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Monday, March 26, 2012

Google's Spending On Traditional Advertising Grows Four-Fold - Wall Street Journal

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Google's Spending On Traditional Advertising Grows Four-Fold - Wall Street Journal
Mar 26th 2012, 22:35

By AMIR EFRATI

After years of touting the superiority of online advertising, Google Inc. is taking a decidedly different approach to promote itself in areas where its rivals dominate.

The Internet company is spending big sums on TV, magazine and newspaper ads to promote new services, including its Google+ social network and Chrome Web browser. Google's ad-spending as a percentage of revenue is now almost on par with rival technology companies such as Apple Inc., Microsoft Corp. and Yahoo Inc., according to new data.

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Last year, Google spent about $213 million to advertise its own products in the U.S., nearly quadrupling the $56 million spent in 2010, according to estimates from Kantar Media, a unit of WPP PLC. The firm didn't have data for spending outside the U.S.

"This is a sign of good old- fashioned competition," said David Cohen, chief media officer at Universal McCann, the media-buying unit of InterPublic Group of Cos. "While Google has a dominant footprint in search, they have work to do in other areas to gain market share."

Rob Shilkin, a Google spokesman, declined to comment specifically about the company's ad strategy. "Our focus is on uncovering and telling stories about our products, our users and the magic they both create. The discussion about how to reach people across different media is a much later conversation."

Online ads still represented the majority of Google's spending, Kantar estimated. But of its non-online ad spend, Google shelled out $70 million on TV ads, compared with just $6 million a year earlier.

To promote Google+, Google spent an estimated $12 million, including on a TV ad featuring The Muppets who were seen using the social network's "hangout" video chat and singing "Under Pressure," the Queen and David Bowie hit.

That commercial ran during the Academy Awards show in February.

Google's ad spending last year represented 1.2% of its U.S. revenue of $17.6 billion, compared with 1.5% for both Microsoft and Apple, based on data from Kantar.

Former Google employees said the company once shunned the notion of advertising its own products, preferring to let its services gain popularity on their own. But since then, Google has ventured beyond search. And that's why it needed to create consumer awareness for new products, while also easing the way for changes in its privacy policy and Street View service, which has been controversial in countries such as Germany.

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One of Google's TV spots promoting its Chrome Web browser features Lady Gaga and her fans.

For Google, pursuing TV ads may seem counterintuitive. The company built its $40 billion business by developing an auction system that allows the market to determine the price of an ad, only charging advertisers when someone clicks on it.

Google has worked hard to convince marketers to shift their ad budgets to online, away from TV and print.

Honing its mass-marketing chops will come in handy as Google aims to become more of a consumer-electronics brand like Apple. Google is planning to market and sell its own music and video streaming device and it is acquiring mobile-device maker Motorola Mobility Holdings Inc., which makes smartphones and computer tablets.

Google ran its first TV ad for the 2010 Super Bowl, featuring Google searches done by an American who was courting a French girl. The company has since invested in its New York-based "creative lab," which develops concepts for Google's ad campaigns and is led by Andy Berndt, a former director at ad agency Ogilvy & Mather.

More recent TV ads, which typically have a length of 60 to 90 seconds, have aired during sporting events such as the World Series and shows like NBC's "Saturday Night Live," and they have featured celebrities such as Lady Gaga.

Some ads have been tear-jerkers: a father collecting memories of his young daughter Sophie, and a spot showing how American writer Dan Savage started a campaign to end anti-gay bullying.

Write to Amir Efrati at amir.efrati@wsj.com

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