A Ten Year Old With a Big Future

You can't do some of the things that they are trying to do without eventually facing some challenges from the government and your rivals.

- Danny Sullivan, editor-in-chief of SearchEngineLand

Michael Liedke, "Google Reigns as World's Most Powerful 10-year-Old," Associated Press, via Yahoo News, September 6, 2008

Larry Page and Sergey Brin founded Google on September 7 1998. "It sounded preposterous 10 years ago, but look now: Google draws upon a gargantuan computer network, nearly 20,000 employees and a $150 billion market value to redefine media, marketing and technology." What started out as a bid by Stanford University graduate students to build a better search engine--with no real business model--has turned into a firm that makes more money than any other on the internet through launching ads on its website based on people's searches as well as on web pages to which people go. In performing those tasks, as well as through its Gmail service, YouTube, and other activities, Google has collected information on hundreds of millions of people--though it is not forthcoming exactly how it uses that information. The company has made advertising agencies anxious because they believe Google has interests taking their place in selling ads across many types of media. Google has also made Microsoft anxious, as it moves to compete with on computers, mobile devices and browsers by placing free software programs on the web, creating its own mobile operating system (Android) and offering its own browser, Chrome.

"Google's expanding control over the flow of Internet traffic and advertising already is raising monopoly concerns....Privacy watchdogs also have sharpened their attacks on Google's retention of potentially sensitive information ..." To fend off government and advocacy-group attacks, Google has initiated sophisticated government-relations activities. Despite these tensions, observers point out that the web today centers around Google and probably will for years to come. John Battelle, an internet publishing executive who wrote a book about Google, put the point succintly. "Google," he said, "is the oxygen in this ecosystem."

The Social Dangers of Declining Newspaper Support

With no end of the cyclical woes in sight, at the end of this downturn, who will be left to investigate those who seek to govern?

- Michael B. Nathanson, senior analyst for Bernstein Research

In Michael B. Nathanson, "Weekend Media Blast: So Attention Must Be Paid," Bernstein Research, August 22, 2008

In a recent privately circulated report (therefore no link), respected Bernstein Research analyst Michael B. Nathanson concisely lays out key secular and cyclical trends that are affecting the system, a kind of perfect storm of problems that in his view bode particularly bad news for newspapers and radio. He worries about the newspaper “carnage” both in terms of the impact on employee lives and for its long-term implications for a free press. Two key paragraphs:

…The reasons behind this demise are fairly well-established
and we have called them the 3 Ds – Dollars, Devices,
Digital. This is shorthand for the negative structural factors
facing the content-creative industries, from the growth of
online advertising, which is eating share of traditional
advertising, to the emergence of negative technology trends,
like DVRs and satellite radio that continue to fragment the
consumer while fostering advertising avoidance. While the
trends are certainly not new, the cyclical pressures of a
softening economy are now just emerging in national
advertising.

…As we watch this carnage, that phrase "attention must be
paid" is reverberating in our heads. For starters, faced with
steeply falling demand, industries are massively cutting back
staff. According to Bloomberg, Gannett is cutting 1,000 jobs
in their community newspapers, McClatchy is eliminating
1,400 jobs (10% of total staff), Tribune is eliminating 235
jobs at the Los Angeles Times and 80 more at the Chicago
Tribune and A.H. Belo is firing 500 staffers. Of course,
there is also sadness on a personal level as affected families
struggle with the loss of income. There also should be
broader concern that a critical piece of our democracy – a
free public press – is in such a tattered state. With no end of
the cyclical woes in sight, at the end of this downturn, who
will be left to investigate those who seek to govern?

What Nathanson's trends fundamentally reflect is the power of media-buying firms to define audience trends and where media money should go. When they and their advertisers act based on their understanding of the media economy, the decisions affect the life and death of magazines, newspapers, and other outlets. Wall Street investors also play a big role in shaping a sense of what is taking place in the media world. A recent Variety article traces the reasons behind News Corporation's stock decline. Much of has to do with Murdoch's purchase of Dow Jones and Wall Street's belief that involvement with newspapers is throwing good money after bad. Supporters of Murdoch buy his belief that Dow Jones can serve as a news-and-information engine across media platforms.

Comcast's Subsidiary Set to Compete With Comcast

More and more of the best content is going to show up on the Internet. As that happens, cable companies are going to get very nervous.

-James McQuivey, an analyst at Forrester Research

In Nick Wingfield and Vishesh Kumar, "Comcast Unit Cuts Web Deals," Wall Street Journal, July 22, 2008

ThePlatform is a Seattle-based subsidiary of Philadelphia-based Comcast. ThePlatform "provides a service that functions as a management system for converting TV shows into the latest online-video formats, inserting promotions from online-advertising networks and transmitting the content to distribution networks that speed up the delivery of Web video to consumers." Although thePlatform has several competitors--YouTube and Brightcove are two--it is developing a reputation for providing longform videos such as full-length movies for the websites of cable and mobile telephone companies. Some observers believe that full-length television programs and movies will eventually show up on the internet, a circumstance that will erode the popularity of cable systems. Seen from that standpoint, Comcast is positioning its Platform subsidiary to be major player in the growth of internet video, just in case its cable systems suffer.

Google's CEO Challenges Hollywood to Create New Business Models

They won't just copy the old models; they'll come up with new ways of both making money, but also building brand. Seth is a good example.

- Eric Schmidt, Google CEO

In Claude Brodesser-Akner, "Entertainment Will Be 'First Through the Gate' in Digital Economy," Advertising Age, July 17, 2008

Schmidt was referring to Seth MacFarlane, creator of the Fox series "Family Guy" and reputed to be the highest paid TV writer in Hollywood. He recently made a deal with the firm Media Rights Capital (MRC) to fund a new online animated series. In turn, Media Rights Capital, which is funded by Wall Street and Madison Avenue, will make money every time people access the video, and wherever they access it online , through a deal with Google. The reason: Media Rights Capital bought advertising space from Google's Adsense service, which places ads around videos and text on websites. MRC it then resold those ads to advertisers, keeping the difference as its profit. And unlike "Family Guy," Mr. MacFarlane keeps the rights to the online series.

Schmidt was highlighting a development that he hoped would replace the approach that a number of Hollywood actors (such as Viacom) have taken: to sue Google for not adequately policing its YouTube video site for their copyrighted products. By contrast, the McFarlane-MRC approach is, he said, "a perfect example of how Hollywood needed to change to adapt the 'anytime, anywhere consumer model,' vs. what he derisively termed 'the lawyer model.'"