Two Lessons in Googlarithmetic: Mind the $37.5 Billion Gap

Get ready for Googlarithmetic.  It's the Newest Math from the company whose algorithms make all math go better.

Lesson One in Googlarithmetic, from Tim Armstong, vp/ ad sales at Google. Tim talked to SIIA last week in New York, either wowing or wearying the New York-heavy media crowd with his approach to advertising. His message: Get off your assets!

Here's his math (imagine it on 40' by 40' screen projected behind him):

 

                 

100%	100%	A
# of Assets	# of Relevant Users Reached	Level of   Success
5%	10%	F

In other words, put your assets to better work, reaching a greater percentage of the customers for whom they are relevant. Tim says Google, after interviewing clients and arriving at a formula, can grade them on how well they're doing. Which of course leads to what Paid Search does and specifically AdSense.

Of course, he's not wrong ( a favorite expression of an erstwhile colleague).  If companies better used  more of what they had, they'd all be more profitable. He's really taken a engineering-driven (Google's DNA) model of the world, in which technology helps us all perfect things. You remember the perfection of information.  If it were all available, all instantaneously transparent, it would be a perfect world. Buyers and sellers would know exactly what to pay each other, based on supply and demand at any given moment.

Thankfully, we're not there yet, because it seems it would be a more perfectly boring place. But that's another discussion.

Tim's perfection of asset use makes sense, and is a smart exercise for anybody, megacorp or individual, who wants to make more with what they have.

Lesson Two:  The Gap Will Make Us All Rich(er). What gap. Tim cited the numbers than about 20% of media usage is Internet-mediated. But only 5-8% of advertising is now placed on the Internet. You could practically see the dollar signs in his eyes.

Again, he's not wrong, though the numbers are all a moving target and the rate of gap closure at question as advertisers and their agents struggle to understand our new marvel of direct, customized marketing.

But, mind the gap.

I't's a $250B annual ad market in the U.S. alone. So each percentage point of closure is worth about $2.5B. So we could be talking, if you scratch 15 points of change across the back of the envelope, $37.5B over some near period of years.

You might see in these numbers something about Google's market valuation. You might also see that we are closer to the beginning of something, rather than the middle, or the end. And you might see how much more MSM -- mainstream media -- may have to lose unless it ratchets up in transitioning mojo.