Social and Local Advertising are Google’s Missing Jigsaw Pieces

Google is one of the most complete digital advertising companies. It has primarily dominated web advertising through search. Success doesn’t just come from the web. Mobile is doing well too.

Google has processed four times the number of mobile searches it did one year ago and AdMob has an astonishing one billion ad requests per day. What are left for Google to venture on are the local and social ads markets.

With Google’s $6 billion bid (to acquire Groupon) rejected, the search giant is either looking to make a second offer or acquire one of Groupon’s competitors to break into the local ad market. Social advertising is a tricky one. Facebook and Twitter have dominated the space and both have grown too huge to be acquired.

Google is stuck because it would take too long to form teams to take on these markets. Even if a team is formed, success isn’t guaranteed. Google Buzz, for example, is a social site introduced by Google’s internal team but has so far failed to capture users’ hearts.

“It’s hard to assemble a team and organize as quickly as you want in these situations,” Susan Wojcicki, a senior VP for product development at Google who oversees the company’s advertising products said in an interview. “Finding the right people, interviewing them and hiring them take time. Companies are willing to pay a premium to be in the market right now.”

Local deals model like Groupon’s is just one way for Google to enter the market. Failure to acquire Groupon, and previously Yelp, a local business review site, doesn’t necessary shut Google off the local advertising market. The check-in model (Foursquare, Gowalla) could be another alternative for Google. Groupon and Yelp are favorites because both companies have established close ties with local businesses, something which Foursquare and Gowalla have yet to achieve. Considering check-in may be the only way for Google to enter the local ad market, I wouldn’t be surprised if Google were to acquire Foursquare or Gowalla.

Lastly, the social ads market is a tough nut to crack because social ads thrive on users network. Google obviously lacks that. Building one from scratch is suicidal and acquiring one seems impossible. My take is that social ads will remain as Google’s missing jigsaw piece.