While most companies have cut back on advertising and marketing because of the economic downturn, an increasing amount of advertising dollars that are being spent are going to the online search engine Google.
While ad-supported media companies struggle, Google's profits go up year after year, maybe because the company has what many consider the most efficient ad machines ever developed.
Much of Google's success is fueled by small businesses. Take Bananas at Large, a music store in San Rafael, Calif., that sells pianos, amps, guitars and just about anything a musician might need.
According to J.D. Sharp, who handles sales and marketing for the store, Bananas isn't advertising in the local paper or the yellow pages. Instead, Sharp says, someone looking for a guitar is more likely to go online and use Google.
"It's the new yellow pages," he explains. "I know that if they're located in this county and they're looking for a guitar and they put in 'guitar, Marin County' or something [like] that, that's a search that's worth paying for."
To select the best search words, the staff of Bananas at Large works with people like Frederick Vallaeys, a product evangelist for Google Ad Word, who helps them understand how to target their ads.
"In the case of the guitar company," says Vallaeys, "if they really wanted to control who was seeing their ads they would probably chose key words like 'Gibson guitars' and much more specific [terms]."
Google wants Bananas to find the right key words because they want the ads on their site to be relevant and not annoying; when customers are looking for electric guitars, Google doesn't want them to see ads for wrinkle cream and flowers. And, says Vallaeys, no matter how much an advertiser is willing to pay, Google won't put up an ad when it isn't related to a specific search.
In fact, Bananas pays Google only when someone actually clicks on its ad — and the store gets a discount the more often users click.
When a small business like Bananas signs up to advertise on Google, it is also given access to a lot of research tools. For example, Google will let Bananas' staff know where customers are located so that the business can target ads to people in that area.
And Google helps Bananas figure out how to write ads to get the best results. So, Bananas' marketers can try out an ad that says "Guitars in Marin" and another that says "Bay Area Electric Guitars" and Google will tell the store which one gets more hits.
"Google will automatically rotate between the different variations and then tell you this is what actually drives people to do what you want them to do," explains Vallaeys.
It isn't just small businesses that are flocking to Google — even the struggling automakers are spending a larger portion of their budgets on Google. Matt Van Dyke who heads up U.S. marketing for Ford Motor Co. says the company is one of the automaker's most important outlets because that is where customers are researching cars.
"In an era where marketing budgets are under pressure, search is a pretty powerful tool," says Van Dyke.
Andrew Frank, an analyst at research firm Gartner, says that while Google fuels itself with ads, newspapers and local television are starving: "With changes to media ... bringing a lot more traffic online — along with the economy — it's a very difficult time."
Still, even though Google is sucking up a lot of ad dollars, Frank doesn't think it's the end of television commercials. Vallaeys concurs. He says that Google's studies show a Ford television commercial drives more traffic online.
"People, for example, when they watch TV, many of them have a laptop on their laps now, and they see an ad about a product and they might go and do a search for it to learn more about it," says Frank.
Google is dominant because its computer algorithms provide businesses with such specific information about searches. But the company is facing growing competition from the social-networking sites that offer a more personable approach.
Bananas at Larger owner Alan Rosen says the store is increasingly using Facebook and Twitter, "places where we can actually have dialogues" with potential customers.
And Van Dyke says Ford is beginning to use social networking, too. Still, for now, no one other than Google really offers a way to know exactly how well your ad dollars are working — and in this economy, that's worth a lot.
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