Listen to this article
Smart, iconoclastic, arrogant, ambitious and rich. With no allegiances to the powers that be and an apparent disregard for the enemies it makes along the way, Google has struck fear into the established media industry.
Aside from the pirate music networks, what other internet company has aroused so much distrust? The bland assurances that its search engine helps media companies by steering consumers to the most relevant “content” are little consolation to companies that have invested heavily in – and built business models around – their own brand and distribution systems.
After deals this week with News Corp and Viacom, though, maybe the time has come to modify this view. Even a company that moves at internet speed has trouble keeping up with the pace of change. Google needs friends too and some come with very well-known old media names.
Consider how Google has had to adapt. Its mission has been to make the world’s information universally accessible and useful. Two of the biggest growth areas in this online information have been video and so-called user-generated content, comprising holiday snaps, random jottings and home movies of millions of ordinary people – much of it appearing on social networking sites such as MySpace. This explosion of content has been taking place largely beyond Google’s web crawlers.
When Google Video appeared 18 months ago, it was greeted with predictions that the search engine would bring about the end of television as we know it. Yet Google’s impact so far has been underwhelming. Hollywood and the television networks have kept a tight grip on their movies and shows, preferring to release them through their own sites or through commercial download services such as Apple’s iTunes. Anyone searching for videos, meanwhile, is likely to start first with YouTube, not Google Video.
Google was also one of the first to jump into the social networking craze, with a site called Orkut. Yet its effort was sidelined by the unpredictable social dynamics of online groups.
These experiences – and the soaring interest in online video and user-generated content – have forced Google to adapt. As Eric Schmidt, the company’s chief executive, conceded this week: if the audience is heading to the social networking sites, Google had better make sure it follows.
If the new online behaviour trends, and the risk that they will weaken Google’s grip on the attention of internet users, have been forcing the company to focus on what its assets are, then that is all to the good.
Contrary to received wisdom, chief among these assets is not a capacity for creating world-beating consumer experiences or compelling user interfaces. The brilliant simplicity of its search engine home page notwithstanding, Google has not proved itself consistently superior at building must-use online services. Consumers have not flocked to Google Video or Orkut – or to many of the other new services it has launched.
Google’s main assets are its search engine, its advertising and the power of its global distribution system. These are the things that have set it apart, which it is now putting at the disposal of other media companies.
The deals with News Corp (owner of MySpace) and Viacom (parent of MTV) show how Google is starting to reach accord with the old-media crowd. Under the MySpace deal, Google will plug its advertising system into one of the fastest-growing online audiences. Google will also unleash its search algorithm to index the mass of personal data that has been accumulating on the social networking site.
There is nothing particularly new in alliances such as this. Google has struck deals in the past with AOL and other internet companies. This one, though, looks different.
The overnight success of MySpace has created a new threat to Google. According to recent data from Hitwise, one in 10 of the people who come to Google arrives there direct from MySpace. If the social networking site were to try to keep this audience to itself by building a better web search engine into its own pages, what would that do to Google’s audience?
The MTV deal takes advantage of Google’s third and least exploited asset: its global distribution system. By a loose network of independent publishers that draw advertising off Google, the search engine company is already estimated to reach 80 per cent of the world’s 1bn internet users. Until now, the system that feeds this network – AdSense for Content – has been used to distribute advertisements, but Google plans to use it to syndicate content as well.
The big winners are the media companies. MTV gets to keep an estimated 70 per cent of the advertising packaged with its shows, while News Corp might keep as much as 90 per cent of the money generated by MySpace advertising.
This does not mean that old media’s internet woes are at an end. It is still the case that audiences online will behave in fundamentally different ways andthe rules for assembling an audience to deliver to advertisders have changed. But it does suggest that Google may start to become part of the answer, not just part the problem.
The writer covers technology for the FT from San Francisco