Google Sticks to Distribution

Aug 14, 2006  •  Post A Comment

One of the Google executives who last week helped make the company a leading distributor of television shows on the Web says the Internet giant’s media strategy is misunderstood.

David Eun, VP of content partnerships for Google, is eager to drive home the message that the company is a technologist, not a studio.

“We see ourselves as a technology partner for content owners,” Mr. Eun said. “We see one of our main goals as helping them reach their objectives in the digital space. We don’t aspire to become content producers ourselves or to get into the media business.”

Google’s announcement last week of a deal to syndicate MTV Networks shows to hundreds of Web sites, twinned with its unveiling of a $900 million advertising deal with News Corp.’s MySpace.com site, reminded

the television industry how old divisions in the media industry are blurring. The transactions also gave the clearest signals yet that the company plans to stick to the script that has delivered it a large chunk of the advertising money flowing to the Web.

Google’s AdSense technology, which lies at the heart of the MTV and MySpace deals, may be poised to become one of the most powerful and widely used assets in the media business. AdSense was developed to marry Google’s text ads to relevant content on Web pages. Its use as a tool for video syndication signals that Google is set to wring revenue from the explosion of TV shows rippling across the Web.

AdSense is the brains and guts behind the Web advertising machine that brings in about $6 billion a year for Google. The company will try to expand the technology’s applications as it competes against other companies that are also trying to cash in on the increase in Web advertising and Web video distribution.

Google’s decision to focus on syndication, rather than content creation, may allay fears that the company’s young founders, Sergey Brin and Larry Page, might become smitten with Hollywood after having dominated the Web search business. Mr. Eun’s declaration signals Google is unlikely to experience the difficulties that rivals Yahoo and AOL have encountered in trying to create unique programming.

“Some people think Google is going to try to get into the cable television space, become a film studio,” Mr. Eun said. “Our goals are to align with their interests.”

Google’s war chest-$8.4 billion in the second quarter-has made TV executives hungry to understand Google’s motives since it entered the video business in January 2005 with a gigantic hiccup.

At the time, the company ticked off TV stations, which claimed Google’s video-sharing site featured their content without permission. Since then, the Web behemoth has taken a conciliatory approach. Last fall, Google made a point of reaching out to Hollywood to strike partnerships.

‘Friend, Not Foe’

Earlier this year, Google executives launched a video download store at the Consumer Electronics Show, emphasizing that content owners have sole discretion to set the rules on price, copyright protection, and whether consumers will download to rent or to own.

The MTV deal again articulates the “friend, not foe” mantra. By distributing MTV clips from “Laguna Beach,” Nickelodeon’s “SpongeBob SquarePants” and other shows on the Internet, Google increases the networks’ visibility and may help them generate revenue. The new strategy employs a three-way revenue split between Google, the content owner and the Web site, and may expand the size of the ad sales pie by creating more video inventory on which to place spots.

“The most brilliant part of Google’s strategy is that it moves them solidly onside with major content owners,” said Tolman Geffs, managing director with investment bank The Jordan, Edmiston Group, which specializes in online media.

Google is unlikely to dominate Web video the way it has dominated online search because multiple players already are staking claims in that territory, Mr. Geffs said.

Other Web portals are likely to enter the syndication business because content owners, like TV networks, want their video seeded across the Web, not just on their own sites, said Kaan Yigit, an analyst with Solutions Research Group.

AOL Video said it plans to closely monitor various online video experiments but hasn’t publicly committed to syndication. Yahoo Video said it offers revenue opportunities through banner advertisements and may potentially expand those opportunities into additional formats and distribution channels in the future. MSN currently syndicates ads and the MSN video player to the Associated Press and its member sites. MSN said it might use its technology to syndicate TV content too.

On a smaller basis, Medialink, a producer of short-form video, said last week it is using ClipSyndicate’s technology to distribute ad-supported informational video clips produced for corporations and organizations. NBC is also entering the Web video syndication business with the fall launch of the National Broadband Co., a content aggregator and a syndicator of broadband video.

The profitability of ad-supported Web video rests on widespread dissemination of video across as many sites as possible and a robust advertising model, said Will Richmond, president of Broadband Directions, a broadband video research firm.

Broad Web syndication probably won’t yield a huge bump for well-known properties like “Laguna Beach,” Mr. Yigit said. “It’s meaningful as MTV begins to develop new brands and shows and customers are scattered all across the Web,” he said.

MTV’s Adam Cahan, senior VP for business operations and strategy, said MTV expects to reach new and engaged audiences with the partnership.

In addition to the partnership with MTV Networks, Google inked a $900 million deal last week to provide exclusive search and keyword ad sales for Fox Interactive Media, which includes MySpace. Under the multiyear deal, AdSense will be the sole provider for text-based and keyword-targeted ads on those sites.