San Francisco — Google Inc. on Wednesday attempted to inform financial analysts that regardless of all the care it dedicates to projects like Google Apps, staying on top of search and search advertising is what really matters. The search titan detailed a series of new search ad formats by incorporating its paid search ads with video, product images and other features as the Internet company strives to refine its money-making capabilities in a tough advertising environment.
The Mountain View, Calif.-based company in a Webcast with investors and analysts on Wednesday, said that it continues to realize many opportunities to improve search and search advertising by developing new formats, tapping the mobile Internet and making it easier for advertisers to manage their ads. Google executives walked through a variety of innovations designed to make its search ads more relevant to users and more effective for advertisers.
“The search advertising industry is still very much in its infancy. I believe we are just getting started,” said Nick Fox, who oversees Google’s ad quality program.
Google displayed video trailers inside text ads for financial analysts Wednesday.
“Our search ads have largely looked the same over the course of the past seven or eight years,” Fox added, referring to the text ads that appear alongside Google’s search results for years.
This is the first in a series of investor Webcasts held Wednesday by Google CFO Patrick Pichette and several other executives, and as the company did not revealed any ground-breaking shifts in strategy or new products, it did cast a spotlight on some recent improvements that the company believes have enhanced the search experience.
Fox detailed numerous ways that Google is attempting to energize the ads. In August, he said, Google introduced a feature that allows advertisers to highlight multiple links to different products or brands within a search ad.
Fox’s comments, made during a webcast, echoed a refrain Google has increasingly stressed in recent months as regulators turn a closer eye to the company’s dominant position in the U.S. search advertising market, which eMarketer estimates will reach about $12 billion this year, roughly half of total U.S. online ad spending in 2009.
Fox also quoted two examples of the upcoming movie “Fame” and the Electronic Arts Inc video game “Tiger Woods PGA Tour 10” in which advertisers can directly embed video into their search ads. He said Google can charge advertisers a fee when a user plays a video.
The portion of ads featuring videos and images is expected to grow, said Fox, though he declined to quantify the expectation.
The video ads has already began to appear for some users since last week according to ReelSEO, but Google is now extending this opportunity to advertisers to insert a video trailer into their text ads. “In many cases, the best information is video,” said Fox.
“Google has not made any major alterations to its text ad format and now sees this as a big opportunity,” wrote J.P. Morgan’s Imran Khan in a research note distributed after the Webcast. It can charge either by the click through to the advertiser’s Web site or by the play of the video, therefore adding a revenue stream that did not exist before.
Rivals Microsoft Corp. and Yahoo Inc. recently made a deal in which Yahoo, No. 2 in the search market, will substitute its technology with Microsoft’s Bing search engine. The search pact is intended to give third-place Microsoft greater clout to challenge Google, which controls about 65% of the U.S. search market.
The event took place as Google’s revenue growth has decreased to single digits from the 30 percent to 40 percent clip it posted in 2008, and as the average cost per click — the amount of money advertisers pay for a click on an ad — has fallen year-over-year for two consecutive quarters.
“For a company that is doing billions and billions in revenue, these are small things,” Merriman Curhan Ford analyst Richard Fetyko said about the improvements that Google described on Wednesday.
“They need consumers to start spending. That is the bottom line. That is when advertisers will increase their bids,” said Fetyko, who has a buy rating on Google shares.
But many analysts expect the companies’ two-year integration process to give Google an opportunity to extend its lead in search advertising, which accounts for almost all of its revenue.
Google last month unveiled what it called a “secret project” to develop next- generation search technology. It said the project will “push the envelope on size, indexing speed, accuracy, comprehensiveness and other dimensions.”
Susan Wojcicki, who oversees Google’s monetization efforts, also noted Wednesday that mobile ads represent a “small but very fast-growing segment” of the company’s advertising revenue and was expected to become “an important part of our monetization story.”
Google, which generated $21.8 billion in 2008 revenue, is the world’s No. 1 search engine with a 67.5 percent market share in July, according to comScore.
The company did not declared any financial details during the briefing, focusing instead on enhancements and changes to the company’s search technology.