Google's Next Big Growth Market

The next big leap for Google in terms of revenue growth potential is most likely their soon to be released Nasdaq-like auction system for banner and video advertising. People know that Google bought DoubleClick a few weeks ago but most people don't realize that DoubleClick had been developing this ad auction portal. When Google bought them they already had 40 major online publishers and ad buyers testing the system and were planning on releasing it later this year.

This new way wave of online advertising will be radically different from Google's current search-based ads.

In this new model Google will sit more on the sidelines. It is an even purer way of bringing advertisers and publishers together. Google will only get a small percentage commission on each ad buy. But the ad buy will be completely independent from Google's search and partner sites. The ad can be seen on any site in the world and neither the publisher nor the ad buyer needs to have an Adwords or Adsense account.

This has the enormous implication in that Google will no longer necessarily need to rely on their dominance in the search space. Of course they will want to continue to gain market share in the search space, but this opens up a whole bigger world of revenue possibilities.

Most of the largest advertisers, the ones who typically advertise on TV or in the big newspapers have been slow in moving their ad budgets over to the Internet. Their online budgets are still typically much less than 10% of their total ad spending. These guys are not enamored with little search and keyword 'Ads by Google'. They want to go big; they want to go glossy; they want to brand in style.

In the last couple of years we have been seeing more flashy banner and video ads by some of these biggest advertisers. And many of them were signing on with DoubleClick to place these ads within the DoubleClick network of large online publishers.

But this Nasdaq-style ad auction system will be so much more interesting to them. Basically now they will be able to bid on banner or multi-media ads on any site. This could include the absolute biggest sites such as The BBC, CNN, The New York Times, Forbes, and People Magazine but it could also include the leading sites that appeal to a specific niche they are after. There will be no middle man in their way. There will be no Doubleclick to tell them that most of these sites are not available in their network roster.

Likewise, the top 20,000 publishers online are sure to sign up for the auction ASAP. Let's not forget that many of the top 1,000 (or even 20,000) websites do not choose to have Adsense ads on their pages. But in this new marketplace, they will see instantly who is bidding to place ads on their site and how the action is heating up. And they can choose to put in a minimum price and only accept ads if they pay it.

What is so addicting with Google Adwords - the very instant ability to have your campaign appear within minutes to a targetted audience - may be even more addicting with this new ad auction system. Here the market is wide open for all to see and all to participate. And there are no delays or compromises as to where you want your ads to appear. The key rule is only that the ad space goes to the highest bidder.

I've always wanted to own Google stock {Nasdaq: GOOG) and I've bought some. Their growth prospects seem enormous yet the forward P/E ratio is only about 26.