Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The Kanoodle boys are in town and gunning for Google: It’s West Coast versus East Coast, it’s the Geeks against the Media City Slickers…now it gets interesting

Posted by Tom Foremski - January 19, 2005

by Tom Foremski for SiliconValleyWatcher.com

A three-exec Kanoodle squad is in town this week for a media tour, and within moments of touching down, they were on their way to visit Silicon Valley Watcher—the gateway to Silicon Valley.

Jessica Ryan Schweitzer from Hill and Knowlton brought them over to our deluxe conference meeting rooms, which are fully-staffed 24 hours a day, and feature all-day breakfast (the "Lucky Penney" diner on Geary and Masonic.)

Kanoodle has picked up a fair amount of buzz and momentum lately, with its different packages of text ads on its advertising network that has some large online publishers. Kanoodle directly challenges Google's Adsense network, its fastest growing, and most profitable, business.

The boys were hungry; cheeseburgers were ordered, and coffee came; and it wasn't far into the conversation when Lance Podell, the president of Kanoodle said, "We are a media company."

"Wow," I said, "because Google thinks it's a technology company: there is not a single media professional within the entire senior ranks of Google."

"Yes," he said, "we know." I think I caught a flash of smirk in his grin, but why not?

I've asked this before: Can engineers grow a large media company?

Or does a time come, as was the case at Yahoo, when you have to bring in the media professionals to help grow the next phase ---you can't get there on Geek power alone.

Lance belives that Google won't be able to take a Yahoo-type approach in recruiting media professionals, because Google has become even more tightly entwined into this idea of being a technology company, not a media company, he said. Still, similar things could have been said about Yahoo as well; but it changed, and decided it was a media company ---with great technology.

Kanoodle is a private company run by sharp and savvy Fifth Avenue media professionals with impressive pedigrees (check out their exec bio page.) They say that they understand what online publishers want, and they speak their language. "We know how they want to present ads, and what types of controls they need. Also, we use humans, not servers, to establish a relationship with publishers, and check out their sites to make sure we offer them the right types of ads," said Mark Josephson, senior vp of marketing and business development.

"The ability to be able to serve up text ads in different ways, on different types of content pages, has attracted many big name online publishers to Kanoodle," said Andrew Zucker, senior vp of sales. CBS MarketWatch and USA Today are among its 30,000 customers.

About 200 thousand online publishers use Google Adsense, an advertising network that publishes text ads and links, within a web page. Publishers add some pre-written code to their web pages, which calls up text ads from Google each time an online reader visits.

The Google text ads are designed to be contextual ---to be related to the content on the page. If readers click on a text ad link, Google pays the publisher part of the fee it collects (it won't reveal the revenue split; Kanoodle does.)

A lot of Google's Adsense members are small publishers such as bloggers, and that's because it was the only advertising vehicle that was available which didn't require high volumes of user traffic. Adsense has been a boon to many small publishers, allowing for easy online sign up, and a regular stream of (modest) checks from Google.

Larger online publishers, however, have not been as pleased with Google Adsense, especially its contextual advertising capabilities. And IDG, the huge computer trade publications group, has grown increasingly hostile towards Google, calling it a competitor, and advising online publishers to lock out the Google spider from their online content. (Now it makes sense why Google won't call itself a media company!)

Google recently said it had improved the contextual ad technology. We've been testing that claim after taking them off last year; and the Google text ads served up, indeed, seem to be better matched to the content.

But as an online publisher, I'd like to have different choices of text ad types, ads that are NOT content related, for example.

Why show tech product related text ads on a page about technology companies?

Before the holidays, some of our pages had a text ad that linked to Amazon's fresh lobster and caviar page. If a reader clicked through and bought a jar of caviar for $4,500, we'd get paid 5 percent. It feels a lot cleaner to sell caviar than tech products related to page content. There are some online publishers that specifically design their content to attract whatever are the highest paying text ads on Google. Advertisers will pay tens of dollars per click for some of the more hotly contested keywords.

How much they pay is established by an online auction system that gives the highest bidder for a keyword or phrase, the top listing on a web page.

It's a brilliant setup, because the market sets the advertising fees, and thus companies (such as Google, Overture and Kanoodle) can capture the exact market value of those ads without guesswork or lowering ad fees. For publishers, there is no need to do things the traditional way: to knock on doors, ring telephones or discount your ad rate card to what you think the market will bear. You always get the perfect price for your ads.

Kanoodle offers the same type of automated set up; but it offers much more. Advertisers and publishers have a wide range of choices. They can use contextual ads, or use keyword-driven text, or choose text ads that are targeted to user behaviors.

Ads can be published within specific time periods only, or only on specific types of web sites.

Publishers can ensure that exclusive advertising relationships are not jeopardized, and can specifically block competitor ads from appearing on their web pages.

And there are plenty more ways to slice and dice the ad type and delivery, especially if you consider that Kanoodle has hundreds of advertising categories and regional publishing choices.

Its customers include many well known media brands, such as CBS MarketWatch, recently acquired by Dow Jones.

Google offers no controls over ad content and where it is delivered. It just gets scattered out through its network chasing keywords in web pages. It's inefficient; but surely Google can just take notes and implement similar ad services packages and controls?

"They won't, because it's not in their genes; they are engineers," Podell says. He clearly likes that genetic metaphor; but he might be right. Josephson says there is ample proof that Kanoodle's ad network is more effective than Google's, because it collects fees that average out to about 70-cents per click. He estimates that this is about twice as much per click than Google gets.

Google Adsense is an important business for Google, and it relies upon publishers of web pages to continue to host its ads. If publishers can get more revenues with the Kanoodle ad network, then Google will have to fight back. It'll call out its top echelon Geek engineers, of which it has plenty. Don't underestimate the Geeks: software engineers are taught to believe they can accomplish anything. And when they do, it's a scalable solution: you just buy more of it. Fewer people needed, just add servers and electric power.

That's the beauty of the Geek solution. However, to engineer a solution to a problem, you need to know what the answer should look like. That's why it's good to have a few media professionals on the team if you are engineering a media solution.

Will Kanoodle persuade publishers to "can" Google? It will some; but Google isn't standing still. How many publishers deflect from Adsense will depend, I guess, on how well Google's engineers can respond to their varied advertising requirements.

As a publisher, I hope both companies are incredibly successful ---and build incredibly effective advertising networks--- so that I can pay to have my car towed out of Google's car park, where it has been sitting for nearly a month.

(It's the bloggers dilemma ---pay child support / fix car / buy groceries, or pay web hosting fees? If you are reading this you know my choice...)

cd2247

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