Google's model is nearly optimal in many cases, but I believe many advertisers still spend the majority of their money outside of Google. The reason is that there are two kinds of advertising, roughly: meeting demand, and creating demand. Google is good for the former ("I'm looking for X"), and TV has been great for the latter ("want to be important? You need this expensive car").
When you see an ad for coke on the street there is just some probability you are thirsty or will remember coke when you become thirsty, with adwords and other kinds of contextual advertising there is also a probability you might be interested in what the advertiser is presenting you, so they might just hit a need or making you aware of it, and not really creating it as in creating demand.
That said, I'd caution against using your imagination to assess ad spending. Ask the nearest small businessperson what they spend on yellow-pages listing.
I think that it's just easier to spend money on creating demand - Maroon's whole point about Google being the theoretical limit for targeting is that it's a hard task. Most people spend much more free time consuming media than discovering things, and it's the search part of discovery that is applicable for targeting.
Hmm, I wonder if you TiVo or the cable companies could mine your channel-surfing behavior to improve ad targeting (but that would require customized TV feeds instead of broadcast, yada, yada, yada). That would be interesting to identify other "discovery" activities that people do.
Supposedly a picture is worth a thousand words. I wonder how many pictures a video is worth. Or how many 468x60 internet banners a full blown page in a magazine is.
I think the big disadvantage to internet advertising is it feels so cheap, even when it isn't. When you see an ad on ESPN, you know somebody spent a lot of money to put it there, and that lends credibility. When you see an ad on espn.com, you don't get that sense even if the company happened to spend more online than the guy on television.
I would love to know television's effective CPM rate versus Google's
He certainly didn't explain how "advertising works," only how search advertising on Google works.
The problems is not only that Facebook lacks the ability to pinpoint precisely what its users want in the manner that Google can, it's that Facebook is the wrong environment to sell specific things to people. Again: people use social sites to keep tabs on people, not to buy stuff or look for specific items or services. The only ads worth showing on Facebook are those that emphasize brand loyalty, and frankly, the money is better spent on television ads.