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Online Advertising Analysis and Implications

Online advertising currently provides an efficient method for advertisers and also provides relevant information for Internet users especially when they require a service or product instantaneously. . It mainly takes the place of traditional mass mediums such as TV, newspaper, and radio. For example, both the Internet browser Google and the Web-advertising company DoubleClick have an ad-serving business. With a burgeoning expansion of online promoting, Google’s acquisition of DoubleClick was seen as an attempt to monopolize the sector. Therefore, this essay will introduce how the online advertising actually works and consider the differences between Websites and mass medium advertising. Secondly, online advertising will be discussed in detail and then further indicate the particular way that Google used it profitably. Then, this essay will further consider both the potential drawbacks and possibilities of online advertising. Finally, it will evaluate the statement according to Google-DoubleClick Merger. As such, this essay will help prove that online advertising is extremely useful and will be the key forces in ad-serving in the future.

The market of online advertising has expanded significantly and the profits within it increased sharply as well. According to an online article by Erick (2010), JPMorgan analysts forecasts that online advertising, especially display advertising, will see a 10.5% bump to $8.3 billion in revenue?. A large number of businesses, such as Google, Yahoo, DoubleClick, MSN, and Microsoft, got involved in the Internet ad-serving market. As Weber (2007:11) mentions in his book, Marketing to the Social Web, “For the past 10 years, corporations have been trained that they should use all the different media—newspapers, magazines, direct mail, television, public relations, and then the Internet”, and he further mentions about, “Managers have to understand that the Web is rapidly becoming the most important marketing medium.” In particular, the Internet provides a specific mode to transmit information and directly deliver advertisements to Internet target clients. Online advertising is based on the premise that people could simply find what information they need by accessing the Websites at any given time. In some aspects, online advertising and traditional advertising are quite similar to each other, however, people can still distinguish the differences from them. For example, online advertising supplies exact messages to users when they are searching on Internet at a precise time. Thus, as the result, online advertising not only provides another method of advertising, but also makes the ad-serving sector more effective and efficient.

Through the Internet and browsers like Google, advertisers and customers can interact directly and gain considerable improvements in effective advertising. Consequently, according to David (2008:8), the online advertising industry can be further simplified into four main sectors: (1) search advertising, which ad-serving presents on searching Websites and result pages; (2) display advertising, which mostly referred to as banners and places on non-searching websites; (3) classified advertising, which is present on websites; and (4) Internet e-mail based advertisements. Meanwhile, search engines such as Google serve advertisements by offering pay-per-click text which was based on the key-word search. Furthermore, as a Pew Internet and American Life Project study (2004) shows, search engines are decidedly popular among Internet users and most of them express satisfaction, trust, and self-confidence when using search engines. In particular, the study indicates good news for Google as well, which is that 47% of the customers surveyed say that Google is their first choice of search engine, which means, the satisfaction of Google runs much higher than the others. By combining the factors, it can be easy simplified that why Google is the runaway industry leader in search advertising and how profitably it is. In other words, when online advertising is done properly, the majority of Internet users can immediately receive the right information while they browse or search on Google.

Unfortunately, some researchers believe that online advertising is dying because of the expected decline in Internet advertising. Part of the problem is that advertisers could not directly connect to users though Web pages: that is, consumers no longer trust the information coming from the paid advertising and tend to focus on what they actually need without noticing the ads. This argument is also analyzed by Eric Clemons Professor of Operations and Information Management at The Wharton School of the University of Pennsylvania, on his personal blog indicates, “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed” (Techcrunch, 2009),. Furthermore, another specific issue with online advertising is, for instance, that Internet users choose to ignore the unnecessary advertisements on the web especially when they are browsing. However, there are still various potential possibilities of online advertising. For example, advertisers could collect and analyze the IP address coming from the customer’s computer in order to create the feedback system and determine the ad-serving strategies for Internet customers. Moreover, Google significantly creates relevant searching results and provides more profitable sales for advertisers. As a result, the efficient feedback system would make the online advertising more profitable by delivering the appropriate information to users.

In relation to the specific casestudy, Google-DoubleClick Merger, Google provides search and advertising services, which deliver ads to a searcher and then takes revenues from advertisers. Meanwhile, since 2002, Google has rapidly increased its revenues in search and advertising market every year, furthermore, it is almost achieving more than 75 percent share of Internet ad-serving. Google and DoubleClick were two individual companies, in particular, both of them have had an online advertising serving business, but operations and processes within them are quite different especially in ad-serving market. In fact, DoubleClick’s advertising operation was much more like the display advertising, for example, DoubleClick placed and linked targeted banner advertisements on Websites. Besides, it also provided advertising exchange service that matches advertisers and advertising networks to sell web space. Thus, after the acquisition of Google and DoubleClick, Google-DoubleClick could further combine advantages of two companies and quickly change its part of advertising business from weak to strength. According to the Chairman and CEO of Google, Eric Schmidt posted on official Google Blog, (2008), “As the combination of Google and DoubleClick delivers better, more relevant display ads, we're also looking forward to delivering an improved online experience to users”. In other words, Google-DoubleClick Merger is not just about advertising, it is actually getting more opportunities to improve and create the interactive service in online promoting market.

After the acquisition, Internet advertisers and users argue that the Google-DoubleClick Merger will probably monopolize the online advertising and also make the anti-competition. Because Google-DoubleClick combines both searching and display advertising in one place, in addition, Google-DoubleClick might dominate the market over straight attack the other companies such as Yahoo, MSN, and Microsoft as well. However, for the monopoly issue, the US Federal Trade Commission (FTC) (2007) stated it’s position on website, “The agency’s evidence, however, showed that current competition among firms in this market is vigorous, and will likely increase.” and “Therefore, the elimination of potential competition also did not raise antitrust concerns”. Furthermore, part of Internet users advocates that Google-DoubleClick might get more information about their clients’ Internet activities by collecting IP addresses. Consequently, Google-DoubleClick tracks and records the Internet surfing data, in other words, the behavior harms those Internet browsers privacy and further occurs privacy issue. For this issue, FTC also made it’s statement, “not unique to Google and DoubleClick and extend to the entire online advertising marketplace.” Above all, Eric Schmidt Google's chairman and CEO said on Google’s Official Blog (2008),, "The FTC's strong support sends a clear message: this acquisition poses no risk to competition and will benefit consumers."

To sum up, online advertising industry has expanded significantly according to its specific mode of transmitting information to Internet users. Nevertheless, it provides effective route to deliver ads to both target and potential clients. After simplifying the main sectors of online advertising and considering about the satisfaction factor, this essay indicated how Google provides efficient search advertising to browsers on a precise moment and how profitable benefit is within it. Moreover, though the case study of Google-DoubleClick Merger, the essay also prove that online advertising provides various beneficial to its client such as delivering better information, more relating ads, and better Web ad-serving. However, there are still some issues about online advertising market, for example, the main problem is the connection between Internet and humanity. Therefore, online advertising must be used properly, in other words, it could be extreme useful to Internet users especially when advertising agencies avoid encroaching customers’ privacy and places their advertisements appropriately.

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