Businessweek Archives

Will Google Own Content in 2010?


This week’s column is about what some execs perceive as a competition among the big players in online advertising and online ad networks—yes,: AOL, Google, Microsoft, Yahoo— for quality traffic, and how that competition and its related costs may ultimately invert long-held notions of how some of these players will react.

Specifically: There’s now a case to be made for Google (and, for that matter, Google’s competitors) to buy up content players. Or, rather, there will, be, once their monumental growth slows down and the competition for traffic becomes more costly than it already is. And it’s not aprticularly cheap right now, at least in some key cases. When expressed as a percentage of total AdSense revenues, traffic acquisition costs (which include fees paid out to content partners in its AdSense program) for Google dropped slightly in the third quarter of 2007. But they still totaled just shy of 84% of all AdSense revenues for that quarter.

As I say in the column, “content companies” can be defined much more broadly than “newspaper publisher” or “broadcast network” Three potential ideas of the kinds of things it could be not-crazy for someone like Google to buy:

—Weather. The Weather Channel, or Weather Underground. This is information every person in the world is interested in, and information that does not have huge content creation costs. (It does not take an army of forecasters to keep wunderground.com online. It does take an army of reporters and Web producers to stoke the engine of nytimes.com.)

—Yellow pages directories. This is information that can be collected via an entirely automated process. It also offers a powerful two-fer The information is content that’s a form of advertising—that you can sell more ads around. A big play in yellow pages directories can also jumpstart whatever Google (or Microsoft, or AOL, or etc.) is planning in terms of localized Web offerings, which is a potentially lucrative market that continues to thwart virtually all entrants.

—Bloomberg. The most complex of all of these, granted, and one that comes with significant content creation costs. But it’s also incredibly valuable information cherished by a particularly valuable kind of customer. Arguably its blue-chip content is still underleveraged, particularly on the advertising side, by the company’s current set-up—and don’t forget that its competitors are busy consolidating with bigger players all over the place, be it Reuters/Thomson or Dow Jones/News Corp.

As the column notes, Google’s culture in particular remains highly allergic to the byways of owning content companies, even Google continues to hire more and more execs from more traditional media companies. But circumstances eventually force many companies to do things that they once might have considered unnatural.

If you look at this form 30,000 feet, companies since time immemorial have gone for vertical integration when their industries have matured, and when there is increased competition for raw materials (There was a reason why newspaper companies eventually began buying up paper companies and, in some cases, forests.) Traffic is the ultimate raw material for a company like Google—and, as crazy as this sounds, there will come a time when the finiteness of quality traffic will become apparent.

Plus there’s history, particularly on the media side. “There are distribution channels, and there are content creators,” says one executive that I discussed this notion with. “:”Over time there is a constant ebb and flow of integration” of the two entities within individual companies.

Because, this exec holds, “there is no right answer” to whether or not content and distribution should commingle within a company—“there is only a growth answer.”


Silicon Valley State of Mind
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus