Is Google eyeing digital signage?

Search-engine giant Google changed the world of online advertising in 2003 when it launched AdWords, which allows ad buyers to purchase keyword-based text ads, delivered based on the contextual information in a given Web page. A recent patent application has some people wondering whether the company is thinking about trying the same thing for out-of-home advertising on digital signs.

U.S. Patent Application 0060287913, filed by Google on Dec. 21, 2006, describes a method for "allocating advertising space in a network of displays," and appears to suggest a context-driven method of selecting and displaying ads — a la AdWords — designed for retail environments and billboards.

"I think this patent is absolutely a signal that Google is interested in continuing to expand its advertising solutions into other media outside of the Web," said Shar VanBoskirk, senior analyst with Forrester Research.

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"Extremely large amounts of revenue"

In a March 5 webcast from the Morgan Stanley Technology Conference, Google CEO Eric Schmidt discussed possible revenue streams for the company in the coming years, largely built upon what he calls missed opportunities in advertising.

He pointed out that worldwide advertising spending is anywhere from $600 billion to $800 billion annually, and 95 percent of that is untargeted.

"The world is a very large place, and very targeted ads are very, very valuable," he said. "Even small improvements in targeting … can drive extremely large amounts of revenue."

Schmidt said one of the biggest areas for improvement is television advertising, which is virtually all untargeted — for instance, he said diaper ads going into homes without children, or pet food ads going into homes without pets, are a waste of money.

Ostensibly, the same could be said about out-of-home ads that reach consumers with no interest in the product or service being advertised.

Enter the Google patent, which describes a "plurality of displays" in a network, each of them assigned one or more attributes. Those displays are connected to one or more databases of advertisements, each of them tagged with "at least one keyword"; the software would then select "an advertising campaign based on a correlation between the at least one keyword and attributes of one or more electronic billboards, and the advertising budget."

"We know that Google has an interest in widening their advertising offerings beyond Web pages and their Gmail offerings," said Bill Slawski, Google analyst and president of SEO by the Sea. "Electronic displays appear to be a reasonable target for Google, especially if they can enable advertisers to use an AdWords styled interface to bid upon and offer ads."

Google could not be reached for comment.

Does it mean anything?

Large companies like Google file patent applications all the time, and most of them go unused. Slawski noted that while Google doesn't file at the same rate as Xerox or Microsoft, it does have a portfolio of several hundred patents, many of them pertaining to advertising technologies.

But Alex Richardson, founder of Netkey and now managing director of Selling Machine Partners, said it's a bit early to imagine a Google digital signage hegemony.

"I believe we need to keep patents in perspective," he said. "For example, bicycles have over 5,000 patents, but that hasn't stalled innovation in the bicycle marketplace."

Even so, industry analysts are excited about what it could mean for a fragmented industry to gain a monolithic new player whose core strength is indexing and tying together massive amounts of far-flung data.

"I've been talking about this for a long time — not the patent itself, but rather the idea of Google becoming perhaps the most important channel for advertising sales for digital signage networks," said Rufus Connell, IT research director with Frost & Sullivan. He points to the large number of small, regional digital signage networks — and the fact that ad buyers are accustomed to buying from companies with large, national footprints.

Plus, he said, Google has trained people to expect to see third-party advertisements on non-Google properties, branded with the "Ads by Google" imprimatur.

"Google's patent foreshadows things to come," he said. "I can see the Google play mimicking the ‘Ads by Google' program. Google will place ads on signs throughout the country and will allow a new class of small digital signage network owners to participate in the digital signage advertising space."