Google: Someday Consumers Will Pay for Ads

Five years after Google acquired Urchin Software and created Google Analytics, the company is promising new features and a growing community of partners who will help Google develop a worldwide market for data-driven ads.

Google Analytics helps businesses analyze how well their Web sites are being used and how well their ad campaigns are performing. The Holy Grail in this market, according to Google vice president Penry Price, who spoke at Google’s Mountain View campus this week, is personalized ads — ads that are so personal, we will pay for the privilege of getting them.

[login]”Search in the beginning was about relevance,” he said at Google’s annual Analytics partner meeting, “but ads will become so relevant that they are a true value exchange with you. You’ll accept them freely, happily, and we will see a changed model where the consumer pays for ads instead of a marketer pushing a message to us without knowing much about us.”

But getting to this goal will be hard. Price acknowledged hundreds of players in the chain from advertiser to publisher to audience, creating a fragmented market where it’s hard for anyone to know how effectively ad dollars are being spent or who should be held accountable for any results.

Some of Google’s partners also expressed concerns about privacy, an issue that Google will likely have to wrestle with for years to come because of the volume of data it collects.

One partner asked Price about the danger of personalized information being misused, but also being mischaracterized to government officials and the media. Google is opposed to a bill backed by West Virginia Democratic Congressman Rick Boucher that Price says “would not let any identifiable information move at all. We’d be back to whack-the-mole ads.”

Another partner asked Price about opposition to some aspects of the Internet in certain countries – Saudi Arabia’s banning of the Blackberry last month is a recent example. Price said Google’s best defense is to use data responsibly to help create ads that have true value to consumers.

“We will try to push as much useful information as we can to the right places,” he said. “We do not want to break laws, and one company is not going to solve this, but more information is good. I wish I had a solution.”

An issue that concerns Price is the idea of media suppliers trading and sharing data with one another in a way that customers don’t know about. “I’m very scared about that and I think it’s a big problem,” he said. “The idea of having open cookie data – a defined pool that can be worked in an industry-standard way, used equally amongst all partners – is a very attractive solution, but I don’t if we’re ready for this. I don’t know the path (to get to that) from where we are today.”

Price declined to discuss publicly any changes that Google will make in Google Analytics, but he did say that Google will work more closely with ad agencies, which are starting to see value in advertising data. He also said Google will continue to get better at helping businesses understand why customers make purchases – “attribution,” as it’s called in the advertising space.

And there are several trends in the ad market that are going Google’s way. Both Internet use and Web content continue to grow, especially in developing countries, and Internet infrastructure has become robust enough that people are able to use the Web on new devices and in new ways.

That use in turn drives new products – the iPhone App Store, for instance or the online check-in service Foursquare – and creates more opportunities for Google to sell ads.

Media is also converging — TV ads, for instance, can drive Internet searches for products, and Google has a foot in both of those camps now with Google TV.

Google’s partner channel is also growing — the company now has 180 certified partners for Google Analytics in 42 countries. Price and others say partners are a “major driver” in shaping the product, because they point out what works and what doesn’t and suggest new features that their customers want.

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