Google, Brands and the Bottom

There are two areas that are critical for Google’s growth: the top and the bottom. That is: the Fortune 1000 and the millions of SMBs who spend $5K to $15K per year on marketing.

Yesterday, this widely cited piece in ClickZ, Brand Advertisers Bash Google Ad Serving Policies, discussed agency and marketer frustrations with Google AdSense and its unwillingness to allow third-party ad serving and managment tools for use with with AdSense.

And then there was this article, Google’s halo dims for some e-tailers, which appeared on CNNMoney and is about the rising cost of keywords and clicks. There’s been a fair amount of coverage in the last couple months about the rising price of keywords and its potential impact on marketers.

Google can thus no longer rely entirely on the traditional “direct response” marketers to drive growth. Indeed, on some level, the effort to attract brands into search is at odds retaining DR marketers. (This is a very crude juxtaposition, I realize.) Direct response marketers and traffic arbitrageurs will always by search. Maintaining growth is the issue.

Google bought YouTube for many reasons, one of which was to have a strong vehicle for brand advertisers (it’s expanding video on its AdSense network for the same reason). Google also expanded its New York offices to be nearer to ad agencies that control brand marketing budgets for the Fortune 1000.

Simultaneously Google needs to expand its reach into the small business market and is mulling ways to do that. One bold and creative channel relationship the company developed was with Intuit. The “phase I” integration of AdWords into QuickBooks is crude but it will get much better and easier for SMBs to use.

But Google is also busy on several other fronts in trying to bring more SMBs into paid search. The challenges of penetrating the small business market are well documented. Nonetheless it’s where the volume (98%+) of US businesses are. So Google will continue to find creative ways to acquire SMB advertisers without building a large, direct channel. Indirectly, Google is also the beneficiary of lots of third-party Internet marketing efforts toward SMBs.

Google “owns” paid search but it doesn’t own the advertiser. There are many alternatives for brands (Yahoo! and MySpace among others); and yellow pages, newspapers and others seek to gain or maintain control of the SMB market as they come online.

So as the company moves into the next phase of its development it faces tough challenges at both the top and the bottom of the marketing food chain. Given its seer girth and brand strength it will have success in growing the advertiser base. The question is how much and how fast?