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Google Gobbles Up Sprinks

Google has signed Primedia to a four-year search and contextual advertising agreement, and has purchased Sprinks, the publishing company's paid listings unit.

Financial terms were not disclosed, and Primedia executives declined to comment further.

The deal calls for Google to become the exclusive provider of contextually targeted and search advertising across the 450 About.com Guide Sites and the Web sites for most of Primedia's Consumer Media and Magazines Group. The group includes many of the magazine publisher's 250 magazines, which include Motor Trend, Automobile, New York, Fly Fisherman and Creating Keepsakes.

Sprinks' key strength is that it has long been working on the problem of serving relevant ads on content pages. This is something Google provides via its AdSense program, and rival Overture, now owned by Yahoo!, also offers. Contextual advertising has become hot as search players seek to capitalize on the popularity of the medium by expanding inventory off of search pages.

In a statement, Primedia chairman Dean Nelson said that he did the deal because Google's base of 150,000 or so advertisers would let the company "accelerate the benefits of contextual advertising across our Internet sites and enable us to more effectively monetize our Web site traffic than we could with Sprinks alone."

The deal is a win for both Google and Primedia, according to Matthew Berk, research director for Jupiter Research, which is owned by this publication's parent, Jupitermedia. "Primedia gets to unload the operating costs of the Sprinks division, which is probably not insignificant. Gogogle clarifies the channel, gains customers and broader distribution for AdSense. Primedia takes a less-profitable division and replaces it with a nice cushy deal from Google." Although he's not privy to the terms of the deal, Berk guesses that Google is paying Primedia in addition to sharing ad revenue across Primedia's network.

Greater distribution for Google is essential, Berk said, in its war with Overture. "Distribution was Overture's Achilles heel," he said, and, before it was acquired by Yahoo!, the biggest line item in its budget. The economics of Google, he said, demand an ever-increasing number of opportunities to serve up keyword campaigns.

What that means for advertisers is another story, Berk said. Google will replace Sprinks' method of contextual targeting, which allowed advertisers to pick from a hierarchical list of categories, with the keyword method used by Google and Overture. "Google took one of the variants out of the model," Berk said. "[Sprinks] advertisers and publishers now have to change horses."