Google Buys Contextual Ad Firm Begun

Google is buying contextual advertising service ZAO Begun for $140 million in cash, a move designed to help the search giant expand its domain in a Russia that Google claims is primed for digital advertising growth.

Google inked the deal, announced July 18, with Russian Web portal Rambler Media, which is Begun's parent. Google expects to close the acquisition in the third quarter.

Google said it will use Begun, which has amassed thousands of advertisers, dealers and direct sales in Russia, to give advertisers access to more sites to advertise on. Publishers will get a wider set of advertisements to run on their sites.

The most important target, of course, is users, who will ideally see more relevant advertising across a wider set of Web sites they search on thanks to Begun's contextual ad chops.

Google thinks a great deal of this, and Google's management has said it is better to put the perfect ads in front of users, rather than blanket them with a bunch of hit-or-miss ads.

Yahoo and Microsoft are also vying to leverage contextual ads on their networks, which is one of the reasons Brin and Co. have repeatedly stressed the importance of improving Google's AdSense contextual ad efforts.

The company has built its multi-billion-dollar online ad empire primarily from placing ads that pop up alongside results for paid keywords as the context.

But true, rich contextual advertising targets the content that appears on pages that are returned to searchers. The more targeted the ad is, the more likely users are to click on them, padding Google's coffers.

The deal also boosts Google's aggressive efforts to expand on the international front.

Google's second-quarter revenues from outside the United States totaled $2.8 billion, representing 52 percent of total revenues for the quarter, compared with 48 percent in Q2 2007 and 51 percent in Q1 2008.

This was a detail Google CEO Eric Schmidt pointed out in the earnings call. Begun can help Google on this front.

So, what's next? Internationally, it's anyone's guess. But if Google is going to continue down this contextual advertising path, it might want to (and probably already has) consider acquiring Proximic.

The alleged "Google killer" has developed a contextual ad platform that experts have deemed superior to AdSense, though the startup is so young as to not have made a real dent in the market.

If the technology is really superior, Google should consider buying it before it picks up a lot of customers and becomes a bee in Big G's bonnet.