Tuesday, September 16, 2008

9 Questions on Googleeeee

You got your East Coast news. You got your West Coast news. Something about the cratering US financial system going on out there on the isle of Manhattan, sources tell me. Meanwhile, here on the Left Coast, it's round 74 of Google (GOOG) and Yahoo (YHOO). GooglyHoo is giving lots of people a case of the hives, an itching reaction in search of a rash.

The latest scratcher is the World Association of Newspapers. Yesterday, it denounced the proposed Google/Yahoo search "cooperation" deal as anti-competitive. For good measure, its statement released lots of frustration about newspaper companies' diminished standing in this new world order in creation. In part, WAN points out that of the $48 billion in online advertising revenue that Google has collected since 2001, less than one-third of that has been shared with online publishers. Those big numbers are of course the ones that hurt, more than the cost-per-click impacts of GooglyHoo.

So nine quick questions on the boiling Google/Yahoo cauldron:

1. Who gave the pile-on signal? Now, according to Bloomberg, the EU is joining the fray, asking for a few Yahoo and Google documents (no, not Google Docs). That makes the Department of Justice, eleven states and the EU. No word yet from Bruce Sherman.

2. Why is the inquiry only about Google's search dominance? Yes, it controls 70%+ of the paid search market, but its goals are clearly global ad dominance. It has made forays into print newspaper, print magazine and broadcast advertising. It bought YouTube, becoming a major video ad player. It bought DoubleClick, planning a major move into the display market. So on the sell side, it will be able to offer integrated packages of advertising -- a little search, a little display, a little pre-roll -- to ad buyers.

While today, much of advertising buying is segmented by type, I've got no doubt that there's a Starship Enterprise console out there in the ad buyer's future, with audience targetable, using various types of advertising through a single interface. Without legal roadblocks, today, you'd have to bet that the console would be branded "Google." Shouldn't DOJ ask P & G (PG), GM (GM) and Walmart (WMT) (all companies that have criticized the Google/Yahoo proposed combo) about Google's wider ad role?

3. Didn't Joe Nocera nail it in his Saturday New York Times column, describing the experience of one company, Sourcetools, as it first won big and then lost big in the Google ad world? The AdSense/AdWords stuff makes so many heads hurt; telling the story (journalism!) through one company's experience is a great analgesic.

4. Does it help or hurt newspaper companies? That kind of depends on whether they are bigger buyers of AdWords or bigger displayers of AdSense. There's little doubt that the further monopolization of paid search will lead to higher pricing -- there's not sufficient alternative inventory to buy of significant scale. So if you are buying AdWords, they should cost more.

But if you're a big AdSense partner, like the New York Times, your share of the take should increase as well. We don't know the particulars of each affiliate deal, but would hope that newspaper companies could get a fair packaged deal from Google. And yes, having Yahoo out there as somewhat of a paid search competitor, has made the chances of getting a better deal better.

5. Will it make a big difference to Newspaper Consortium members? Apparently not much. The Consortium members, almost half of US papers by circulation, take Yahoo search as part of their wider participation. For their participation, they get a contracted minimum payment, and sources say that earned ad payments haven't reached the minimums yet, generally. So, if GooglyHoo does increase pricing of ads, earned revenue should increase, but wouldn't result in actual new dollars falling into newspaper company pockets, at least for awhile.

6. The US Newspaper Association of America is a WAN member, but has been so far quiet on GooglyHoo. Is that because some US publishers think they'll be winners out of a GooglyHoo tie-up, some think they'll be losers, and some just don't know?

7. Isn't this more about the transfer of ad wealth than pricing? If you look at the big numbers, the US news industry was down $3 billion in the first half of 2008 compared to 2007. You can make the big-picture case that that most of that money is going to Google, Yahoo, MSN, AOL and a few other non-newspaper-owned places on the web. From my reading, it looks like newspaper companies used to pull in about 20% of the national ad pie in the US, pre-web, a percentage that of course is dropping annually. More significantly, newspaper company share of internet advertising is no more than 15%, and probably closer to 10%, if we were to untangle bundled ads. Yes, cpc pricing is at the base of this, but it's this larger transfer of wealth that's behind the current fuss.

8. How much of WAN's angst has been caused by Google's lukewarm response to ACAP? UK and European publishers have pushed ahead with their Automated Control Access Protocol, a program to better control and protect editorial content as it moves through the web ecosystem. In theory, publishers can express "terms and conditions" for use of their content by web bots. As with all such systems, they only work if they are near-universally used. And if the biggest search company in the world won't play, ACAP can't really catch on. Google keeps talking with ACAP, but won't commit.

9. How much of a competitor is Yahoo anyways? Jonathan Weber, who publishes the excellent New West site, makes a compelling case on Times Online today that Yahoo has long faded an as effective competitor.


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