The Google Empire’s Next Strike: Media Organizations?
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Written By Debbie Frank | May 3, 2007 | Share This
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As Google continues to expand its empire, rumors have surfaced (unfounded or not) that Google may buy a major media organization. Last week, Bloomberg reported that Google might bid on NBC Universal. This week, Bloomberg reported more rumors that Google might also be interested in the Dow Jones (owner of the Wall Street Journal). In response Danny Sullivan at Search Engine Land writes, “Enough… Does anyone seriously think Google would want to end up owning the Dow Jones-controlled Wall St. Journal? That fits with the company how again?”
I’d propose - How does it not?
Last week Google reported $3.6B in revenues for Q1, blowing away analysts’ predictions. The majority of those profits came from search advertising - Google’s semi-transparent auction of ad spots beside search results. The success of Google’s paid search business is largely product of the company’s overwhelming market share as the most popular search engine. But, as NPR forewarned after Google’s earnings call, “There’s always the potential that eventually there’s going to be a saturation point for search ads. You can’t keep growing forever. Some are predicting that it’ll be sooner rather than later.”
With their core business inevitably waning, Google has been building an auction platform for ad sales beyond search. Consider some of Google’s other recent acquisitions: Doubleclick, dMark, and YouTube. Google bought DoubleClick and dMark for their distribution technologies, ad inventory, and powerful clients. Google bought YouTube for its video content and enormous volume of unique users (which, last week helped Google surpass Microsoft in site traffic for the first time since ComScore began recording internet statistics). All three recent acquisitions, however, are related to discovering new sources of ad revenue by venturing into new types of content distribution - DoubleClick for display ads, dMark for radio, and YouTube for digital video.
In addition to these networks, Google is exploring advertising options in television, print, in-game advertising, and outdoor billboards. TV and Print, specifically, have been Google’s most aggressive new ventures. Despite the increased efficiency that Google’s auction platform affords to these traditional markets, Google has had a hard time attracting advertisers to the new products. Thanks to industry aversion to the auction model, scalability issues, and pricing concerns, initial TV and Print ad tests have been reported as substandard.
The problem, however, isn’t Google’s lack of ad clients, it’s their lack of content. Google can’t attract big advertisers to their TV and Print products without premium ad spots, and premium ad spots run next to content owned by major media publishers. Google has already filled its publisher void in radio by partnering with Clear Channel - and in doing so finally reached a point of mass adoption to warrant proper product testing and optimization. Now Google needs to carry forth with TV and Print by acquiring a company that will help Google build a content network in offline media. Down Jones or NBC Universal are two companies that seem perfectly suited to such a need.
Whether this violates antitrust laws, however, is another debate. I’m not qualified to talk about the legal ramifications of a Google-NBC or Google-Down Jones…but I can’t help but wonder, is there a reason, beyond sheer company growth, that Google is aggresively hiring for their legal team?
Topics: Advertising: Offline, Google, Investment, M&A, Legal Issues, Media Convergence |
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