In the lobby of Google’s Building 900 at its Mountain View headquarters, there’s a display of Google-colored squares and rectangles that looks like a bland abstract-art piece. It turns out these are the shape and relative size of standard display-ad units that run on nearly every commercial website.
The “display” display exposes the paradox of Google’s attempt to extend its dominion over online ads to the realm of image advertising done chiefly on television and in glossy magazines. To get the wide reach of television, the company needs to shoehorn image ads into those standardized, easy-to-buy units, but it also needs to provide technology that allows marketers to do more compelling pitches inside those boxes. Resolving that paradox is the job of Neal Mohan, Google’s vice president of display ads.
After joining the company with the $3.2 billion acquisition of display technology firm DoubleClick in 2007, Mohan has helped build or buy what’s likely the industry’s broadest set of technologies needed to create, place, and measure the impact of display ads. In an extensive interview for a story in the current issue of Forbes, we talked about how he and hundreds of engineers in Mountain View and New York City are trying to apply that technology to wrest billions of brand advertising dollars from TV. This is an edited version of our conversation.
Q: Could you lay out the key challenges today in getting more brand advertising to move online?
A: The primary use case for advertisers online is generally performance-oriented. That applies not just to search advertising but frankly to display, and even video ads have been performance-oriented. That’s done the industry well. There’s been a lot of growth around impressions and clicks and conversions.
But the next big opportunity for the industry if we are going to grow it not just X percent a year but 10X over the next few years is to crack this brand advertising nut. It’s not about display banners or text ads or rich media or video or mobile. It’s really about all of the above, and what the objectives of the brand advertiser are. It’s more upper-funnel campaigns where brands are looking to establish their brand or a new product that they’re looking to bring to market.
Q: Why the focus on brand advertising now?
A: There are a couple of things coming together that make this the right time for this opportunity to be addressed. The first is just the fundamental consumer trend. Fifty-seven percent of media consumption is online now, greater than any other channel combined, including television.
Q: How so?
A: Our roadmap and strategy for brands is … less what product feature or product Google should build but what are the fundamental problems that brands are looking to solve. It starts with identity. A brand has to have an identity, something that it’s looking to communicate. The beauty of digital is that the tools we can give to brands for this are so much more expansive than anything they’ve had in the past.
Q: Like what?
A: Like custom YouTube channels. Now for the first time, brands can truly publish their identity and keep it fresh and real-time and interactive. Like what Red Bull did with their Stratos campaign. We also have Google+ pages where brands can not only publish their identity but they can interact and engage with those followers. They can reward followers for engaging with the brands.
Q: What other problems are you trying to solve for brands?
A: It’s not just about publishing identity but it’s about truly connecting with those consumers. How did it work in TV land? For many decades, it meant you bought time in primetime on the three major networks and reached 80% of the U.S. audience but you did that in a way that was pretty unsophisticated. It was much more of a pray-and-spray approach where you’re probably getting in some of the right audience, some of the audience probably found the advertising irrelevant, but if the reach was broad enough, maybe you got the message to the right amount of people.
The beauty of digital is that you can get much more precise, but you can combine that precision with true reach. For example, running a brand campaign across the Google Display Network including YouTube and our mobile network, you can reach something like a billion users but you can do that at the precision level that you really care about. So for example, if you’re launching a product, and all you really want to reach are a custom audience that you know is going to be interested in your product–soccer moms in this age group with this type of household characteristic–you can do that. Digital allows you to do precision at scale. That has been a challenge for brands for a long time.
Q: Many would still consider it a challenge to get really broad reach in digital, at least as easily as in TV.
A: They consider it a challenge in TV too. In TV land, they basically gave up trying to do that.
Q: But there are brands that say, Look, I can still get easy reach with enough targeting on TV.
A: The targeting is basically you buy a bunch of shows where there’s some demographic association with the brand. Forty percent of your audience is going to be wasted because it’s not really that demographic you were targeting, they just happened to be watching the shows sitting next to their spouse, for example.
Q: I’m sure you hear this message from brands, though.
A: I hear the fact that you can get broad reach on TV. I never hear the fact that the targeting actually works for them. What we hear is, Hey, if I’m going to shift dollars to digital, the first problem you need to address is this notion of broad reach. With the advent of what we can do with the Google Display Network, what we can do on YouTube, the question of whether you can truly reach an audience that looks and feels like television has been addressed.
Now the next challenge for digital is to deliver on that promise of precision, which is something that television could never actually achieve. One of the big brands we work with is Kellogg, a classic brand advertiser looking to reach a particular demographic, but a broad swath of that demographic. They use our DoubleClick technology stack–DoubleClick Bid Manager, which is our new version of Invite Media–and they are buying the age and gender criteria that they’re looking for.
And they’re buying it in real time, bidding in real time, and they’re buying it at the precision levels they want where they’re only buying that audience. They’re willing to pay 5X more for that audience [compared with standard run-of-network rates]–I’m just making that up, some multiple–than they would have paid if they were doing the spray-and-pray approach [on TV], because they know they’re getting exactly what they’re looking for.
Q: Programmatic or automated ad buying is still used mostly by direct marketers, though.
A: People often think of programmatic buying as a means to buy banners on the cheap across multiple websites. It’s the contrary. Big brands, brands like Kellogg, are using it as a means to deliver on this vision of precision at scale. So they get the broad reach–they can reach the hundreds of millions of users that they could reach on television–but now they can do it with zero waste.
From a brand advertiser’s perspective, that’s a very compelling proposition. And the fastest-growing format in the programmatic channel is video. We’ve seen a 3X increase in video buying on our ad exchange in the last few months, video being a format primarily bought by brands.
Q: Once you reach the right people, you still have to provide a marketing message they’ll respond to. How are you trying to get beyond the plain-vanilla banner ad?
A: One thing that Google is betting on is this notion of consumer choice. Unlike traditional channels, whether it’s TV or magazines or what have you–where, let’s face it, no matter how creative you were from a brand standpoint, it was still one-way communication–in the digital sphere it can be truly a two-way street. The biggest evidence of that is what Google is doing around ad formats.
So there’s the TrueView [a YouTube video ad] format where you as an advertiser don’t pay if a user skips your ad. And as a consumer, if you don’t like that ad, you skip it, which I think is pretty revolutionary. The risk has always been, well, is that actually going to work for publishers? TrueView’s the fastest-growing ad format on YouTube by far, so clearly it’s working for us as a publisher and for our content partners as well.
Q: That’s just on YouTube. What about beyond that one site?
A: We’ve tried to take that concept of consumer choice and make it something that’s ubiquitous across the Internet. So what we’re doing on our Google Display Network, which consists of a couple million websites from the largest to the smallest publishers, is this concept of Engagement Ads. We just concluded a video livestream of a big Samsung launch [for the Gear and Galaxy Note III products, on Sept. 4] that was literally playing in a display ad all across the Internet. It’s how they did the product launch. They targeted it only to the audience they thought would be interested in this product. You can get an audience that’s very large very quickly across the network.
But the most interesting aspect of it was … that the consumers actually raised their hands and decided to consume that content. The way the ad works is it starts off as a standard display creative, but if you scroll the mouse or swipe over the ad, it expands into a full, 100% share of voice experience for that brand. You can replace that livestream with a product catalog, a video catalog, whatever sort of rich media engagement you want. But the key thing is that as an advertiser, they didn’t pay for that first impression. They only paid for the ad when the user actually expanded it into the full experience.
Q: How have Engagement Ads done?
A: They vary by campaign. They’re being used fairly widely, though we don’t break out the run rate. We have dozens of campaigns that are running them for large brands. Of the top 50 publishers that run Engagement Ad campaigns, the RPMs [revenue per thousand views] that they see on those pages are 2X what they otherwise would have seen. So it’s paying off in spades.
But all of these efforts are early. It’s truly going to be a multi-year effort.
A: What led to the success of digital for performance advertising is that it was measurable. You got an immediate on impressions and clicks and how clicks tied to conversions. In the brand space, you don’t have that. In the television world, you buy a bunch of reach and frequency, maybe a big chunk of it is wasted, maybe a bunch of it is not, and then you do longitudinal studies to say this is tied to this kind of lift because I ran the campaign in this geography and I saw this differential.
Q: And many would say that kind of measurement works with some precision.
A: You’re not going to get it down to the precision in the digital world, but directionally you can run an experiment to show that there’s lift from a TV campaign in terms of sales. There’s decades of measurement there. And I’m the first person to remind all our internal teams around that point.
But I think digital can actually do this better. The most fundamental place to start in any kind of advertising is whether human beings saw the ad. This is why we’re betting so heavily on technology like Active View [a standard similar to TrueView that says at least half the ad was seen for a second or more]. It’s something that we’re building natively into our DoubleClick ad server products both for publishers and advertisers but is also a standard that we’re going to use across any media that we sell on YouTube or the Google Display Network or AdMob. (It did just that in December.)
A few months ago, we announced a capability that we deliver to our brands where they can understand what those views are doing in terms of metrics brands care about, like brand recall and brand effectiveness, brand favorability. It was a product we launched using Google consumer surveys, where you could actually survey users at scale to get statistically significant feedback in real time with a control group that could actually show true brand lift.
Q: And are they producing that lift?
A: The lift we’re getting on campaigns, whether they’re Engagement Ad campaigns like the Samsung livestream or TrueView campaigns, is pretty substantial. It’s not tiny, incremental lift. The key thing that digital will be able to solve that never was possible in the traditional world is not just giving feedback on whether this is working or not, but actually doing it in as near real-time as possible. So you can actually make corrections in the middle of your campaigns as opposed to waiting three months after your campaign ended to get the results of your holiday campaign in April.
I looked at some results earlier this morning that showed this lift for a couple of big brands. After they ran an Engagement Ad campaign, were getting the feedback in real time, made some optimization changes over the course of the campaign and the net result in one case was a 59% increase in brand recall. Another one was around brand effectiveness, which saw a very substantial increase.
A: In the traditional model, creative would build mini-30-second movies and not worry about anything and throw it over the wall, the media guys then would find a way to get distribution. That world is changing and is going to change forever. We see this in a lot of the feedback we hear from agency partners. The creative process and the media process are much more intertwined now than they ever used to be. You can’t build creative without an eye toward how it’s going to connect and engage with consumers.
One of the big things brands are asking us for is, I have a general storyline that I want to convey in an ad, but depending on who the audience is and who I’m getting in front of or who’s engaging with my ad. I might want to swap out the SUV for a convertible, for example. Because all I’m trying to do is convey something about my brand and the best way to do that is put a model in front of a user that is more likely to attract that user.
A: Brands themselves are going to force that change not only in their own organizations but the agencies they work with. We’re working hand in hand with our agency partners to enable that. You’re going to see some components of it in the BrandLab and in how our agency teams are trying to help them work through some of these inertia issues you describe.
Consumers are going to change things for all of us. What happens five years from now when you’re watching television … but it’s delivered over a digital IP connection as opposed to an analog cable connection? What does the advertising on that look like? Basically, it looks like display advertising. You’re watching it on a TV, but it’s addressable, it’s measurable, it’s interactive.
Q: Does digital advertising usurp television advertising eventually, or does TV become digital and then you’re there already?
A: TV becomes digital. The consumer trends are going to be so strong in that direction. There will be a world where all the content we consume in this form is going to be digital in nature, in which case the advertising is therefore going to be digital in nature. It’s going to have all the characteristics–addressability, interactivity, precision–and in a few years, 100% of this type of advertising is therefore going to be digital advertising. So that’s why we’re investing so heavily in it. We have hundreds of engineers here in this building, hundreds in New York that are focused on solving this problem, because we think it’s a tremendous opportunity for the entire industry.
Q: The TV industry wants to keep control of those ad revenues, though, and it isn’t standing still.
A: The whole zero-sum game concept doesn’t make sense. Google is not going to be successful in addressing this brand advertising opportunity if it doesn’t deliver results for our publisher partners. And our publisher partners are a lot of these companies. We work with all the major media companies that are part of the Google Display Network. They use our DoubleClick platform products. If we crack this brand nut, they benefit.
A: Fundamentally we operate a network of publisher partners for whom we build advertising products, and if the publishers don’t make more money, Google doesn’t make more money. So at the end of the day, it’s about delivering results back to our publisher partners. It has to be an opportunity that grows the pie for everyone.
Q: A lot of existing publishers would say they’ve lost in this equation. They’re not making so much money online.
A: Three years ago, you’d hear publishers say I’m never going to do things like work with an exchange or do programmatic. I don’t hear that conversation from publishers today. What I hear from them is, OK, I can see this is a way to do things much more efficiently, it’s a way my buyers are telling me they want to conduct their business, it’s a way for me to get some value out of the data they have. In general, when I have conversations with publishers, it’s not about, “Hey, Google, what did you do to me?” It’s more about, “You need to deliver these products and capabilities to me faster.”
I can go back to my advertisers and say, you know what? That thing you were paying me $2 for is actually worth $20 because the metrics you were measuring it against, impressions and clicks, are not the right metrics, you should be measuring it against things like brand lift and recall and effectiveness. Oh, and by the way, instead of running a banner ad here, what if I was able to give you a Lightbox ad that gave you 100% share of voice as opposed to one of five ads on the page. Would you be willing to pay five or 10X for that?
Q: How well is that message getting through?
A: The big challenge before all of us is less about people doubting the opportunity and more about organizational inertia that needs to get broken through. People are used to the way things have worked for 50-plus years. The only way to address is to continue to build innovative products, work with our agency partners, and continue to chip away at it.
Q: What jazzes you about advertising, given that you’re in an area, Silicon Valley, where a lot of people even in the media business profess to hate ads?
A: One of the things that’s kept me excited during this entire time is, I’m a technologist at heart, an electrical engineer by training, I love computer science. Digital sits at the cross-section of media and creativity and technology. So day to day, that’s exciting.
But fundamentally, what motivates me and the hundreds of people here is that everything that we take for granted–Forbes, the New York Times, other great content on the web–the only reason it exists is what we are able to provide in terms of products and advertising. The vast majority of the free Internet is advertising-supported. Otherwise, that entire ecosystem would collapse.
A: That’s frankly a very myopic way of looking at things. Advertising is a means to an end.
Q: Your boss Susan Wojcicki has talked about Google marrying the science of search with the art of display. How far along has Google gotten on the art side?
A: Fundamentally our strength is being the technology enabler for our partners. It’s not Google’s job to create an identity for a brand. Brands need to create their own identity. The creative agencies need to be the ones that convey that identity. We need to be the technology provider that makes it easy for them to do that.
So at BrandLab and in agency initiatives, we really are the technology partner, but we are not the ones that are bringing all of that creative insights to the table. I want to make this technology almost disappear. Success for me would be such great technology that it kind of disappears in the background, so digital ads can be just as memorable and powerful as TV ads.
The litmus test in digital should be: Can we actually create campaigns that are just as memorable and impactful as TV ads?