Google, EchoStar deal tests how TV advertising is usually done

Joyzelle Davis, Rocky Mountain News

Published April 7, 2007 at midnight

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Google Inc., whose advertising technology revolutionized the Internet, has set its sights on the $70 billion television advertising market.

The world's largest Internet search engine this week announced an agreement with Douglas County-based EchoStar Communications Corp. to let advertisers go online to place TV commercials on EchoStar's 125-channel Dish Network.

While the alliance is for now just a limited test involving a small portion of Dish's airtime, it has the potential to disrupt the longstanding relationships between media-sales organizations and television advertisers, as well as the way TV networks set rates.

"The impact, over time, will be considerable because what Google is trying to accomplish is a major deviation from business as usual," said Glenn Morey, president of Denver-based Morey Evans Advertising.

He added that EchoStar, with its 13 million subscribers, represents "an interesting laboratory to determine how this marriage" of TV media sales with the measurability of the Internet come together.

Advertisers participating in the trial will know within 24 hours exactly how many people watch their ads and whether viewers switched channels during the commercials. While that's a potential gold mine of information for marketers, it could upset TV networks' traditional practice of charging for ads based on how many people watched the program - not the ad breaks.

The EchoStar venture works just like Google's successful AdWords online program, letting marketers bid on TV ads in a blind auction. They can target the time of day and channel or a specific demographic group.

Google is just the latest, albeit the highest-profile, company poised to transform the traditional advertising process. Several Web sites let users select commercial footage, customize campaigns and sometimes place the ads. Spot Runner, a Los Angeles-based online ad agency whose investors include CBS Corp., lets clients create TV commercials for $500.

Services like those tend to appeal to smaller advertisers in local markets, and the same will probably be true with Google's TV ad program, said Bill Figenshu, chief operating officer of SoftWare Media Exchange. The Irvington, N.Y.-based company has offered an automated system for radio and TV ad buying for the past year.

But for major purchases such as a $50 million ad buy, he said, marketers aren't going to use an automated system.

"What we've learned is it's much like the experience with online shopping," Figenshu said. "People haven't stopped going to the mall."

The venture is limited to a select group of advertisers, including Intel and ETrade. EchoStar won't say how much of its inventory it will put up for auction other than "it's less than 50 percent," said Michael Kelly, EchoStar's executive vice president of advertising.

Morey says there still are unknowns about the venture, including whether EchoStar will require a minimum bid and whether there's even a need for the service. Television doesn't typically have trouble selling its advertising time, he said.

That alone might be reason to maintain the status quo. EBay's proposed online marketplace for buying TV ad time suffered a blow Thursday when the industry trade group Cable Television Advertising Bureau dropped out.

davisj@RockyMountainNews.com or 393-954-2514.

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