Google, and the power of ads in e-mail

July 30, 2007, 3:16 PM UTC
Fortune

Japanese wireless carrier KDDI announced Monday that in September it will launch a branded version of Google’s (GOOG) Gmail service. Like regular Gmail, it will be accessible through both desktop computers and PCs.

At first blush, the new sounds downright pedestrian. Gmail in Japan? Who cares? But it turns out there’s a lot of money in e-mail.

Take a look at the Nielsen//NetRatings ranking of the most popular places to put ads, and e-mail programs consistently rank at the top. During one typical week in mid-July, Nielsen//NetRatings shows that 54 percent of online ads were placed into e-mail programs. (Think of those little banner ads that appear in your webmail, or those tagline ads at the bottom of messages.) The agency shows nearly 30 billion ad impressions for e-mail during that week alone.

After e-mail, the next-largest categories for ad placement were General Community (12%), Portals and Search Engines (9%) and Other (9%). Note: The numbers are for share of ad placements, not share of revenues. Ads in e-mail tend to bring in less money because they are not as well targetedas the display ads in e-mail; Google, Yahoo (YHOO), Microsoft (MSFT) and others are trying to change that with their recent forays into the display ad market.

Another potential benefit for Google in this deal: KDDI said its “Au”-branded service would be identical to Gmail in every way except the name. That means Google is also potentially getting its search box in front of KDDI’s 28 million users, or about 29 percent of the Japanese wireless market. Since Google targeted international expansion as a key part of its strategy, this is also a potentially strong chess move versus Microsoft and Yahoo.