We all know that Google and Yahoo showed us how to make money from online advertising. Just for the starter, 2010 Q1 recorded highest ever first quarter revenue from online advertising in US [read this]. In fact if you look at Google's result, Google's unaudited Q1 revenue [mostly online advertising] is shown to be $6.7 billion which is 27% higher than the Q1 revenue of last year. So, I guess it is safe to assume that online advertising has arrived and much money is to be made in the coming years. Question is what does it mean for you and me? Before we get there we need to understand how the online advertising works and what role you as individual play.
Online advertising works very differently than conventional advertising viz. advertising in print media and TV. Both print and TV media are non-interactive which means once the advertisement is in place, there is no direct feedback mechanism to assess how much additional business it generated. Of course there is mechanism such as TRP rating or customer survey to gauge how well the advertisement was received but that is far more indirect and passive approach compared what is possible with online advertisement.
Google and others are educating the general advertisers about this and brought the concept of pay per click which is automatically counted by the software and therefore, is expected be a lot more transparent to the advertisers. Fact that every user has an online profile, one can use that to customize the advertisement that would suit individual's requirement providing much better chance of the advertisement to make an impact on you as the consumer. I can go on, but I guess you got the gist. Just to understand what we are talking about, online advertising market is growing at a CAGR of 28% approximately in India. It is quite obvious that this growth is happening at the cost of conventional media. So what is so unique about this, right?
Well, the point is, advertising business is going through an inflection point now. In next five years new technology will take up a major share of advertising revenue worldwide and like every other technology inflection point, this also will change the game and top players of game i.e. advertising.
And this is what Google is looking forward to. Note that Google already has reached a run-rate of approx $23 billion / year of revenue and more than 95% of their revenue is coming only from advertisement. That means they are uniquely positioned to take advantage of large growth in online advertising.
A basic requirement for the success of online advertising is its ubiquity and reach of internet. And both requirements are best served when internet is available at mobile phone. Think how frequently you use mobile phone compared to your desktop or laptop. The cellphone is almost an extension of your existence today and what can be better than having a control of that very device of your own? Imagine if the advertiser knows everything that you like consciously, every place that you frequent, every little weakness that you identify with, what power that advertiser would wield upon you! And if somehow all those can be controlled by a single corporation, what power that corporation can have! It is evident why all market surveys project a steep growth of mobile online advertising in the next few years to come. With 3G and 4G, the wireless operators have already created the necessary infrastructure for ubiquitous, high-speed mobile internet. The mobile OS is the last frontier of the war-zone. Microsoft, Symbian have been looking at this opportunity for a very long time but as it is happens, the latest entrant, Google seem to be changing the game with Android. If you believe half of the buzz and market survey, Android is fast picking up as the preferred vendor-independent OS for smartphones, Handset players ranging from Motorola to Taiwanese HTC, all are bringing new product with Android OS. Many are predicting that Android is going to be the leader among all mobile OS in the market very soon.
So how would that help Google? Imagine Android as the Windows of the future mobile world and add to it the fact that your mobile knows a lot about you [your contacts, your calling patterns, your browsing patterns, your financial details, probably] and in fact is the constant companion of yours. Using these information on the real-time basis one can accurately predict what you need at a certain point. Imagine that you discovered that your bathroom tap is leaking and before you become frustrated your cell provides you local plumber's number and other details. Wouldn't you appreciate? Or it is Friday morning and you are thinking where to take your girlfriend this evening and you get a flash message on your cell about the events happening at places that you like to go! Is that feasible? Of course, it is! It is highly possible that all those information that your cell knows, the OS, in your cellphone, starts sending to a server continuously sometimes with your consent and may be sometimes without your consent. Good things like the instances that I described can be done using an intelligent software, running on powerful servers, that mines through your data in real-time remotely. But it also has its disadvantage. Your privacy is the first item on the block that carries the risk to be taken on hostage! If you believe I am being paranoid, do kindly read the following article on android strategy [http://paidcontent.org/article/419-androids-secret-sauce-googles-little-known-advertising-rev-share-deals-/]
It is you who is the end target for advertising and with the advanced technology of online advertising and mobile phone, you are at the most vulnerable position, especially if you are in countries like India where the protection of privacy is the most poorly understood [and therefore one of the least respected] topic. That means you alone are the sole custodian of your privacy and therefore you should choose the gadgets and technology very carefully to control your exposure.
