Google urges local firms to do more with online ads

Article by: STEVE ALEXANDER , Star Tribune
Updated: April 29, 2011 - 8:50 PM

They can give customers more of the information they need to make decisions, the ad giant said.

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Google executive Nikesh Arora, chief business officer

Photo: Tom Wallace, Star Tribune

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Google is offering to help Target, Best Buy and General Mills move to what it calls the next stage of online marketing: using online ads and up-to-the-minute inventory to steer shoppers into brick-and-mortar stores that have what they want in stock.

Google marketing executives visiting the three local companies recently pitched the idea of retailers providing Google with store inventory data.

Best Buy and Target already show online whether a popular product like the Apple iPad 2 is or isn't available at a particular store. But there's no indication of whether a store has one unit or 10 in stock.

Google is suggesting something more. It wants to let customers view the actual fluctuating store inventory so they can make better decisions about where to shop. Nikesh Arora, Google's senior vice president and chief business officer in Mountain View, Calif., said this would have the beneficial effect of influencing offline consumers, who, despite the industry's steady gains in online sales, still account for about 90 percent of consumer purchases.

This would be different from the ship-to-store strategy some retailers use, in which a consumer can buy a product online, then pick it up at a retail store later. The new Google approach of referring customers directly to a store would appeal to consumers who want a product right away, rather than buying it online and waiting for the order to reach the store, Arora said.

"In the past, showing your brand online was enough," Arora said. "Today you must engage people with your brand via a website that gives them a personal experience."

Google already has some experience with helping retailers disclose store inventories online. Today it gets basic inventory information from Best Buy, Sears, Williams-Sonoma and OfficeMax, said J.J. Hirschle, head of Google's retail marketing in Chicago.

But one retail analyst said most companies may not want to disclose store inventory information for competitive reasons. In addition, he said the store inventory systems may not be up-to-date enough to make Google's plan work.

"I definitely believe that merging online and offline marketing is the wave of the future," said Stan Pohmer, a Twin Cities retail consultant. "But inventory data might not be useful in guiding people to the right store."

When asked about the Google strategy, Target said only that "digital advertising is a vital part of our overall ad mix." Target has been experimenting with new online marketing techniques; last year it used bar codes sent to customer smartphones as a substitute for paper coupons.

Best Buy didn't respond when asked about the Google plan, but said in April that it plans to double its U.S. online sales from $2 billion to $4 billion in the next three to five years.

'One toe in the water'

Google executives also pitched General Mills on how it could improve its connection with consumers by linking today's online recipes and how-to-make-it videos to interactive advertising, digital coupons or a sign-up for an online newsletter.

"Consumer packaged goods companies have barely scratched the surface of what's possible," said Catherine Roe, who sells advertising to those firms from Google's Chicago office. "They've got one toe in the water, but just one."

Rick Hosfield, vice president of media at General Mills, said the company "is continuously developing and testing new channels of active communication with our consumers. We are discussing opportunities with Google, as well as other leaders in the industry." General Mills said recently that it's experimenting with Groupon, the online discount coupon website, to encourage consumers to try its products when they buy groceries.

The executives' trip to the Twin Cities also reflected Google's increasing emphasis on cellphone advertising. While Google recently disappointed investors with its first-quarter earnings, it was because profits didn't go up as much as expected after it hired nearly 1,900 new employees to work on projects such as YouTube and cellphone initiatives.

The Google executives tried to convince marketers at the three local corporations of the importance of cellphone advertising, which enables "location-based ads" to be distributed to people who share their locations via GPS chips in their cellphones.

Google has been pursuing cellphone advertising since it first noticed the rise in Google searches from smartphones three years ago. More recently, Google has been encouraging consumers to share their locations. It said last month that with user consent it collects location data from smartphones that use its Android operating system, and uses the data to provide consumers with maps and the ability to search for nearby stores or restaurants.

Today, most retailers don't market to cellphone owners with location-based ads, partly because, so far, relatively few consumers enable their cellphones to be tracked. But that might change if more retailers tailored websites to mobile phones, the Google executives said.

"About 75 percent of the top consumer brands lack a mobile-ready website" that is designed for small cellphone screens, said Jim Lecinski, Google's managing director for U.S. sales in Chicago.

Arora also touted Google's ability to show an advertisement only to the people most interested in it, either as a result of a Google search or because the ad was displayed by Google on some of the 1 million independent Web pages where the search giant places advertising on behalf of corporations.

"We've been working on this Web sales initiative for the last few months," Arora said. "It's still on advertising's leading edge, but you have to be where the world is going."

Steve Alexander • 612-673-4553

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