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Google is expanding its lucrative Internet advertising network into the print world in a bold attempt to capture traditional ad dollars.
The search king, which makes 99 percent of its revenue from Internet ads, is quietly testing the waters of print advertising sales, according to executives at several companies that have bought the ads. Google recently began buying ad pages in technology magazines, including PC Magazine and Maximum PC, and reselling those pages--cut into quarters or fifths--to small advertisers that already belong to its online ad network, dubbed AdWords.
"We were approached by Google two and a half months ago, telling us that they were starting this print advertising campaign," Michael Keen, president of Inksite, one of the five advertisers in PC Magazine, said Monday. "Because we had been one of their AdWords advertisers, they thought we would be a good candidate to try their new advertising" effort.
The experiment, as it is described by the companies buying the ads, is Google's latest foray into display advertising and another big step toward becoming a one-stop shop for ad sales, whether online or offline. The trial also marks the first time the company has ventured offline with any of its products, according to industry watchers.
"Google's been working to add more oomph to its creative for a while. Clearly they have a desire to offer more to advertisers than just a text link," said Tim Hanlon, senior vice president of emerging contacts at ad agency Publicis Groupe.
The print ads also expand Google's efforts to become a middleman for advertisers and publishers.
"Google has shown that big media companies don't have to be part of the mix at all," Hanlon said. "People can just get the content and ads directly from an uber-intermediary. That's caught a lot of traditional ad types off guard."
Inksite, which sells printer ink and toner, paid about $1,000 for a one-quarter page ad in the Sept. 6 issue of PC Magazine, Keen said. By comparison, a text ad in search results for "printer toner" might cost as much as $2.25 per click.
The issue has a full page of Google-facilitated ads with the URL of an online version of the page at the top. Fine text also appears at the top saying "Ads by Google," and "Google advertisers offer these products and services" at the bottom. However, there is no Google logo.
Over the last four years, Google has established itself as the kingpin of online advertising, largely through its sales of tiny search-related ads.
Google's "cost per click" system was built on selling keyword ads to the highest bidder and letting marketers pay only when Web surfers click on tiny text links. It was introduced in early 2002. By also syndicating those ads to third-party Web sites and publishers, Google struck gold, and its revenue climbed to more than $3 billion last year.
Two years later, in an effort to find new sales and avoid an eventual slowdown in the booming search ads business, Google started selling display ads.
Yet the latest move toward the print ad business has some financial analysts frowning.
"I would be surprised and somewhat disappointed if they were to spend a lot of money and resources on a print advertising unit," said Safa Rashtchy, senior Internet analyst at Piper Jaffray. "My guess is it is just an experiment."
Other industry watchers saw an upside in the move, given that search ad sales could eventually peak.
"All the big talk today is how the inventory available for PPC (pay per click) ads is shrinking each day," Barry Schwartz, editor of Search Engine Roundtable, wrote in an e-mail. "So it does make sense for Google to look for ways to increase that inventory."
Gartner analyst Allen Weiner noted that Google and Yahoo had approached shopper magazines in Europe about similar ads. "Hey, if these companies want to evolve to become full-service ad agencies, I think they'll be looking at print opportunities," Weiner said.
Despite mixed reactions from Google watchers, some online marketers said they are excited about the potential.
Bill Adler, chief executive of security software company CyberScrub, another of the Google advertisers in PC Magazine, said print ads are a welcome alternative to pay-for-click, which "tends to be somewhat up and down as far as effectiveness, for any number of reasons."
"I think this will give us an opportunity to showcase our products to a different audience and reinforce our branding," Adler said.
AHS Systems, a maker of Web-based content management software, paid $4,000 to $5,000 for its ad to appear in PC Magazine for two months, compared with the $3,000 that a typical ad that size would likely cost in the magazine for one month, said AHS Systems President Jeff Witkowski.
"It's a lot of exposure for cheap," he said, adding that Google is "doing a ton of tracking on this. They're using their own 1-800 numbers on this, and it forwards to our line." The Internet addresses of the online versions of the ads also redirect traffic through Google servers.
Maximum PC's Oct. 5 edition also has a full page of Google ads. In addition, Inksite's Keen said Google ads were running in Mac Addict, but none could easily be found in the edition that went on sale last week. Keen suggested that Google may be experimenting with the idea of being an online advertising broker like Adauction.com.
Calls to PC Magazine and Maximum PC were not returned. Google declined to comment. (Google representatives have instituted a policy of not talking with CNET News.com reporters until July 2006 in response to privacy issues raised by a previous story.)
"I think Google might be able to bring the same benefits to small advertisers where it is too cost-prohibitive to get into," Keen said. "This is certainly a departure from what they've been doing, but it's certainly a good thing for the industry."