Google gives up on newspaper ad deal

Google Inc. said Tuesday that it would shut down an advertising partnership with more than 800 newspapers, a key part of the Internet giant’s effort to expand into offline media, because it didn’t make enough money.

The Print Ads program, which launched with 50 newspapers in November 2006, allowed advertisers to use Google’s online services to bid on space in print much as they do for search-engine ads. The service ends Feb. 28.

“While we hoped that Print Ads would create a new revenue stream for newspapers and produce more relevant advertising for consumers, the product has not created the impact that we -- or our partners -- wanted,” Spencer Spinnell, director of Google Print Ads, said in a statement on the company’s blog.

Google has recently closed some experimental products and trimmed its head count to better deal with the global recession. The Mountain View, Calif., company has wound down deals with outside contractors and vendors, cut its recruiting staff by 100 and closed three engineering offices.


It also said last week that it was ending uploads to Google Video, closing its mobile social networking service Dodgeball and shuttering Google Catalog Search.

“They’re in belt-tightening mode, just like everybody else,” said Anthony Valencia, media and entertainment analyst for TCW Group in Los Angeles.

Google is scheduled to report its fourth-quarter earnings Thursday. Its third-quarter profit, announced in October, was strong, but the company had already begun to cut back on capital expenses.

The Print Ads program faced an increasingly challenging advertising climate. Print ad revenue nationwide fell 16% in the second quarter of 2008 and 19% in the third quarter, according to the Newspaper Assn. of America.


The Print Ads approach was problematic, said Gordon Borrell, chief executive of media research and consulting firm Borrell Associates Inc.

Print Ads used an auction system to sell ads. When major advertisers found they could get lower rates through the Google auction than by dealing directly with the papers, they began canceling their newspaper ad contracts. In response, papers began refusing to run ads from marketers that had canceled contracts, Borrell said.

“Newspapers probably found themselves in a situation where their valuable advertising was going at a low rate, and they weren’t willing to accept a lot of those bids,” he said.

One of Google’s rivals, Yahoo Inc., says it isn’t scaling back work with the 796 newspapers in its Newspaper Consortium program. Also launched in 2006, it helps newspapers put ads online, not in print.

Lem Lloyd, Yahoo’s vice president of U.S. partnerships, said the company was going “full steam ahead.”

Google has a famously experimental culture, encouraging its engineers to spend 20% of their work time on projects they’re passionate about. It’s not surprising that some initiatives don’t pan out, said Sarah Rotman Epps, media analyst with Forrester Research.

“They work on a lot of products that never see the light of day,” she said. “This is not necessarily a verdict on the futility of print advertising.”