Google may dominate digital advertising, but there is still a $ 70 billion television advertising market in the United States, from which the subsidiary of Alphabet (WKN: A14Y6F) (WKN: A14Y6H) is pretty much excluded.
Walt Disney (WKN: 855686) is supposed to change its ad technology. It may not be a coincidence that Disney is reevaluating its advertising technology provider – the company is currently relying on Freewheel, a Comcast (WKN: 157484) company, as Disney takes steps to streamline.
Google has gained a lot of momentum over the past year since launching a new set of advertising tools in conjunction with the launch of YouTube TV. The company has signed multiple contracts with major media companies, most notably CBS for its all-access service, but Disney represents the biggest Google opportunity yet.
What Google offers
As a leading online search provider, Google has a plethora of data that Google can offer to media companies to make their ads more effective.
Google can tell businesses what people are looking for after viewing an ad or show. This can be very useful to determine the effectiveness of ads.
Thanks to its solid user profiles, Google can provide better data about the demographic development of viewers.
Google can leverage its machine learning expertise to optimize advertising breaks and maximize revenue.
The company brings its unique advertising data and technologies.
Google can leverage its broad network of web ad partners to serve ads across multiple objects and devices, providing a complete solution for advertisers.
The Alphabet subsidiary also has the technology required to ensure that viewers do not always see the same ad or that competing ads are not played during the same usage time. Even competing TV advertising platforms offer these features.
While Google has much to offer the media companies, there are still some challenges for the digital giant.
More power for Google
As mentioned earlier, Google is already a dominant force in digital advertising. But the company is also a competitor to television media companies thanks to YouTube, which is likely to contribute to a decline in the number of traditional television viewers and may affect the use of video streaming on other platforms.
The question for media companies and advertisers is: How much data and control over advertising do they want to give to Google? There is already concern that Google may be part of a digital advertising duopoly – adding TV advertising to the mix will only make Google more powerful and make it more difficult to compete with the company.
However, freewheel is not a much better deal for most media companies. Freewheel is owned by Comcast, the company that owns NBCUniversal. Comcast is one of the largest multi-channel video program distributors in the US and NBCUniversal is one of the largest TV media companies. So it’s not very attractive to give Comcast huge amounts of viewer and ad data.
A major hurdle for Google is the high switching costs for media companies. Comcast bought Freewheel in 2014 and very few customers have moved to the market despite Comcast’s position. If Google can make a compelling proposition within a few years to make up for the high switching costs, it will have a good chance of attracting many new customers as video streaming becomes more important to many companies.
Disney would be the beginning of something big
Disney is already one of the largest television companies in the world. If it successfully acquires the assets of Fox, the contract to provide Disney advertising technology will be a massive success for the company, which eventually prevails.
Disney’s push into the field of video streaming means greater demand for more complex ad technology that can take full advantage of digital delivery. If Google can win this contract, it can show other media companies that it can add value to their advertising business, as well as many others who want to follow Disney in the direct streaming video section.
Finally, working with major media companies could open the door for Google to sell linear TV billboards in a much larger market that goes well beyond YouTube TV.