Growing By Leaps And Googles
Evidence that it's Google's World, part 4,352: Three major deals with the search giant hit the papers in about as many days. They even arrived with a lovely sense of orchestration and crescendo: soft to loudest, big to biggest. First a deal to pay Associated Press for some of its news stories. Then, on Aug. 7, came a plan to distribute Viacom video clips to hundreds of Web sites and sell ads within them. And then, an announcement that it would be the exclusive search engine for News Corp.'s MySpace.com and its sibling sites in Fox Interactive Media. Google guarantees $900 million in revenue from search ads to Rupert Murdoch as long as the sites achieve certain traffic goals.
1. The most impressive move, in terms of dollars, is the MySpace deal. But this is actually the most conventional of the three, albeit breathtaking in scale (Fox Interactive Media President Ross Levinsohn says that MySpace users -- there are more than 45 million of them -- will see a Google search box on every MySpace page). Conventional because plenty of newspaper Web sites have search boxes "powered by Google," and each of these in turn comes with its own revenue-sharing pacts.
2. Look for the biggest shadows to be cast by the Viacom deal. It points to an entirely new way to syndicate ad-supported video across the Web. It also gives Google's geeks a new laboratory for testing something that sounds a lot like Google TV: a future in which shows are streamed for free on Google Video, supported by ads, just as streamed shows on abc.com are. "We have already experimented there," points out David Eun, Google's vice-president of content partnerships. Now they can experiment more.
3. One of the key media stories of the year centers on publishers' mounting fear and loathing of Google's tightening grip on the Web. These fears always had more than a tinge of the paranoia once reserved for Microsoft circa 1995: "They already dominate their business. What if they get into mine?" Well, now it looks like they won't. "They can't afford to commit journalism," says a chest-beating Tom Curley, CEO of Associated Press. Which is why they're paying others to do so. So everyone is now easy with them? Um, no. "We continue to have a schizophrenic relationship with Google," offers one newspaper executive who is happy with his Google deals, even though "there is no question that over time, it probably cannibalizes some of our core business," such as classified or retail advertising.
4. Can we talk for a moment about how ridiculous it is that Google's power keeps growing? Search is free, so it costs nothing to switch from Google. Its three major competitors -- Yahoo!, Microsoft, and Ask.com -- are spending like crazy to steal its customers. Yet Google not only keeps building its market share in search, it's also getting better at leveraging its strength with search ads to swing deals the other guys can't. The Google/MySpace hookup is an especially bitter pill for Microsoft, which has tried mightily to strike such alliances. And to layer on the loss, Microsoft counts foxsports.com -- excluded from the Google deal -- as one of its search partners.
FORBES INC.'S SALE of an undisclosed minority stake to Elevation Partners ends a long odyssey for the Forbes family and gets them exactly what they have wanted for years: a minority investor, a nine-figure sum, and the retention of family control. Earlier this decade, the Forbeses sought around $250 million for about a quarter of the company, says one executive familiar with that attempt, which came up short. (Forbes would not comment.) Elevation paints the deal as one aimed at expanding the business, including the fast-growing Web site. An executive elsewhere who is familiar with the financials says total company profits this year are projected to be around $50 million. This executive also confirms that the deal was motivated in large part by the need for family liquidity. In the first half of 2006, Forbes had 1,549 ad pages -- about 40% fewer than in the first half of the halcyon year of 2000. To borrow from an Oscar winner, it's hard out here for a business magazine.
For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia
By Jon Fine