[H&R] From the Business Pages

[Steven Vroom]

Google, Microsoft worry ad agencies

The growing advertising ambitions of technology powerhouses like  
Google and Microsoft are creating alarm at ad agencies. At an annual  
gathering...

By ERIC PFANNER

The New York Times

CANNES, France — The growing advertising ambitions of technology  
powerhouses like Google and Microsoft are creating alarm at ad agencies.

At an annual gathering here, executives harshly criticized Google's  
recent agreement to place ads next to Yahoo search results. The move  
could strengthen Google's dominance over the most lucrative portion  
of the fast-growing online ad field.

The executives worry that Google and Microsoft, which is moving to  
bolster its capabilities in search and other areas of online  
advertising, will not stop there. They fear the companies want to  
extend their reach into traditional advertising — transforming, as  
they see it, a business built on creativity to one controlled by the  
sterile algorithms of computer programmers.

Google "clearly wants to replace the advertising industry in its  
totality," said Cindy Gallop, a former chief executive of the New  
York office of the ad agency BBH. She added, however, she thought  
Google would be "fundamentally undermined" by what she saw as its  
antipathy toward traditional advertising.

Despite the alarm, ad agencies are eager to take advantage of the  
technology companies' new tools. WPP Group, the second-largest  
advertising company, spends $900 million a year of clients' money on  
Google search ads, CEO Martin Sorrell said.

Microsoft paid for 550 people — its own employees and those of  
clients — to attend last week's Cannes conference, roughly 5 percent  
of the total number of attendees.

Its advertising ambitions, and the tensions raised, were demonstrated  
when Microsoft said at the festival it had acquired Navic Networks,  
whose software helps direct cable-TV ads to demographically desirably  
audiences.

Sorrell said ad agencies were being priced out in the quest to  
acquire companies like Navic and upgrade their own digital capabilities.

While advertising companies have bought a number of digital ad  
specialists, the biggest prizes have gone to the new entrants, with  
Google spending $3.1 billion for DoubleClick and Microsoft paying $6  
billion for Seattle-based aQuantive.

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