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.
The TV world's Big Four — CBS, NBC, ABC and Fox —have all seen huge declines over the past year, thanks largely to evaporating ad revenues. Cable, especially top-tier channels like CNN, ESPN and general entertainment channels like FX and Bravo, has been encroaching on broadcast's audiences for years.
That's what frustrates David Levy, president of Turner Entertainment Sales and Marketing. He points out that the days of Seinfeld's 30 million viewers are long over. Right now, a show like TNT's The Closer averages about 7 million viewers. That's great for cable, and perfectly respectable by broadcast standards.
But why, Levy wonders, can NBC demand almost twice as much ad money during Lipstick Jungle, a show that brought in only about 4 million viewers before it was canceled?
"Broadcast networks have been rewarded, really, for past performance in shows that appeared on networks five, 10, almost 15 years ago," Levy says.
Levy adds that lots of people can barely tell the difference between cable and broadcast anymore. Television analyst Derek Baine, of SNL Kagan, agrees. He says TiVo and other DVRs are also affecting advertising: An ad for a movie shown during 30 Rock on Thursday night, for instance, loses value when viewers put off watching the NBC show until after the peak moviegoing days of the weekend.
When old-school broadcasters like CBS and ABC are posting millions in ad revenue loss, a consortium of cable networks is developing new ways to target consumers. The hope is they'll be better ways, too.
"Our research shows about a third of the ads you're seeing today are ads you probably shouldn't be seeing in the first place," says David Verklin, whose Canoe Ventures group includes such heavy hitters as Comcast and Time Warner.
In the not-too-distant future, Verklin promises, software could filter TV ads for dog food only to households with dogs, for example.
Baine says such innovation may, in conjunction with the economic downturn, help cable compete with broadcast when it comes to advertising. Some in his industry predict broadcast ad sales could fall as much as 20 percent in the next year.
"A lot of the national networks have been very stubborn and held pricing firm," Baine says.
At the least the Big Four aren't asking for a government bailout.
Stealth Ads: They're Effective — And Priced To Move
Stealth advertising — an ad-industry buzzword for a few years now — is so low-key it doesn't look like advertising at all.
Turns out it's also fairly recession-friendly — because it's cheaper than traditional TV advertising. And when it works, it's usually the kind of thing that really works.
Take that popular Web video of guys jumping and swinging and back-flipping into their jeans. It was paid for by Levi Strauss & Co. — at a fraction of the cost of a TV commercial.
Levi's then paid a relatively modest fee to Feed Co., which planted the video — and a conversation about it — on the Web. The video has been viewed about 14 million times, according to Feed.
"Your marketing — if you're successful — is going to be done by your audience," explains Feed Co. executive Josh Warner. "It's where you're getting return on investment that can really explode through the roof."
The media helped promote Levi's stealth advertising campaign by showing or writing about the jump-into-jeans video. It was featured in the online versions of the Wall Street Journal and The New York Times, and on David Letterman, MSNBC and Good Morning America — all for free.
(And now, with this report, NPR is biting on that lure: You can watch the video in our player here.)
Warner estimates it would cost between $100,000 and $200,000 to buy 30 seconds of commercial time on one of the big network morning shows.
"Stealth ads are very cheap to execute because you generally don't have to buy expensive media time," says Warren Berger, author of the books Advertising Today and Hoopla. He believes we will absolutely see a lot more stealth and viral advertising during the recession.
"We're in an environment now where viral messages can be very effective," Berger says.
But there's a lot of risk to go with the potential rewards of viral advertising. There's no guarantee a quirky video will get passed around the web.
That's why Eric Hirshberg of the agency Deutsch LA thinks we will see less of what he calls advertising-world "party tricks." Companies are cautious in hard times, he argues.
"There's an intensity and immediacy to their need to sell," Hirshberg says — though he himself often counsels against that corporate caution.
Now more than ever, Hirshberg says, people need to be charmed. And creative viral advertising can do that.