Tuesday, May 13, 2008

Google Confirms Plans To Put Display Ads On Google.com

The most pressing question for Google (GOOG) shareholders is what product will drive the company's next growth boom as the search product cycle ends. Most likely candidate? Not sexy mobile or video. Just boring old display ads.

Google has been serving display ads on other sites for years, and the DoubleClick acquisition will accelerate that effort. Third-party display ads will only make a small contribution to the bottom line, however (10-20 cents on the dollar). So the key question here has been whether Google would deign to put display ads on its own sites.

We've argued that a full load of display ads on Google.com could add $3-$4 billion in annual revenue. Many SAI readers considered this estimate too optimistic, and it might be, at least over the next couple of years. But $1-$2 billion seems easily achievable.

Most importantly, Google itself is now talking explicitly about display ads on Google.com. It will start small--placing display ads on, for example, image search results. But we imagine that display ads will gradually spread throughout Google.com over the next few years.More>>