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Is Google entering the online classified ads business?

An almost two-year-old patent application from Google has drawn attention this week because it details a system to help individuals advertise products and services online, which some observers view as another sign that Google plans to enter this ad market.

The patent application, filed with the U.S. Patent & Trademark Office in March 2004 and made public by that agency in September of this year, is for a "system and method for providing online user-assisted Web-based advertising." Various images that accompany the application call the service Google Automat.

Application Info

Google Automat would pit Google against a formidable competitor, eBay, and also against America Online and Yahoo, all of which sell classified ads online.

The application explains that the motive for creation of this system is that Web-based advertising "poses a unique set of challenges," particularly with respect to individual and small advertisers, because creating effective online ads that generate Web traffic requires "significant time, effort and expertise."

"Therefore, there is a need for an approach to providing Web-based user-assisted advertising," reads the application for the patent, whose inventors are listed as Andrew Fikes, Ovidiu Predescu, and Mike Frumkin. The inventors give as their address Google's Mountain View, California, headquarters.

"Preferably, such an approach would guide a user in the creation of advertisements describing offerings of goods or services, creatives associated with the advertisements, and advertising budgets. Such an approach would also help create and host a Web presence for individual and other advertisers. Such an approach would also facilitate driving Web traffic to hyperlinked advertisements through targeting," the application reads.

Google Diversification?

The move would also help Google diversify its revenue stream, which is overwhelmingly dependent on pay-per-click ads. Advertisers pay Google when users click on the ads, which link to the advertisers' Web sites and are delivered along with search engine results and on regular Web pages, as long as the search query and page content are topically related to the ads.

In the first half of 2005, U.S. spending on paid search ads reached $2.3 billion, while spending on online classified ads was $1 billion, according to a study from the Interactive Advertising Bureau and PricewaterhouseCoopers.

Asked for comment on Google Automat, a Google spokesperson sent via e-mail the following prepared statement: "Like many companies, we file patent applications on a variety of ideas that our employees may come up with. Some of those ideas later mature into real products or services, some don't. Prospective product announcements should not be inferred from our patent applications."

Google Automat could "directly impact the $100 billion annual global classified advertising business," said Classified Intelligence, a provider of consulting services for the classified advertising industry, in a statement Wednesday.

Classified Intelligence, based in Altamonte Springs, Florida, examined the Google Automat patent filings. Taking into consideration other recent, related clues from the company, it has concluded that Google is going to make "an all-out move into classified advertising."

Google Base

Further evidence of that expected Google move was the surfacing in late October of a screen shot of a Google service called Google Base.

The screen shot describes Google Base as a database in which users can store and make searchable all types of content, such as items for sale. In response to the Google Base screenshot, Google later acknowledged that is indeed testing a new way for content owners to submit their content to Google.