Media: All about ... Google's deals with ad groups

The digital giant reinvents its relationship with agencies.

It has always been, some observers say, a wholly predictable arc - but fascinating all the same. Not so very long ago, Google, the blood no doubt draining from its head thanks to the awesome acceleration it experienced as it left the launch pad, let it be known that the tired old 20th century advertising business was as good as dead.

And if you didn't get that, then you really didn't get "it" - it being the future of, well, the whole economy. Google would henceforth talk directly to its advertising customers, thus "disintermediating" those quaint old entities known as media agencies.

Alas, the purity of its vision became compromised - because those aforesaid agencies somehow kept associating themselves with the money as it changed hands.

Not, of course, without ambiguous feelings on their part. The WPP boss, Sir Martin Sorrell, back in 2007, in noting that the clients of his agencies were spending hundreds of millions of dollars with Google, dubbed the company a "frenemy". And then, as spend increased still further, passing $850 million in 2009, he reckoned they had become a slightly friendlier frenemy - almost, you might suggest, a "froe".

Well, how dim and distant that now seems - because these days, Google and agencies seem the best of friends (perhaps best encapsulated by Google's recent "GoogleJam" event for the more creatively minded at agencies). And it's not too hard to speculate on some of the motivating factors in play here.

The days of exponential growth in search are over - and mature markets tend to reward those with a grown-up outlook. Also, since acquiring DoubleClick for $3.1 billion in March 2008, Google has been putting ever-greater emphasis on the display advertising side of the digital market. In display, you need to work with, not against, ad agencies - or you are dead.

But more than anything, perhaps, with the continued explosive growth being experienced by Facebook (which passed the 500 million users milestone last week), Google is adjusting to the realisation that it may no longer be the absolute star of the digital show. If you're number two, as the legendary old ad campaign had it, you try harder.

So, it's no surprise to see Google signing the sort of deal that it signed last week with Omnicom.

1. Under the two-year global partnership agreement, Omnicom Media Group agencies, notably PHD and OMD, will increase their spend with the Google Display Network, whose outlets include YouTube, Google Finance and the DoubleClick Ad Exchange, which is basically a digital ad sales house for thousands of third-party sites.

In exchange, Google will help to "co-develop" OMG's display buying capabilities, not least by setting up a "trading desk" that will co- ordinate OMG spend and help analyse its effectiveness. In addition, Google will work with OMG to "support learning and development and do significant co-marketing to evangelise the benefit of data-based display advertising".

2. Damian Burns, the head of global agency relations at Google, says that the agreement merely formalises the existing relationship that it has been building with OMG - and that similar relationships exist with all of the other five major groups: Publicis, WPP, Aegis, Interpublic and Havas. Burns adds that these partnerships are not just about investment levels and buying clout but about developing advanced technologies, at a global level, to guarantee the evolution of the marketplace in digital display. "That's especially relevant when media is bought as it usually is in these markets on an auction basis, so you don't need poker-faced discussions," he says.

3. However, there are different nuances in Google's partnerships with the other holding companies. Publicis, through its VivaKi unit, has made no secret of its collaborative agenda - and its Pool initiative (to "align the industry on engaging ad models of the future") is of great interest to YouTube, given that its first wave of research focused on online video. But VivaKi has its own ad exchange.

4. And WPP, of course, not only owns 24/7 Real Media, acquired for $649 million in May 2007, but also has an ad optimisation product called B3. On the other hand, WPP is the only other group to have signed formal agreements with Google. In 2009, the two companies promised to spend £4.6 million over three years to fund the "Google and WPP Marketing Research Awards Programme".

WHAT IT MEANS FOR ...

GOOGLE

- The media community has been hugely impressed by the manner in which Google has reinvented its relationship with the advertising industry over the past few years - and there's a widespread belief that this will lead to real progress in the medium.

- For Google, this could deliver benefits in general and, in particular, at a time when much of the buzz in digital is about social media - a Google weakness. Google, after all, is desperate to turn the likes of YouTube - one of the biggest brands in the internet economy - into a display advertising goldmine.

AGENCIES

- The big media agency networks have all been appointing global trading directors in recent weeks. So this sort of global deal is clearly on the agenda - and both buyers and sellers now have the structures in place to pursue these opportunities. It's perhaps inevitable that we'll see more deals of this nature.

ADVERTISERS

- An accelerated development of the digital display marketplace is likely to benefit advertisers - but some observers question whether, in pursuit of this common agenda, it's really necessary to come to a formal agreement with the likes of Google.

- As one source puts it: "We remain unconvinced as to whether there are any direct benefits to advertisers in making spending commitments upfront. That's a tough call to make in a bidded, auction-based, marketplace."

- Some advertisers might also be nervous about having confidential data pooled in a non-agency "trading desk" environment.

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