Google and Other People's Content

Google and Other People's Content
It sticks ads all over. But to maintain growth, it may need to own the places it puts them
BY Jon Fine
http://www.businessweek.com/magazine/content/07_49/b4061083.htm

The eternal story line in media is "Google is moving into [fill in the blank]." In recent weeks, Google announced its Android operating system for mobile phones and its OpenSocial standard, which will link applications across major social-networking sites, so long as (for now, at least) they're not named Facebook. As several blogs discovered, in November the company filed a patent application for a Google magazine of sorts, which would allow users to collate Web content around which Google would wrap targeted ads. It's also launching a job ads initiative.

All of which multiplies the number of arenas into which Google can sell advertising, which provides 99% of its revenue. The formula is familiar: Sell ads, in many cases around content Google doesn't own; turn over the bulk of that revenue to the owner of the content; repeat until the end of time.

Google's revenues almost tripled, to $11.8 billion, in the first nine months of '07, so it's hard to argue with its approach. But, really, how long can this go on? Not even the most ardent Google apologist claims its profits will balloon by the billion forever. Some perched in lofty places throughout the media biosphere advance a quietly radical notion: Google will start buying content companies. In fact, they say, Google will have no choice.

EYEBALL HUNTERS
This doesn't happen today or tomorrow but somewhere down the road, as the torrid growth tails off. The reason is AdSense, Google's business that runs ads around others' content and pays the owners the bulk of related revenues. (For the first three quarters of 2007, AdSense accounted for 35% of Google's gross revenues.) This business is less profitable than AdWords, which runs targeted ads around Google's search results. And there are indicators that gap will widen. The costs for eyeballs will only go up as the other big online ad network competitors-Microsoft , Yahoo! , and AOL -all tussle to lock up sites that generate lots of quality traffic, of which there are a limited number. (For an online ad network, more traffic equals more data equals better targeting equals more money. Microsoft's $240 million bought only 1.6% of Facebook, but it kept that traffic from Google.) Google's traffic acquisition costs-which include fees paid to content players-come to almost 84% of its AdSense revenues in the third quarter.

Owning some high-traffic sites, however, does away with revenue splits and immediately boosts profit.

Remember that "content" doesn't have to mean "television network." "Content" can simply be "information you sell ads around." It would be insane for Google to buy New York Times Co. a cost-intensive entity operating in a severely stressed sector. It may not be insane for Google to load up on properties like Landmark Communications' Weather Channel-or, better, the competing Web site Weather Underground, which would be cheaper. That's info everyone wants, and creating it doesn't require an army of reporters and producers.

This idea, of course, runs wholly counter to Google's reigning ethos. Its stated goal is to organize the world's information, not buy it. Google-ites will tell you the culture is allergic to owning content. And companies begun, and defined, by programmers have struggled to navigate the byways of media, as many failed initiatives from AOL and Microsoft attest. (Don't recall Microsoft's Sidewalk online city guides? You're not alone.) Google intimates also say that the company's we'll-partner-with-everyone approach would be hurt by owning content, given the incentives to favor what one owns.

But Google already owns sites traditional media outlets view as rivals, like Google News and YouTube , and few partners have fled. As long as Google's ad network delivers the goods, traditional players won't opt out. (Giving up a few million dollars a year from Google is not an option these days.) Google's defenders say it's more likely to invent new lines of business, as it's trying to do with Android and OpenSocial, among others, to stoke growth. But as generations of past companies have discovered, there comes a time when it's easier to buy a way out of a bind than to invent one.

The Era of Bottom-Up Brands

The Era of Bottom-Up Brands
Google's Dominance Is Changing the Rules
By Which Brands Win Consumer Loyalty
http://online.wsj.com/article_email/SB119393895627879318-lMyQjAxMDE3OTAzNTkwMzU4Wj.html


One of my favorite stories in the history of Web business -- a chronicle by turns heroic and tragic, ambitious and doomed, shrewd and really, really dumb -- is that of Pathfinder, Time Warner's attempt to dominate the Web by building a common home for its various print titles.


Pathfinder began in late 1994, when the Internet was still largely the domain of scientists and academics, and as such was a bold effort. But by the time it was shuttered in 1999, it cost Time Warner some $75 million on paper and immeasurably more in opportunities lost while charging in the wrong direction. (It lives on here as a rather sheepish billboard for Time Warner properties -- I probably would have guessed that Coastal Living is "the Web site for people who love the coast." For a look at what used to be, check out the Pathfinder Museum.)



"The Pathfinder Way" should be shorthand for a particular flavor of brand confusion -- namely, that people know what corporation has the rights to a particular magazine, book, song, TV show or movie. Imagining that they do, or thinking they can be taught to do so, still trips up record labels, publishers and other content companies who only listen to voices inside their own building. But not to the extent it did during Pathfinder's heyday, when Time Warner media properties fought with the parent company for the right to establish Web sites branded with their own names.



The idea is obviously crazy now, but don't give Time Warner a break based on hindsight -- it was crazy then, too. You never needed a Web futurist to see that Time Warner's individual brands were better off on their own than subsumed under a corporate umbrella site with its own newly created brand. (If you'd like to continue down bad idea memory lane, here's what remains of Walt Disney's Go site, a halfhearted Pathfinder whose other legacy is extraneous characters added to Web addresses for Disney properties such as ESPN and ABC.)



It's fun to mock Pathfinder, and companies forget its lesson at their peril. But it's also easy to forget how different the Web was before Google arrived. In the early days, any good Web site about anything was of at least passing interest -- hence Cool Site of the Day, now a somewhat random portal. By giving people a reliable way to actually find what they were looking for, Google changed everything. And those changes haven't stopped coming.



A decade after registering its domain name, Google's name has become a verb for the service it offers. Seven years after it started to sell ads based on those searches, it's on track to top $15 billion in revenue for 2007. Riding on those big coattails is the industry of search-engine optimization, which has gone from an oddball curiosity for small businesses to something no organization with a Web presence can afford to ignore.



On today's Web, everything begins with Google -- and that's driving a sea change in how brands are built and succeed. While brands remain vital online, the old top-down model of building them (think of a new magazine launch) is increasingly irrelevant to the Web. Instead, Google's dominance allows and even encourages brands to be built from the bottom up, with their overall identity far less important than the little slices of themselves returned by Web searches and their position in search rankings.



These bottom-up brands already exist, and here's an easy way to identify them: You're more familiar with individual slices of their content than you are with their home pages -- some of which you may never have visited.



REAL TIME FORUM







Has Google's dominance changed how you use the Web? How do you think branding is changing in a search-first online world? Join the ongoing discussion in the Real Time forum.There's About.com, a compilation of how-to guides you've undoubtedly used or at least encountered. There's YouTube, now part of the Google empire. And there's Wikipedia. If you've ever entered a given term and "wikipedia" in Google to bring the Wikipedia page to the top of your search results, you've summarized bottom-up branding rather succinctly. Odds are you became aware of these sites not because of some big marketing campaign, but by repeatedly encountering bits and pieces of them through search engines -- until you began to think of them as entities in their own right.

And more such brands are arriving every day.

At first acquaintance Hulu, the online-video venture between NBC Universal and Fox -- whose parent company has agreed to acquire the Online Journal's publisher -- feels like a whizzier version of the Pathfinder Way: It assumes consumers know what network a show is on and dresses that inside-the-building conceit up with a new brand name.

Ten years ago, that approach would probably have been fatal, and it still might be. But today it's far less important than how high Hulu's videos will appear in search rankings. (Hulu's distribution deals also help, though in that case bits of content are being pushed to consumers through various outlets, rather then pulled by them through search.) This raises the possibility that the Pathfinder Way may live on for years as a full-employment act for old-style brand marketers, who will soldier on without ever having to confront their own irrelevance.

A different example is presented by Associated Content, which recruits people to write about a huge number of specific subjects in hopes of attracting Web users performing searchers -- and by doing so, creating an inventory of interest to advertisers and content companies looking to supplement their offerings. (For a good portrait of the company, including the debate over its model and the presence of Google's Tim Armstrong on the board, see this July portrait by News.com's Elinor Mills.)

From its model to its no-frills name, Associated Content can sound utilitarian, particularly to veteran writers like me. But the company contends that many people performing a specific search will value specific information more than fancy wordplay: If you're going to Venice in August with kids, Joe Friday's workaday account of visiting Venice in August with kids may prove a lot more useful than a John Berendt travelogue. (Not to mention that it's snobbish to assume Joe Friday's account is workaday.)

As you'd expect, search is a significant part of Associated Content's strategy. But right now brand isn't, and that's because of how search has evolved. As with About, Wikipedia and YouTube, visitors to Associated Content are likely to arrive through search results instead of by calling up the home page -- entering through the side door instead of the front, if you will.

Asked why Associated Content even has a home page (it's here), CEO Geoff Reiss -- a veteran of Spy and ESPN -- confesses that "for a while I was toying with a home page that would just be a search box." He says the company does need a front door for everything from recruiting writers to giving potential partners a place to visit, but acknowledges that at this point "I don't think it's fundamental to our success."

And that may not be a bad thing, considering how many home pages have to serve as the point of entry for every part of their Web sites -- a single-entry strategy that Mr. Reiss sees as increasingly out of sync with how consumers want to use those sites. "If you look at the home pages on Web 1.0 sites, you can hear them groan under the pressure they're under," he says.

But wait! About and Wikipedia and YouTube are strong brands -- Google paid $1.7 billion for YouTube, after all. But rather than building on big, top-down marketing pushes, those sites evolved into strong brands by being repeatedly found through search and gradually creating customer awareness and loyalty. That's the new way of the online world, and the lead Associated Content hopes to follow.

"We have achieved critical mass without having to predicate the business on building a brand," Mr. Reiss says, adding: "We're of the mind that hundreds of thousands of positive experiences can define a brand better than just sticking a flag on top of a hill and saying, 'This is the brand.' "

Don't give Google double the power

Don't give Google double the power
BY Joseph Turow
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/03/EDOOSIHM5.DTL


Google's decision to spend $3.1 billion to buy little-known DoubleClick will affect the future of American media and the way advertisers tell stories about you and me. Eventually, if Google has its way, what we see on the Web, hear on the radio or read in print will largely be based on decisions Google computers make about how different we are and why.

Already Google can likely say quite specifically how you search for stuff on the Web. Google can also send you text ads and (very soon) video ads that fit your search interests, your background and what you are reading about on thousands of Web sites. Other firms are doing the same thing. But by acquiring DoubleClick, Google will jump so far ahead of the pack with the technology and knowledge to be the only place marketers have to go to reach you and just about anybody else.

Perhaps more than any other company, Google sees that American media and marketing will change profoundly in the coming decades. At the center of the transformation is a phenomenon called ad-serving. Many of the ads that we receive online come from a company that makes deals with Web sites to send ("serve") ads to you when you reach the site. The Web site receives a part of the revenue that the ad-serving firm makes from selling the ads. Advertisers like digital ad-serving because they pay only if the customer reacts to the ad- clicks on it or responds in some other way. Because they need to show action-oriented results, Google and its competitors have been collecting loads of information on Internet users, slicing and dicing what they know about us and our actions in relation to different topics so that they will know what ad will yield what action from what person.

Ad-serving can be very lucrative. AOL, Microsoft, Yahoo, ValueClick and others bring in a lot of cash. Google makes, by far, the most money from it on its search site as well as its ad network. Moreover, Google has been the most aggressive in seeing ad-serving as where its future lies. That future is not just on the Web. Google's top executives understand that consumers are using all sorts of media in all sorts of places. They also know that marketers want to follow their best customers wherever they go, and they want Google's technology to help them do it. So far, Google has tested the waters of ad-serving in mobile phones, radio, newspapers and satellite television. The company's secret weapon: Its knowledge of us.

Google can use its enormous and accumulating knowledge of who we are and what we do to become the "go to" company of choice when it comes to advertising on any medium. Some years from now, Procter and Gamble will go to Google to sell diapers rather than to CBS, Meredith Publications, Rodale Press or Clear Channel Outdoor. With its huge database, Google will identify the particular individuals and types of individuals P&G wants to reach, will know where and when to reach them across media, and will digitally insert ads tailored for them in CBS, Meredith, Rodale and Clear Channel vehicles. Those media firms will feel forced to share in the take. You and I will see the results, too, though we may not know it. Wherever we go, we will receive ads and discounts (and maybe even different articles and programs) based on whether and when Google thinks we are valuable to one or another sponsor.

Of course, Google knows that Microsoft and other competitors want to do this, too. And Google has an Achilles heel: Almost all its ad-serving activity has involved text ads - meaning it has dealt with millions of small advertisers. Google has by all accounts not cultivated really big sponsors, the Fortune 1000s of the world. DoubleClick, the king of display advertising with powerful technology and strong ties to the largest ad agencies, will allow Google to rush into this territory. The merged company can then create new networks and other facilities for marketers that will drive it far ahead of rivals in the business of database ad-serving. This advantage will feed on itself so that Google will become the most influential entity in the new media world. With competitors marginalized, the great proportion of ads we receive, tailored to us across a wide range of media, will be based on what Google thinks about us. At the start of a great marketing-and-media transformation, the meaningful protection of consumers requires we ensure real competition even among giants.

Google supporters argue that the company is being unfairly singled out and that its plans for DoubleClick don't threaten competition or the public. But their claims can't be evaluated because so little is known about Google's goals for DoubleClick and about the ad-serving market. That's why the Federal Trade Commission merger review and the upcoming congressional hearings on the subject must carefully evaluate the union's impact and be ready to act in support of genuine competition across the new media marketplace. Ultimately at stake is more than whether we receive ads tailored to our interests. It's about what kind of news, entertainment and marketing system we want for our democracy.

Joseph Turow is the Robert Lewis Shayon Professor of Communication at the University of Pennsylvania's Annenberg School for Communication. He is the author of "Niche Envy: Marketing Discrimination in the Digital Age" (MIT Press, 2006).

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/03/EDOOSIHM5.DTL

Google's plan to poach election traffic

Google's plan to poach election traffic


Google is road-testing a major initiative capable of hijacking a good deal of the web traffic the mainstream media ordinarily would get during the 2008 election in the United States.

Fortunately for the MSM, Google's ambitious new online publishing project went on public view last week in Australia. So, American newspapers interested in preserving as much of their flat-lining web traffic as possible should waste no time in taking a look at Australia Votes, the up-and-coming way of presenting the political news from Down Under.

Australia Votes signals a significant strategic shift on the part of Google to become a primary web destination, as opposed to restricting itself to its historic role as a supplemental, though highly valuable, research tool. As such, it eventually could compete head to head with not only the likes of CNN, the Washington Post and all the other media biggies but also with the tiniest of tiny weeklies.

If you don't think the mainstream media are vulnerable to Google's greater growth, look at the data.

As you can see in the graph below from Alexa.Com, Google and its new subsidiary, You Tube - respectively the third and fourth busiest sites on the Internet - have been gobbling market share over the last three years at the expense of the mainstream media (and, of course, certain other competitors, too). The combined traffic of Google and You Tube would lift them well above Yahoo and Microsoft, the top two sites.

Meanwhile, ABC, the highest-ranking MSM site, has dropped to No. 48 today from a position in the 20s three years ago. And the New York Times, the highest-ranking newspaper site, has fallen to 209 today from the top 50 in the early part of 2006.

The Google election project, an elegant mashup of Google's arsenal of search, mapping, video, widget and other technologies, is a preview of how all but the most technologically recalcitrant consumers will expect to get political - and many other types of - news in the future. In addition to delivering a wealth of well-packaged election information and interactive tools, Google has created four content-pushing widgets and a number of ways for users to express their opinions via forums and home-brewed video.

I'm going to save myself a bunch of typing (and you a lot of reading) by linking here to the promotional video on the project that Google has posted at the explosively growing You Tube. Before you go, however, let's consider the implications of this latest affront to the once-unchallenged power and glory of the legacy media companies:

Australia Votes - and the all but certain sequel, America Votes - demonstrates emphatically the lopsided competitive advantage Google (and similar but less formidable web publishers) has over the traditional media companies.

While the MSM bear the enormous costs of producing content and delivering it via capital-intensive print or broadcast infrastructures, Google (a) pays nothing for the content it scours off MSM web sites, (b) incurs essentially no costs in selling advertising and (c) spends a trivial percentage of its more than $13 billion in annual sales on the 24/7 data centers that require human intervention only when they go awry.

Although Google is brilliant at finding, aggregating, indexing and rapidly presenting the collective wit and wisdom of the web, dozens of libraries worth of books and a growing array of public documents, Australia Votes, like all Google products, contains zero original content produced by Google, if you don't count the promotional video. Instead, Google is populating Australia Votes with original content provided for free by the mainstream media companies whose lunch, as previously reported here, it already has begun to eat.

Now or in the future, Google can make money off the large and expanding audience of sites like Australia Votes by selling advertising to marketers who use a totally automated, self-service system that gives them immense control over their buys and the instant gratification of minutely tracking the success of their campaigns. What Google does not have is the sort of large, highly compensated sales staff that is employed by every newspaper, magazine and broadcast outlet in the country (save for public broadcasters, who rely on the support of listeners and viewers like you).

Unlike the humans creating content, selling ads and producing products at the legacy media companies, Google's massive computer arrays do not require lunch breaks, sleep, vacations or union representation. To be clear: I'm not against lunch, sleep, vacations or union representation, each of which I have enjoyed to a greater or lesser extent in the course of my career.

But Google's boldest-yet intrusion into the formerly sacred space of the MSM underscores the urgent need for legacy operators to cut their embedded costs to be able to compete in the future with Australia Votes and the many similar initiatives surely coming down the line.

Among other efforts, the MSM need to take a page from Google by learning to publish efficient, compelling and customizable database-driven sites like Australia Votes or Chicago Crime. And they need to emulate the frictionless online advertising platform that fuels Google's high-margin success.

And here's one more out-of-the-box idea: The MSM may want to start thinking about charging Google for their valuable content before they discover they can't afford to produce it any more.

UPDATE 9/17/07: The cautionary note in the above paragraph goes double for the New York Times, which announced today that it will stop charging for access to its premier columnists.

The decision sort of makes sense, given the steady deterioration in the newspaper's web traffic since Times Select launched two years ago this month (see graph below). While this decision may arrest the declining ratings of the Times web site and create a decent number of new premium advertising opportunities, the comparatively small amount of fresh ad revenue generated by this decision will not sustain over the long term the formidable expense of generating the content for which the Times is rightfully admired.

Accordingly, the Times and the other MSM need to work harder than ever to cost-effectively produce engaging new-media content to compete with initiatives like Australia Votes that threaten to take ever-more-meaningful chunks out of the mainstream media business.

A Cautionary tale for all publishers - The Yahoo Booboo

BoSacks Speaks Out: Now here is a tale of caution for all modern day publishers. As stated below there are valuable cautionary words for other media companies - old and new - who are struggling to stay focused in an era of rising competition and competing opportunities.


"One of the greatest diseases is to be nobody to anybody."
Mother Teresa




Yahoo's booboo
BY Alan Mutter
http://newsosaur.blogspot.com/
The overdue departure of the overcompensated Terry Semel as chief executive of Yahoo represents not only the definitive end of Web 1.0, but also a valuable lesson to other companies thinking they can successfully create undifferentiated, monolithic brands on the Internet.

Although Yahoo got off to a great start as one of the premiere web directories in the pre-Google era, it followed the now-discredited lead of America Online by stretching far beyond its core competence to become a "portal," a jack of all trades offering not just search, but also horoscopes, email, classified ads, news, picture hosting and everything in between.

In its quest to be something to everybody, Yahoo ceased to be particularly good at anything for anyone. And, thus, it lost its way, putting its stock into an 18-month slump and leaving itself open to a take-over - hostile or otherwise.

Among the company's strategic blunders, as noted in this excellent article by the Associated Press, was ceding search leadership to Google, which it could have bought for a mere $5 billion as recently as 2002. Today, Google, whose market capitalization is $160 billion to Yahoo's $38 billion, makes more money in a quarter than Yahoo earns in a year.

Rather than sticking to the business that put it on the map, Yahoo until recently had strayed so far from its roots that it actually subcontracted its search function to Google. It attempted to reclaim its search advertising business only last fall with the launch of a home-brewed system that continues to sub-perform Google's commanding pay-per-click search engine.

Beyond the mistake of forsaking search, Yahoo over the years entered one online business after another with scarcely a vision or a plan, much less a cohesive approach to capitalize on the disparate initiatives.

In so doing, Yahoo became the archetypal Web 1.0 company, grabbing eyeballs as fast as it could in hopes that the rapidly growing number of people newly attracted to the Internet would develop lifelong loyalties to its services.

While this worked for a while, it didn't last long, as increasingly sophisticated users recognized that they could go one place for shopping, another place for videos and someplace else for email. Innovation was rapid, the barriers to change, nonexistent, and loyalty, if there ever had been any, was a relic of the past.

Thus, we entered the era of Web 2.0, an environment so thoroughly disbursed and democratized that people had a limitless choice of cheap, if not free, content and services. If they didn't like what they saw, they could fairly well create something of their own.

Yahoo, which in retrospect stands clearly as the first geezer media company of the Internet, failed to grasp the changes in the marketplace, much less adapt intelligently to them.

"We lack a focused, cohesive vision for our company," said Brad Garlinghouse, a senior vice president of the company in a leaked memo last fall that became known, for obvious reasons, as the Peanut Butter Manifesto. "I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and, thus, we focus on nothing in particular. I hate peanut butter. We all should."

His memo also contained valuable cautionary words for other media companies - old and new - who are struggling to stay focused in an era of rising competition and competing opportunities.

"We are reactive instead of charting an unwavering course," he said. "We are separated into silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics."

For all its resources, Yahoo couldn't get its act together. Even if you like peanut butter, don't let this happen to you.