sites increased 18% YoY, and the average cost-per-click increased about 12%.

    Interestingly, Google’s employee headcount increased from 22,316 full-time employees at the end of March to 28,768 at the end of June.

    Here’s the report in its entirety:

    MOUNTAIN VIEW, Calif. – July 14, 2011 – Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended June 30, 2011.

    “We had a great quarter, with revenue up 32% year on year for a record breaking over $9 billion of revenue,” said Larry Page, CEO of Google. “I’m super excited about the amazing response to Google+ which lets you share just like in real life.”

    Q2 Financial Summary

    Google reported revenues of $9.03 billion for the quarter ended June 30, 2011, an increase of 32% compared to the second quarter of 2010. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the second quarter of 2011, TAC totaled $2.11 billion, or 24% of advertising revenues.

    Google reports operating income, operating margin, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

    • GAAP operating income in the second quarter of 2011 was $2.88 billion, or 32% of revenues. This compares to GAAP operating income of $2.37 billion, or 35% of revenues, in the second quarter of 2010. Non-GAAP operating income in the second quarter of 2011 was $3.32 billion, or 37% of revenues. This compares to non-GAAP operating income of $2.67 billion, or 39% of revenues, in the second quarter of 2010.
    • GAAP net income in the second quarter of 2011 was $2.51 billion, compared to $1.84 billion in the second quarter of 2010. Non-GAAP net income in the second quarter of 2011 was $2.85 billion, compared to $2.08 billion in the second quarter of 2010.
    • GAAP EPS in the second quarter of 2011 was $7.68 on 326 million diluted shares outstanding, compared to $5.71 in the second quarter of 2010 on 322 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2011 was $8.74, compared to $6.45 in the second quarter of 2010.
    • Non-GAAP operating income and non-GAAP operating margin exclude the expenses related to stock-based compensation (SBC). Non-GAAP net income and non-GAAP EPS exclude the expenses related to SBC and the related tax benefits. In the second quarter of 2011, the charge related to SBC was $435 million, compared to $309 million in the second quarter of 2010. The tax benefit related to SBC was $91 million in the second quarter of 2011 and $70 million in the second quarter of 2010.

    Q2 Financial Highlights

    Revenues – Google reported revenues of $9.03 billion in the second quarter of 2011, representing a 32% increase over second quarter 2010 revenues of $6.82 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

    Google Sites Revenues – Google-owned sites generated revenues of $6.23 billion, or 69% of total revenues, in the second quarter of 2011. This represents a 39% increase over second quarter 2010 revenues of $4.50 billion.

    Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $2.48 billion, or 28% of total revenues, in the second quarter of 2011. This represents a 20% increase from second quarter 2010 network revenues of $2.06 billion.

    International Revenues – Revenues from outside of the United States totaled $4.87 billion, representing 54% of total revenues in the second quarter of 2011, compared to 53% in the first quarter of 2011 and 52% in the second quarter of 2010. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2011 through the second quarter of 2011, our revenues in the second quarter of 2011 would have been $167 million lower. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the second quarter of 2010 through the second quarter of 2011, our revenues in the second quarter of 2011 would have been $417 million lower.

    • Revenues from the United Kingdom totaled $976 million, representing 11% of revenues in the second quarter of 2011, compared to 11% in the second quarter of 2010.
    • In the second quarter of 2011, we recognized a benefit of $4 million to revenues through our foreign exchange risk management program, compared to $79 million in the second quarter of 2010.

    A reconciliation of our non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues is included in the accompanying financial tables.

    Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 18% over the second quarter of 2010 and decreased approximately 2% over the first quarter of 2011.

    Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 12% over the second quarter of 2010 and increased approximately 6% over the first quarter of 2011.

    TAC – Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, increased to $2.11 billion in the second quarter of 2011, compared to TAC of $1.73 billion in the second quarter of 2010. TAC as a percentage of advertising revenues was 24% in the second quarter of 2011, compared to 26% in the second quarter of 2010.

    The majority of TAC is related to amounts ultimately paid to our AdSense partners, which totaled $1.75 billion in the second quarter of 2011. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $355 million in the second quarter of 2011.

    Other Cost of Revenues – Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, increased to $1.06 billion, or 12% of revenues, in the second quarter of 2011, compared to $735 million, or 11% of revenues, in the second quarter of 2010.

    Operating Expenses – Operating expenses, other than cost of revenues, were $2.97 billion in the second quarter of 2011, or 33% of revenues, compared to $1.99 billion in the second quarter of 2010, or 29% of revenues.

    SBC – In the second quarter of 2011, the total charge related to SBC was $435 million, compared to $309 million in the second quarter of 2010.

    We currently estimate SBC charges for grants to employees prior to July 1, 2011 to be approximately $1.9 billion for 2011. This estimate does not include expenses to be recognized related to employee stock awards that are granted after June 30, 2011 or non-employee stock awards that have been or may be granted.

    Operating Income – GAAP operating income in the second quarter of 2011 was $2.88 billion, or 32% of revenues. This compares to GAAP operating income of $2.37 billion, or 35% of revenues, in the second quarter of 2010. Non-GAAP operating income in the second quarter of 2011 was $3.32 billion, or 37% of revenues. This compares to non-GAAP operating income of $2.67 billion, or 39% of revenues, in the second quarter of 2010.

    Interest and Other Income, Net – Interest and other income, net increased to $204 million in the second quarter of 2011, compared to $69 million in the second quarter of 2010.

    Income Taxes – Our effective tax rate was 19% for the second quarter of 2011.

    Net Income – GAAP net income in the second quarter of 2011 was $2.51 billion, compared to $1.84 billion in the second quarter of 2010. Non-GAAP net income was $2.85 billion in the second quarter of 2011, compared to $2.08 billion in the second quarter of 2010. GAAP EPS in the second quarter of 2011 was $7.68 on 326 million diluted shares outstanding, compared to $5.71 in the second quarter of 2010 on 322 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2011 was $8.74, compared to $6.45 in the second quarter of 2010.

    Cash Flow and Capital Expenditures – Net cash provided by operating activities in the second quarter of 2011 totaled $3.52 billion, compared to $2.09 billion in the second quarter of 2010. In the second quarter of 2011, capital expenditures were $917 million, the majority of which was related to land and building purchases, and IT infrastructure investments, including data centers, servers, and networking equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the second quarter of 2011, free cash flow was $2.60 billion.

    We expect to continue to make significant capital expenditures.

    A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included in the accompanying financial tables.

    Cash – As of June 30, 2011, cash, cash equivalents, and marketable securities were $39.1 billion.

    Headcount – On a worldwide basis, Google employed 28,768 full-time employees as of June 30, 2011, up from 26,316 full-time employees as of March 31, 2011. Net headcount growth (excluding approximately 450 employees hired as part of the acquisition of ITA Software) was similar to the first quarter of 2011.

    WEBCAST AND CONFERENCE CALL INFORMATION

    A live audio webcast of Google’s second quarter 2011 earnings release call will be available athttp://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

    FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our plans to invest in our products and other new opportunities, our expected stock-based compensation charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2010, which is on file with the SEC and is available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011. All information provided in this release and in the attachments is as of July 14, 2011, and Google undertakes no duty to update this information unless required by law.

    ABOUT NON-GAAP FINANCIAL MEASURES

    To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, free cash flow, and non-GAAP international revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP international revenues to non-GAAP international revenues” included in the accompanying financial tables.

    We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our “recurring core business operating results,” meaning our operating performance excluding not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes stock-based compensation allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, stock-based compensation, that are recurring. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, stock-based compensation is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

    Non-GAAP net income and EPS. We define non-GAAP net income as net income plus stock-based compensation less the related tax effects. We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with stock-based compensation. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

    Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

    Non-GAAP International Revenues. We define non-GAAP international revenues as international revenues excluding the impact of foreign exchange and hedging. Non-GAAP international revenues are calculated by translating current quarter revenues using prior quarter and prior year exchange rates, as well as excluding any hedging gains realized in the current quarter. We consider non-GAAP international revenues as a useful metric as it facilitates management’s internal comparison to our historical performance.

    The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

    Contact:
    Willa Lo
    Investor Relations
    +1-650-214-3381
    [email protected]

    Google Inc.
    CONSOLIDATED BALANCE SHEETS
    (In millions)
    As of
    December 31,
    2010*    		 As of
    June 30,
    2011
    (unaudited)
    Assets
    Current assets:
    Cash and cash equivalents $13,630 $10,320
    Marketable securities 21,345 28,798
    Accounts receivable, net of allowance 4,252 4,476
    Receivable under reverse repurchase agreements 750 1,020
    Deferred income taxes, net 259 153
    Income taxes receivable, net – 347
    Prepaid revenue share, expenses and other assets 1,326 1,328
    Total current assets 41,562 46,442
    Prepaid revenue share, expenses and other assets, non-current 442 465
    Deferred income taxes, net, non-current 265 –
    Non-marketable equity securities 523 893
    Property and equipment, net 7,759 9,003
    Intangible assets, net 1,044 1,381
    Goodwill 6,256 6,677
    Total assets $57,851 $64,861
    Liabilities and Stockholders’ Equity
    Current liabilities:
    Accounts payable $483 $567
    Short-term debt 3,465 1,217
    Accrued compensation and benefits 1,410 1,180
    Accrued expenses and other current liabilities 961 1,493
    Accrued revenue share 885 916
    Securities lending payable 2,361 1,936
    Deferred revenue 394 489
    Income taxes payable, net 37 –
    Total current liabilities 9,996 7,798
    Long-term debt – 2,985
    Deferred revenue, non-current 35 28
    Income taxes payable, non-current 1,200 1,469
    Deferred income taxes, net, non-current – 129
    Other long-term liabilities 379 461
    Stockholders’ equity:
    Common stock and additional paid-in capital 18,235 19,216
    Accumulated other comprehensive income 138 603
    Retained earnings 27,868 32,172
    Total stockholders’ equity 46,241 51,991
    Total liabilities and stockholders’ equity $57,851 $64,861

    * Derived from audited financial statements.

    Google Inc.
    CONSOLIDATED STATEMENTS OF INCOME
    (In millions, except share amounts which are reflected in thousands and per share amounts)
    Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
    2010 2011 2010 2011
    (unaudited)
    Revenues $6,820 $9,026 $13,595 $17,602
    Costs and expenses:
    Cost of revenues (including stock-based compensation expense of $8, $51, $14, $100) 2,467 3,172 4,919 6,107
    Research and development (including stock-based compensation expense of $202, $247, $393, $484) 898 1,234 1,716 2,456
    Sales and marketing (including stock-based compensation expense of $56, $74, $110, $152) 629 1,091 1,236 2,117
    General and administrative (including stock-based compensation expense of $43, $63, $83, $130) 461 648 871 1,244
    Charge related to potential resolution of Department of Justice investigation – – – 500
    Total costs and expenses 4,455 6,145 8,742 12,424
    Income from operations 2,365 2,881 4,853 5,178
    Interest and other income, net 69 204 87 300
    Income before income taxes 2,434 3,085 4,940 5,478
    Provision for income taxes 594 580 1,145 1,174
    Net income $1,840 $2,505 $3,795 $4,304
    Net income per share – basic $5.78 $7.77 $11.93 $13.37
    Net income per share – diluted $5.71 $7.68 $11.77 $13.19
    Shares used in per share calculation – basic 318,350 322,228 318,123 321,878
    Shares used in per share calculation – diluted 322,486 326,036 322,547 326,209

    Google Inc.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In millions)
    Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
    2010 2011 2010 2011
    (unaudited)
    Operating activities
    Net income $1,840 $2,505 $3,795 $4,304
    Adjustments:
    Depreciation and amortization of property and equipment 266 347 530 648
    Amortization of intangible and other assets 76 108 143 208
    Stock-based compensation expense 309 435 600 866
    Excess tax benefits from stock-based award activities (19) (9) (31) (33)
    Deferred income taxes 9 175 (4) 464
    Other – 19 2 55
    Changes in assets and liabilities, net of effects of acquisitions:
    Accounts receivable (243) (205) (197) (24)
    Income taxes, net (545) (171) (164) (98)
    Prepaid revenue share, expenses and other assets (34) (70) (191) (148)
    Accounts payable 79 50 199 77
    Accrued expenses and other liabilities 319 260 (75) 297
    Accrued revenue share 11 39 34 6
    Deferred revenue 17 36 28 69
    Net cash provided by operating activities 2,085 3,519 4,669 6,691
    Investing activities
    Purchases of property and equipment (476) (917) (715) (1,807)
    Purchases of marketable securities (12,934) (13,364) (25,421) (20,955)
    Maturities and sales of marketable securities 11,135 8,982 20,630 13,627
    Investments in non-marketable equity securities (227) (212) (230) (343)
    Cash collateral received (returned) related to securities lending 2,870 57 2,870 (424)
    Investments in reverse repurchase agreements – (445) – (270)
    Acquisitions, net of cash acquired, and purchases of intangible and other assets (229) (715) (419) (863)
    Net cash provided by (used in) investing activities 139 (6,614) (3,285) (11,035)
    Financing activities
    Net proceeds (payments) related to stock-based award activities 39 (28) 1 88
    Excess tax benefits from stock-based award activities 19 9 31 33
    Repurchase of common stock in connection with acquisitions (704) – (801) –
    Proceeds from issuance of debt, net of costs – 5,846 – 8,030
    Repayments of debt – (4,869) – (7,304)
    Net cash provided by (used in) financing activities (646) 958 (769) 847
    Effect of exchange rate changes on cash and cash equivalents (57) 42 (100) 187
    Net increase (decrease) in cash and cash equivalents 1,521 (2,095) 515 (3,310)
    Cash and cash equivalents at beginning of period 9,192 12,415 10,198 13,630
    Cash and cash equivalents at end of period $10,713 $10,320 $10,713 $10,320

    Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures

    The following table presents certain non-GAAP results before certain material items (in millions, except share amounts which are reflected in thousands and per share amounts, unaudited):

    Three Months Ended June 30, 2010 Three Months Ended June 30, 2011
    GAAP Actual Operating
    Margin (a)    		 Adjustments Non-GAAP
    Results    		 Non-GAAP
    Operating
    Margin (b)    		 GAAP Actual Operating
    Margin (a)    		 Adjustments Non-GAAP
    Results    		 Non-GAAP
    Operating
    Margin (b)
    $309 (c) $435 (d)
    Income from operations $2,365 34.7% $309 $2,674 39.2% $2,881 31.9% $435 $3,316 36.7%
    $309 (c) $435 (d)
    (70) (e) (91) (e)
    Net income $1,840 $239 $2,079 $2,505 $344 $2,849
    Net income per share – diluted $5.71 $6.45 $7.68 $8.74
    Shares used in per share calculation – diluted 322,486 322,486 326,036 326,036
    (a) Operating margin is defined as income from operations divided by revenues.
    (b) Non-GAAP operating margin is defined as non-GAAP income from operations divided by revenues.
    (c) To eliminate $309 million of stock-based compensation expense recorded in the second quarter of 2010.
    (d) To eliminate $435 million of stock-based compensation expense recorded in the second quarter of 2011.
    (e) To eliminate income tax effects related to expenses noted in (c) and (d).

    Reconciliation from net cash provided by operating activities to free cash flow (in millions, unaudited):

    Three Months Ended
    June 30, 2011
    Net cash provided by operating activities $3,519
    Less purchases of property and equipment (917)
    Free cash flow $2,602
    Net cash used in investing activities* $(6,614)
    Net cash provided by financing activities $958

    * Includes purchases of property and equipment.

    Reconciliation from GAAP international revenues to non-GAAP international revenues (in millions, unaudited):

    Three Months Ended
    June 30,
    2011    		 Three Months Ended
    June 30,
    2011
    (using Q2’10’s FX rates) (using Q1’11’s FX rates)
    United Kingdom revenues (GAAP) $976 $976
    Exclude foreign exchange impact on Q2’11 revenues using Q2’10 rates (81) –
    Exclude foreign exchange impact on Q2’11 revenues using Q1’11 rates – (29)
    Exclude hedging gains recognized in Q2’11 – –
    United Kingdom revenues excluding foreign exchange and hedging impact (Non-GAAP) $895 $947
    Rest of the world revenues (GAAP) $3,895 $3,895
    Exclude foreign exchange impact on Q2’11 revenues using Q2’10 rates (336) –
    Exclude foreign exchange impact on Q2’11 revenues using Q1’11 rates – (138)
    Exclude hedging gains recognized in Q2’11 (4) (4)
    Rest of the world revenues excluding foreign exchange and hedging impact (Non-GAAP) $3,555 $3,753

     

    The following table presents our revenues by revenue source (in millions, unaudited):

    Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
    2010 2011 2010 2011
    Advertising revenues:
    Google websites $4,499 $6,232 $8,938 $12,111
    Google Network Members’ websites 2,063 2,484 4,099 4,911
    Total advertising revenues 6,562 8,716 13,037 17,022
    Other revenues 258 310 558 580
    Revenues $6,820 $9,026 $13,595 $17,602

     

    The following table presents our revenues, by revenue source, as a percentage of total revenues (unaudited):

    Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
    2010 2011 2010 2011
    Advertising revenues:
    Google websites 66% 69% 66% 69%
    Google Network Members’ websites 30% 28% 30% 28%
    Total advertising revenues 96% 97% 96% 97%
    Other revenues 4% 3% 4% 3%
    Revenues 100% 100% 100% 100%

     

     

    A conference call is scheduled for 4:30 Eastern. A webcast will take place here.

  • PayPal Aims to Save You From Being Eaten Alive by the Living Dead

    PayPal Aims to Save You From Being Eaten Alive by the Living Dead

    In light of our other recent zombie coverage and Bruce Campbell on Twitter news, it seems appropriate to bring up a new PayPal commercial community-made video that was unveiled today at a company event, which shows how you may be able to survive a zombie apocalypse if you’re a PayPal user.

    Hat tip to All Things D’s Tricia Duryee for sharing:

    Update: This was originally reported to be a PayPal commercial, but a spokesperson for the company tells WebProNews it’s not actually one of their commercials, but was created by the PayPal community. Don’t expect to see it on TV (unfortunately).

    It’s also worth noting how horror scenarios are being used in advertising these days. A couple weeks ago, we first saw a Woolite ad directed by Rob Zombie.

    I still love this classic Freddy Krueger Fonzies commercial though:

    Some stats subtly dropped at the end of the PayPal video:

    • 100 million active users
    • More than $3,500 per second
    • $7.5 billion yearly via mobile by the end of 2013

    By 2015, we’re all going to live our lives digitally, according to PayPal President Scott Thompson. That means without wallets:

    PayPal also updated its iPhone app this week. With this, all app features are displayed on one page, transaction history details are “just a tap away,” and filtering of transaction history has been improved.

  • Report: Google to Launch Data Exchange for Advertisers in Coming Weeks

    Report: Google to Launch Data Exchange for Advertisers in Coming Weeks

    If you use Google products, Google probably has a fair amount of data about you. Of course, it provides a dashboard, where you can see just what they do have, and adjust accordingly, but it’s unlikely that the majority of users bother, while many probably don’t even realize it’s available to them.

    Now that Google+ is out, Google is getting a whole lot more data, and if the new social network were ever to reach Facebook-like levels of usage, the amount of data would just be enormous. This kind of data has been invaluable to Facebook and its advertisers, and Google could soon have a lot more to offer its own advertisers.

    On top of that, according to Michael Learmonth at AdAge, the company is building an exchange for advertisers to buy and sell data. He reports:

    Here’s how a data exchange works: publishers and third-party providers, such as BlueKai and Exelate, would be able to feed their data into the market and advertisers could dip in and buy audience segments, such as people shopping for new cars or planning a trip, soccer moms in Ohio, or readers of certain sites like The New York Times. That data, attached to a cookie, is used to target advertising to the right people. Online publishers using Google’s ad server, DoubleClick, would be able to sell data on their audiences in the exchange as easily as they might sell ad space.

    Google declined to comment on the specifics or offer a timetable for a data-exchange product, though executives briefed on their plans believe it is perhaps weeks away from rolling out at least some of its functionality.

    After interviewing Google ad guy Neal Mohan, Learmonth also says the end result might not be a single product, but capabilities across Google’s online display infrastructure.

    Google is currently in the process of trying to acquire ad optimization firm AdMeld. The purchase is currently being scrutinized by the Department of Justice. The investigation is aimed at determining if Google’s dominance in search advertising could make this an anticompetitive buy, and will examine Google’s plans for expansion strategies related to the acquisition.

    “The acquisition is designed to help publishers get the most from the rapidly growing display advertising industry, which is both complicated and incredibly competitive — the emergence in recent years of a huge variety of technologies for publishers, like Admeld’s, is great evidence of that,” a Google spokesperson has been quoted as saying. The Federal Trade Commission has since launched its own antitrust investigation into Google’s broader business practices.

  • Kenny Powers Becomes CEO of K-Swiss, Launches Viral Ad Campaign

    California-based footwear makers K-Swiss have just debuted a bold new viral advertising campaign this weekend starring Danny McBride in his role as Eastbound & Down‘s Kenny Powers. Verdict: The foul-mouthed baseball player makes one hell of a spokesman.

    Here’s the basic concept of the ad campaign: Kenny Powers has taken over (in a hostile fashion) K-Swiss and become their new CEO. Why did he do this? In order to change the sports world and stop people from acting like “goddamn pussies” all the time, according to him. To fulfill this goal, he has hired some top athletes to help him run the company.

    It looks like K-Swiss has launched this viral campaign to promote their new shoe called “Tubes” or as Kenny Powers calls them Totally Unbelievably Badass (and) Extremely Stealth-like. They have taken a multi=platform approach, taking to Twitter, Facebook and YouTube to promote their new product.

    On their YouTube Channel, K-Swiss has released a series of videos that show what Kenny Powers is doing as their new CEO. With the help of people like Michael Bay, The Biggest Loser‘s Jillian Michaels, and KC Chiefs QB Matt Cassel, the results are some of the best commercials I’ve seen in quite some time. This longest of the commercials contains components from most of the shorter ones. It is NSFW, as you would expect a Kenny Powers commercial to be, and just shows what companies can get away with on YouTube that they could never do on TV. Check it out –

    [UPDATE: The original video I had embedded here has been removed by the user (K-Swiss Inc.), about 3 minutes after I put up this article. It contained quite a bit of foul language. Here’s another video from the ad campaign, which is free of bad language]

    [UPDATE 2: Here is the original video, entitled “MFCEO,” uploaded by a user that’s not affiliated with K-Swiss. So, enjoy – it may be removed at any time.]

    K-Swiss announced their new campaign via Twitter on Friday, saying that Powers had taken over and linking to their Facebook page.

    @KSWISS
    K•SWISS    Kenny Powers has taken over @KSWISS as the new CEO! Things will never be the same. #ImTheCEO

    http://on.fb.me/oQqWFO 2 days ago via HootSuite · powered by @socialditto

    They began two new hashtags: #ImTheCEO and #WhenKennyPowersIsYourBoss. The latter actually started trending over the weekend, probably thanks to its adoption by the popular fake-account of Kenny Powers, @KFUCKINGP. That account has almost 300,000 followers on Twitter.

    @KFUCKINGP
    Kenny Powers    Got rid of @KSWISS‘ “Employee of the Month,” because when #ImTheCEO, I am THE damn employee of EVERY damn month. http://on.fb.me/oQqWFO 23 hours ago via HootSuite · powered by @socialditto

    @KFUCKINGP
    Kenny Powers    KENNY POWERS IS FUCKING BACK…
    As @KSWISS‘ new CEO! I’ve taken over and nobody is fucking safe. #ImTheCEO http://t.co/rX61oNt 2 days ago via Twitter for iPhone · powered by @socialditto

    @tompkinsjr
    Ryan Tompkins    #WhenKennyPowersIsYourBoss sexual harrassment is not frowned upon, it’s part of the job requirements. @KFUCKINGP 19 hours ago via Twitter for Android · powered by @socialditto

    That account is explicitly “not affiliated with HBO or Eastbound and Down,” but you have to think that K-Swiss reached out to them when this viral campaign began. Not only does it get involved in the hashtags and humor of the thing, but @KFUCKINGP links to K-Swiss’ Facebook pages on multiple occasions.

    That aforementioned Facebook promotion looks something like this –

    K-SWISSWe’re still trying to figure out why our new CEO Kenny Powers is paying all K-SWISS employees in $1 dollar bills. 1 day ago · 58 likes · 14 comments

    Besides providing for a ridiculously awesome viral video, do you think this is a good viral campaign by K-Swiss? Let us know how you feel.

  • Is Advertising the Best Option for a Business Model?

    It’s no secret that many businesses today, especially in the tech industry, create great services but wait until after their service has taken off to come up with a revenue model. Twitter, for instance, is one very useful company that began this way.

    This model works in many cases, such as with Twitter, but the question of whether or not it is an effective business practice is still debatable.

    Should the business model or the success of the business come first? What do you think?

    Many of these online businesses find their business model in an advertising platform. While we’ve seen multiple companies have great success with advertising, studies show that consumers are often frustrated by the excessive ads.

    In a recent interview with WebProNews, Jeff Tinsley, the CEO for MyLife, told us that businesses have more than one option when it comes to finding a revenue model. He said, “Advertising is not the only model that works, as proven by us and proven by LinkedIn.”

    In addition to MyLife’s free service, it also has a premium model with three different subscription services for users. He told us that users are willing to pay for what they consider to be valuable. In this case, in particular, users see value in connecting with people they want to hire and vice versa.

    Tinsley said that both sides benefit, so it makes it something that is worth paying for. He went on to say that this model has worked so well for MyLife that there is potential for an IPO in the future. He said that it is something that they “seriously want to take a look at.”

    More than likely, opinions are mixed on determining the best form of monetization for a business. However, I think it’s safe to say that most of the deciding factors depend on the business itself. Any thoughts?

  • Q2 Report: Online Advertising Strong Across All Channels

    Online advertising spend showed a strong second quarter across all channels despite continuing uncertainties from the economy and higher gas prices, according to a new report from IgnitionOne.

    The report is based on a survey of digital media that showed increases in year-over-year spend across paid search, display advertising, and Facebook. Facebook advertising, the firm says, was particularly strong.

    This would somewhat reflect another recent report from MerchantCircle, which found that Facebook ads are gaining popularity among small businesses.

    According to the IgnitionOne survey, Facebook advertising spend is up 22% year-over-year on a same-client-basis, with impressions up 11%.

    Facebook Ads

    “However, Facebook advertising has experienced high rates of growth from new marketer adoption in the past year, contributing a 280% increase in spend across all clients, and 200% increase in impressions YOY,” IgnitionOne tells WebProNews. “Spending patterns within an advertiser’s campaign lifecycle show marked growth declines after the first few months, suggesting advertisers are still in a ‘test and learn’ phase with the new and immature ad platform.”

    Despite the increasing success of Facebook ads, Google was still the “standout performer,” according to the firm. Google showed grew to 80% share of all U.S. search advertising spend in Q2, compared with Yahoo/Bing at 19% share. “Google also saw dominating growth in other key search metrics, including impressions, clicks, CTR and eCPM,” the firm tells us. “Google’s AdEx commands 51% share of U.S. RTB display spend, compared to Yahoo!’s Right Media at 49% share. This marks a significant jump in Google’s market share in display YOY.”

    It will be interesting to see how a jump in market share might impact a pending Department of Justice probe of Google’s pending acquisition of ad-optimization platform AdMeld. The investigation is aimed at determining if Google’s dominance in search advertising could make this an anticompetitive buy, and will examine Google’s plans for expansion strategies related to the acquisition. Google, of course, says that this is not an anti-competitive acquisition.

    “The acquisition is designed to help publishers get the most from the rapidly growing display advertising industry, which is both complicated and incredibly competitive — the emergence in recent years of a huge variety of technologies for publishers, like Admeld’s, is great evidence of that,” a Google spokesperson is quoted as saying. The Federal Trade Commission has since launched its own antitrust investigation into Google’s broader business practices.

    U.S. paid search spend grew a steady 12% year-over-year in Q2, and was flat compared with Q1 growth, according to IgnitionOne. “The quarter began strong, but dipped sharply in June to nearly flat growth on a YOY basis,” the firm says. “While this decline did not have a significant impact on the quarter overall, it could be an indicator of future months’ performance, and expectations for Q3 are cautiously optimistic.”

    Google launched its latest attempt at a social network today. While it is being released under the veil of an early-stages project, it will be interesting to see what impact it might have on Google’s advertising offerings in the months and years ahead.

  • Google Extends Ad Targeting Based on Browsing History. Good or Bad?

    Remember Google’s interest-based advertising? You know, where they serve you ads based on your browsing history, and allow advertisers to behaviorally target users? It has now rolled out on a mass scale after a two-year beta run. All advertisers can now utilize this targeting.

    What do you think about Interest-based advertising? Let us know in the comments.

    The way Google’s Interest-based advertising works is that sites that join the Google Display Network (which includes Google’s Display partners, YouTube, and specific Google properties that display Adwords ads), and serve ads to users based on browsing history. Google’s Display Network and Search Network are separate, and combine to make up the entire Google Network, but advertisers have the option of running their ads on the Google Network.

    On the Inside AdWords blog, Google Display Network Product Manager Jon Krafcik writes:

    We’ve been slowly expanding the availability of this feature, and as of today, interest categories are now available to all AdWords advertisers. It works like this: our system looks at the types of pages a user visits, taking into account how recently and frequently those pages have been visited, and then associates their browser with relevant interest categories. Using these categories, you can show ads to the people most likely to purchase your products or services, and you can reach them across all types of sites in the Google Display Network in addition to contextually relevant sites.

    With over 1,000 interest categories from ecotourism to mobile phones, we’re confident you’ll find a category that fits your business. And with over 500 million users interested in these categories who visit the Display Network every day, you’ll be able to reach a huge number of potential customers. You pay only for clicks or impressions at auction prices, as always. Our beta advertisers have used interest categories to successfully meet all kinds of goals, from an advertiser increasing brand lift by 40% to a shoe retailer driving 400% more conversions at a lower advertising cost per sale.

    Google claims that the Display Network reaches 70% of unique Internet users around the world. “The Display Network has the advantage of reaching potential customers at different points of the buying cycle,” Google says. “Not every potential customer is focused on conducting a search. Not every visitor is ready to buy at a given moment. The advertiser’s challenge is to capture their attention at the right time. For example, a user might begin a search for digital cameras with just an interest in reading reviews. While reading a review, though, that user might note the ads of online retailers or click on the ads themselves. With search-only advertising, this customer would have been missed.”

    The addition of interest-based advertising should theoretically help the advertiser in reaching the customer at the right time.

    Privacy

    Here’s a video Google put out about privacy as it relates to interest-based advertising, back in ’09:

    Google users can edit the categories of ads they wish to be shown. I’m not sure the average user will know to do this or even think about it, but Google has a page where you can go and adjust this, or even opt-out entirely. Right now, Google has me set up to view ads from the following categories: celebrities and entertainment news, online video, advertising and marketing, Internet software, Mac OS, search engines, SEO and marketing, business news, politics, and social networks.

    While these categories, I would imagine are relevant enough to me, I would hardly say they’re representative of my interests at large or even my web use at large. Google will let us add (or remove) categories, as we like, however. You can add sub-categories from Arts & Entertainment, Autos & Vehicles, Beauty & Fitness, Books & Literature, Business & Industrial, Computers & Electronics, Finance, Food & Drink, Games, Hobbies & Leisure, Home & Garden, Internet & Telecom, Jobs & Education, Law & Government, News, Online Communities, People & Society, Pets & Animals, Real Estate, Reference, Science, Shopping, Sports, Travel, World Localities, and Demographics.

    The interests are associated with the advertising cookie that’s stored in your web browser. When you opt out, Google disables your cookie and no longer associates interest and demographic categories with your browser. Your ads are likely to be less relevant as a result. Here’s another privacy video from Google talking specifically about cookies:

    On the Ads Preferences page, Google says, “Google is a participating member of the Network Advertising Initiative and follows the industry privacy standards for online advertising. You can opt out of this cookie, as well as other companies’ cookies used for interest-based ads, by visiting the aboutads.info choices page. If you want to persist your opt-out of interest-based ads from all NAI member companies, you can install the Keep My Opt-Outs plugin.”

    The “Keep my opt-outs” plugin is essentially a “Do Not Track” mechanism that lets users opt out from receiving personalized ads as they browse the web. More on this here.

    Competition

    As Facebook becomes an increasingly attractive alternative for online ad spending, Google is smart to ramp up its targeting abilities, although I’m not sure they match the targeting power of Facebook’s. Google’s is much more about timing, which can certainly be effective, but in reality can be hit or miss. Facebook has the advantage of all its users “likes” which can really be far more representative of their “interests” than simply listing somewhat broad categories in their Google settings.

    For example, with Facebook Ads, I can create an ad that targets 21-year-old males who live in Lexington, KY, and Like the “It’s Always Sunny in Philadelphia,” the band “My Morning Jacket,” and drink “Pabst Blue Ribbon”. That can be pretty powerful. There’s a reason these ads are gaining popularity, particularly among local businesses. I report from MerchantCircle this month found that 22% of local merchants have used Facebook Ads, and that two-thirds of them would use them again.

    Facebook and Google are becoming competitors in more ways than one, but advertising is obviously a key area, as it’s the real money maker for both companies. This also comes at a time as Google’s future in advertising is uncertain. The company is facing multiple antitrust ordeals, including a potentially lengthy investigation from the U.S. Federal Trade Commission and questioning from the Senate Antitrust Subcommittee. Meanwhile, the U.S. Department of Justice is looking into the company’s proposed acquisition of ad optimization firm AdMeld.

    The FTC is said to be sending out requests for information from companies that deal with Google, and it will be very interesting to see which companies these include. Google will argue things like “the competition is a click away,” and probably that it’s main competitor Bing (using Microsoft AdCenter, which is also powering Yahoo search advertising) continues to gain market share from month to month. In online advertising alone, Google may also point to an increasingly popular Facebook advertising platform, as Facebook is clearly a force to be reckoned with on the web with its nearly 700 million registered users (yes, the number is disputed, but there’s not denying that Facebook is an enormous force).

    Is interest-based advertising good for the web? Tell us what you think.

  • Google AdMeld Deal Draws DoJ Scrutiny

    Google AdMeld Deal Draws DoJ Scrutiny

    Earlier this week, Google officially announced that it has agreed to acquire ad optimization firm AdMeld, and now, as expected it appears it will draw government scrutiny. Pretty standard really.

    Bloomberg is reporting that the $400 million deal will be reviewed by the U.S. Department of Justice, citing two people familiar with the matter. Since all transactions over $63 million have to be reported for review by authorities, and this one in particular involves Google and advertising, this hardly comes as a shock.

    The publication shares a statement from Google spokesperson Rob Shilkin, who says that the deal won’t hurt competition, and “The acquisition is designed to help publishers get the most from the rapidly growing display advertising industry, which is both complicated and incredibly competitive — the emergence in recent years of a huge variety of technologies for publishers, like Admeld’s, is great evidence of that.”

    Earlier this week, on the Official Google Blog, Neal Mohan VP of Display Advertising wrote:

    By combining Admeld’s services, expertise and technology with Google’s offerings, we’re investing in what we hope will be an improved era of flexible ad management tools for major publishers. Together with Admeld, we hope to make display advertising simpler, more efficient and more valuable, provide improved support and services, and enable publishers to make more informed decisions across all their ad space. These are all things our publisher partners have been asking us to further invest in. Of course, Admeld will continue to support other ad networks, demand side platforms, exchanges and ad servers, to yield the best possible results for publishers.

    We believe that this investment will be an important step to help online publishers, and will further improve and grow the display advertising industry as a whole.

    The investigation will reportedly aim to determine if Google’s dominance in search advertising could make this an anticompetitive buy, and will examine Google’s plans for expansion strategies related to the acquisition. The DoJ has not commented.

    Meanwhile, an FTC investigation into Google’s broader search dominance and competitive practices is also expected to take place.

    The DoJ recently approved Google’s $700 million acquisition of ITA Software.

  • Should Google Display Click Counts on Ads?

    Should Google Display Click Counts on Ads?

    Google is testing an AdWords feature that displays how many clicks an ad has received for a particular advertiser. It’s unclear how widespread the testing is, and whether or not Google will actually turn this into an available feature on a broad scale.

    Nor do we know, if Google does make this widely available, whether it will be standard or optional for the advertiser. Affiliate marketer Vinny O’Hare was able to capture a screenshot (hat tip: Search Engine Land):

    Ads Display click counts

    “I was up late watching tv when I saw a commercial for the Oreck air purifier and since I didn’t want to sit there for a half hour to learn the price I went to Google to see what they are going for,” writes O’Hare. “I was surprised to see the amount of clicks the advertisers has mixed in with the PPC ads on the results page. Knowing this can’t be a normal thing I took a screen shot of it. Click on the image to see it in full size. I am not sure Google wants to put out this info to everyone. I did a few more searches and it was on a few other searches but not many.  It does help people doing ppc to see what their competition is actually doing.”

    David Iwanow, co-author of O’Reilly’s Google Advertising Tools, commented, “The issue with any of this is that what is based on… is it local data, is it search data, is it ppc data, is it data from the beginning of time or just this month? The problem with any deployment like this is that it’s another black box that you have to try and explain to a client or deal with as an advertiser because you started a new campaign and people aren’t clicking on your ads because it shows you only have ever had 10 clicks…It’s another element that is going to potentially put advertisers in a box and make them weigh up the options of chasing a higher number again…. ie PageRank v3.”

    There’s some interesting discussion going on about the feature in the WebmasterWorld forum. User “Tropical Island” writes:

    I don’t know that I want my competitors knowing how many clicks I’ve been getting or how many I’ve paid for over the years.

    I definitely think that it would encourage buyers to click on heavily clicked on ads. There is a reliability factor there as well.

    LucidSW wonders if this could be some sort of extension to the +1 button. Google is using the +1 button on ads. While not the same as clicks, it would have a similar (perhaps not entirely the same) impact on ad clickability, one would think. If a large number of clicks are registered, some users might be more inclined to check it out for themselves.

    LucidSW also makes the point that competitors knowing the number of clicks might be a “small price to pay” for getting more clicks.

    In the thread, there is also a running theme that some users don’t understand that these ads are actually ads, and may assume that they’re regular search results, making the regular results appear less valuable, because they don’t display large numbers of clicks. Everybody in the thread so far seems to be in agreement on this, though personally, I have a hard time believing that this is the case for too many users, especially considering that they’re clearly marked with the word “ads.” Furthermore, the display in the new ads reads, “x clicks for this advertiser.”

    O’Hare noted that he saw different things for the same keyword in Firefox and Chrome.

    What do you think of the feature? Should Google make this widely available? Mandatory or optional? Tell us what you think.

  • Happy Fathers Day From The Beastie Boys

    The Beastie Boys have sure embraced viral marketing in past few months. They made a splash back in April when their star studded “Fight For Your Right Revisited Trailer” blew up the interwebs. The video, which served as a promotion for their then upcoming album Hot Sauce Committee Part Two, featured the likes of Seth Rogen, Jack Black, Will Ferrell and Danny McBride.

    “Just in time” for Father’s Day The Beastie Beastie Boys have released a new video to promote their new album. This time, they are promoting the June 21st release of Hot Sauce Committee Part Two on vinyl. Yes, I am aware that Father’s day is this Sunday, June 19th. I’m sure the Beastie Boys are as well. Let’s not let math get in the way of this.

    @beastieboys
    Beastie Boys    Your Dad puts up with enough of your shenanigans, why not aggravate him some more on Father’s Day? http://t.co/9Kl3Xxf 1 day ago via web · powered by @socialditto

    This one isn’t star studded, but it is so awesomely strange that it quickly makes up for that. A happy family sits down for a nice cookout, but things get interesting when dad starts to grill his vinyl collection. Check it out below –

    So forget the coupons for a free car wash. Forget the ties, #1 Dad shirts and executive pen sets. Your father really wants some Beastie Boys. The album, released May 3rd in the U.S., has received pretty universal acclaim. This writer has regrettably failed to find the opportunity to give it a thorough listen, but I might have to remedy that this weekend.

    This classic gem has put me in a great mood, enjoy – ALI BABA AND THE FORTY THIEVES!

  • More to Google Offers Than Meets the Eye?

    More to Google Offers Than Meets the Eye?

    Let me take you back to the beginning of the year for a minute. Groupon had recently turned down a buyout offer from Google reported at around $6 billion. Everyone was wondering what Google’s next move was going to be. Clearly they were interested in entering the Groupon/daily deals space. It was highly unlikely that Google was just going to give up on these aspirations because Groupon turned them down.

    Google’s Marissa Mayer did an interview with Media Beat, reminding us that Google already had some things that could compete with Groupon, and with the right integration and implementation of products, could be a viable player in the space.

    “I think that when you look at our overall suite of services, especially around our advertising, we already have some things that are like this,” Mayer said. “We have things like coupons and offer extension ads that allow merchants to basically make offers to our users. So we’re looking at how we can take that technology and put it to use, especially in the location space.”

    Here’s the full interview:

    Fast forward a bit, and Google officially launched its first Google Offers deals in Portland at the beginning of this month. The product is, for all intents and purposes, essentially a Groupon clone. While some may have dismissed Google’s entry into this space as just that, now comes an interesting discovery by Search Engine Land’s Greg Sterling, which seems to fall more in line with a broader vision, and with Mayer’s discussion.

    Sterling happened across a Google “offer ad” in the wild (which has been known to be in testing), but when he clicked “view offer,” he was taken to an offer page with a button for “save to My Offers,” that when clicked takes you to a “My Offers” dashboard, which he describes as a “repository for several deal types that Google appears to have up its sleeve”.

    So, all of these Google-based offers would appear in the same place in your Google account, making for an easy way to access them, which could be huge for user engagement.

    In addition, the concept would seemingly give Google more flexibility in its own “offers” offerings – to delve more into other areas, such as location, like Mayer talked about, for example. The thing about Google is that it has so many products that it could find ways to integrate offers into. So many products tied to that one Google account. Think search, Gmail, Latitude, Places, etc. They have a lot of ways to potentially get offers in front of users’ eyeballs, and an email-style Groupon clone appears to be only a part of their strategy.

  • Google Launches New Tools for Display Network Advertisers

    Google announced some new tools for the Google Display Network, which it says will give users better measurement, transparency, and value for display campaigns.

    One feature is Relative CTR, which shows you how your ads perform relative to other ads running in the same places on the Google Display Network. “User behavior on web pages varies depending on the type of page users are on,” says Dan Friedman of Google’s Inside AdWords crew. “For example, users may interact with ads on a product review page differently than with ads on a blog. Clickthrough rate (CTR) tells you how often users click on your ads, but CTR can’t tell you how your ads perform compared to other ads on the same page.”

    The feature can be accessed by going to the “Ad Groups” tab in your AdWords account, then going to “Customize columns,” and selecting “Relative CTR” from the drop-down menu.

    Another feature is Impression Share, aimed at helping measure advertisers’ online presence. It represents the percentage of times your ads were shown out of the total available impressions for which they were eligible for. “In other words, impression share provides you with your online share of voice,” says Friedman. The Lost IS (budget) metric will let you know how many impressions you’re losing due to your budget. Lost IS (rank) tells you how many impressions you’re losing because of Ad Rank.

    There is a Content Ads Diagnostic Tool (CADT), which tells you why your ads aren’t showing on the Display Network. Google will start releasing this to a small number of advertisers this month, and then will fully launch it in July.

    Another recently launched feature is the Unseen Impression Filter, which ensures that CPM advertisers aren’t charged for impressions that users have a small chance of seeing.

    Each of the new features is available in all AdWords languages. More info here.

  • Google’s AdMeld Acquisition Made Official

    Google’s AdMeld Acquisition Made Official

    Last week, a report came out that Google had acquired AdMeld for around $400 million. While the price has not been confirmed, Google did officially announce the acquisition today.

    Google’s VP of Display Advertising, Neal Mohan, wrote on the Official Google Blog:

    To help major publishers get the most out of the rapidly changing and growing display ad landscape, we’ve signed an agreement to acquire Admeld, a New York-based yield optimization firm.

    There are lots of different ways that they can sell their display ad space. Often, they’ll sell space directly to advertisers or agencies, using an ad server to actually deliver and measure the ads (like Microsoft’s Atlas, AOL’s AdTech, DoubleClick’s DFP, Yahoo’s APT, OpenX, Zedo, 24/7 Real Media and others). Alternatively, they’ll make their ad space available indirectly—to hundreds of ad networks (like Advertising.com, Specific Media, Collective, 24/7, ValueClick, Vibrant, AdSense, Undertone and others), each with thousands of advertisers, or to various advertising exchanges or technology platforms (like Yahoo’s Right Media, OpenX, DoubleClick Ad Exchange, ContextWeb, AdBrite, AppNexus and others) that match them with ad buyers (like ad networks and demand side platforms) who represent advertisers, in real-time marketplaces.

    Some publishers also work with a “yield optimization” provider (such as Rubicon Project, Pubmatic and others) that supplies technology to select ads from across these many indirect options, while providing personalized service and support. In a very complex and rapidly growing display ad landscape, that’s what Admeld does.

    …

    By combining Admeld’s services, expertise and technology with Google’s offerings, we’re investing in what we hope will be an improved era of flexible ad management tools for major publishers. Together with Admeld, we hope to make display advertising simpler, more efficient and more valuable, provide improved support and services, and enable publishers to make more informed decisions across all their ad space. These are all things our publisher partners have been asking us to further invest in. Of course, Admeld will continue to support other ad networks, demand side platforms, exchanges and ad servers, to yield the best possible results for publishers.

    @google
    A Googler    Helping publishers get the most from display advertising with Admeld http://goo.gl/YJMq6 32 minutes ago via Tap11 · powered by @socialditto

    AdMeld CEO Michael Barrett led global sales at Fox Interactive Media, Co-Founders Ben Barokas and Brian Adams held senior positions at AOL, and Chief Media Officer Jason Kelly was VP of Strategy & Revenue for Time Inc. Digital. It is this veteran leadership that the company plays up in its pitch.

    “When I joined Admeld as CEO about 13 months later, the company had dozens of clients, most of whom reported at least a 100% increase in their revenues from ad networks,” says Barrett on the AdMeld Blog. “What’s more, the team had learned that technology, while the foundation of Admeld, wasn’t the full solution. In truth, publishers didn’t want just another platform. They wanted a partner who understood their business and could help them use technology to navigate this increasingly complex space. This mix of expertise and technology still resonates with publishers today, and it will always be the cornerstone of Admeld’s approach.”

    “Over the last two years in particular, display advertising has undergone more innovation than in the previous ten years combined,” he adds. “RTB, data management, private exchanges: the space has come a long way, but despite all the progress, it still has a long way to go. Our goal, together with Google, is to continue to move display advertising forward and ensure that publishers stay on the cutting edge.”

    The deal must still go through regulatory review. During this time, the two companies will remain independent from one another.

  • Google Buys AdMeld for $400 MIllion: Report

    Google Buys AdMeld for $400 MIllion: Report

    According to an unconfirmed report from Michael Arrington at TechCrunch, citing “multiple sources,” Google has acquired ad optimization platform AdMeld for around $400 million.

    AdMeld CEO Michael Barrett led global sales at Fox Interactive Media, Co-Founders Ben Barokas and Brian Adams held senior positions at AOL, and Chief Media Officer Jason Kelly was VP of Strategy & Revenue for Time Inc. Digital. It is this veteran leadership that the company plays up in its pitch.

    “It’s been an exciting year in the display advertising business—the movement of media online and the emergence of new technologies are causing incredible growth, and we’re investing significantly to help improve display advertising for publishers, advertisers and users,” Google’s VP of Display Advertising, Neal Mohan said in a blog post this week. “But I believe we’re poised to make even greater advances in the years ahead. We’re at the beginning of a user-focused revolution, where people connect and respond to display ads in ways we’ve never seen before.”

    No mention was made of the acquisition of course, and both companies have yet to comment on the deal, but the timing is interesting.

    Mohan went on to predict that by 2015, the number of display ad impressions will decrease by 25% per person, engagement rates ill increase by 50%, people will have a direct say in 25% of the ads they see, 35% of campaigns will primarily use metrics beyond clicks and conversions, 25 billion ads per day will tell people why they are seeing them, and over 40% of online Americans will name display ads as their favorite ad format.

    The predictions were presented at the IAB’s Innovation Days at Internet week.

    Peter Kafka at All Things Digital says the AdMeld deal will draw a great deal of scrutiny from government regulators, based on the size of the deal and Google’s currently strong presence in the display ad space. Sounds about right.

  • Facebook Ads Gaining Popularity Among Local Businesses

    22% of local merchants have used Facebook Ads, and two-thirds of them would use them again, according to a survey from MerchantCircle. The firm’s quarterly Merchant Confidence Index, a survey of about 5,000 local business owners across the US, finds that Facebook ads are gaining popularity due to ease of use, and the ability to start and stop campaigns (the top reasons cited).

    Darren Waddell, vice president of marketing at MerchantCircle, tells WebProNews, “The surveys continue to show us that local businesses have very limited budgets, and social networks have become a mainstream marketing method for them.”

    Of the 35% of merchants who said they wouldn’t advertise with Facebook again, 69% said the ads didn’t help them acquire new customers and 35% said they were simply too expensive.

    Facebook Ads

    MerchantCircle also found that “familiarity may favor Facebook and Google in the daily deals market,” a bold conclusion, based on the success of industry leaders (in this particular space) like Groupon and LivingSocial, the former having just filed for an IPO and the latter being integrated into a new offering from Amazon (an investor in the company).

    “For local merchants, familiarity with huge social network brands like Facebook, their ease of use and the large audience they offer certainly play into the decision on which locally targeted ads and group buying deals to try out,” Waddell tells us.

    52% said the familiarity of the Facebook and Google brands would lead them to choose Facebook Deals or Google Offers over competitive offerings. Business owners also cited bigger audience size (26%) and better local targeting (21%) as reasons to use Facebook Deals. Bigger audience (42%) and brand reputation (34%) were the top reasons for using Google Offers cited by those most likely to do so.

    77% of those who have done daily deals say they’d be willing to offer another one, citing effectiveness in customer acquisition (58%), favorable deal structure (30%) and profitability of the deal (24%) as top reasons.

    Out of the ones that wouldn’t offer another daily deal, 42% said it wasn’t effective in customer acquisition, 25% said it was too costly and 24% said they lost money.

    The survey found that print advertising dropped from 27% to 24%, use of print Yellow Pages declined from 37% to 29%; and use of direct mail decreased from 28% to 26%. Interestingly, the popularity of location-based marketing services has also dropped over the past quarter.

    The survey found that 22% of businesses are using Facebook Places to market their business, while only 7% are using Foursquare. In January, 32% were using Facebook Places and 9% were using Foursquare.

    In fact, mobile marketing in general doesn’t appear to be doing as well as one might think. Only 18% of merchants reported doing any sort of mobile marketing or advertising whatsoever. This may have a lot to do with limited budgets and a newer, untested medium. 71% said they don’t have a good idea of how to reach consumers via mobile marketing and 61% are spending less than $2,500 a year on marketing. 73% have no plans to raise their budgets this year.

    The results of the Merchant Confidence Index also found that merchants remain cautiously optimistic about the economy and revenues, while hiring is holding steady. 57% of small business owners expect revenue to improve or slightly improve over the next three months, over which time, 90% of merchants expect to keep headcount the same or add jobs.