Google announced today that they are extending their context advertising AdSense product to visual display ads. The big difference is that context advertising is driven by intent (a user searching for something specific), and display advertising is used to build the advertiser's brand but isn't necessarily linked to a specific search. Another difference is that display advertising is usually paid on a "cost per impression" model, while context advertising is predominantly "cost per click."

From the Times article:

"Now our system takes things very literally," said Susan Wojcicki, Google's director for product management. "If you are on a wine site, we show ads for wine. Now we will let you advertise your cheese on wine sites."

John Battelle has a quick assessment:

[This] declares Google's intentions in the advertising business: The company is going to compete with everyone, on every front...

Any pretense this has to do with search should be put to rest. This is an advertising play, pure and simple.

This move also shows Google is growing up, acting more like a business with its own agenda, as opposed to a engineering-driven playground where the coolest idea wins.

I see this move as a prerequisite to extending beyond the Web into Google TV as well, since there is often no search "intent" with television. Because TV is one of the primary vehicles for Fortune 1000 corporations to do brand and image advertising, if Google will "do for TV what they did for the Web," this capability is essential.

Update 04/25/05 21:31: I criticized Battelle's sketch on Google TV in that it solves the advertiser's problem first, instead of focusing on the user problem and monetizing later. This enlightened approach is unique to Google and is responsible for much of their success. It's why their services are cleaner, easier, and more widely adopted than those who try to monetize first.

With today's announcement of display advertising that's not driven by keywords, maybe Google's not so concerned with this. The new ad model will allow big-bucks advertisers to shove non-relevant ads out to the content network, overriding relevant contextual ads with the power of the dollar. I'm not clear what interesting user problem this solves, and I'm catching a faint whiff of Google trading revenue for reputation. Battelle thinks "this move shows Google is growing up, acting more like a business with its own agenda, as opposed to an engineering-driven playground where the coolest idea wins." But you've gotta ask, Is Google Still Google?

Update 04/26/05 12:08: Fortune has picked up on the theme that Google's move into branded ads is a prerequisite to extending Google's reach beyond the Web:

Search-related advertising is a $5 billion business and growing at nearly 40% a year, ... but branded online advertising is at least as big a market and growing just as fast. More importantly, the size of the branded offline advertising business, at more than $100 billion, is huge. "GM's ad budget is as big as we are" and it seemed clear that we weren't going to get a big piece of that just offering them targeted search ads, said one Google insider. "It seemed stupid to be religious about it."

The article also notes the danger: "[It is] a clear signal from executives that they will indeed take risks with the company's brand."