What exactly did Google do to create such a fervent enemy-combatant in the media company Viacom? Ever since we learned of the collapse of discussions over carrying Viacom cable content on YouTube, Viacom has been on an apparent crusade to bring Google to its knees.
After months of negotiations to give Google's YouTube permission to display video programming from Viacom's Comedy Central, MTV, VH1, and Nickelodeon cable channels, the deal collapsed in February. Viacom executives claimed "it has become clear that YouTube is unwilling to come to a fair market agreement." Following that statement, Viacom quickly inked a deal with Joost, effectively handing the up-and-coming rival video service hundreds of hours of licensed programming that Google (GOOG) had coveted for YouTube (see BusinessWeek.com, 2/21/07, "Viacom Juices Joost").
Since then, Viacom (VIA) has slapped YouTube with a $1 billion lawsuit claiming the video-sharing site had "built a lucrative business out of exploiting the devotion of fans to others' creative works in order to enrich itself and its corporate parent Google." In addition, Viacom announced a partnership to bring its video programming to mobile handsets, via Sprint Nextel (S) and on Apr. 10 announced a multiyear search-engine-advertising deal with Google's archrival, Yahoo! (YHOO) (see BusinessWeek.com, 4/11/07, "Viacom Spurns Google for Yahoo").
Fears of Too Much Power
What's interesting here is not so much Viacom's ability to compete with Google—despite the popularity of channels such as Comedy Central and MTV, Viacom has yet to create any legitimate Web presence—but its perceived desire to make any deal that reminds Google of what it could have had. Like a jilted lover flaunting a new partner in front of an ex, Viacom's recent flurry of partnerships reeks of revenge. And with each small victory, Viacom is helping those desperate to court Google believe that there are plenty of other fish in the corporate sea.
Viacom's small victories come at a time when Google faces continued comparisons to Microsoft (MSFT) and a growing sentiment that it has become far too powerful a partner. The result is an "anyone but Google" mindset among some potential suitors. Surveying the landscape of recent deals, it's easy to find instances where companies are souring on Google and instead banding together to protect themselves from the search giant's monopoly. For example, in March, News Corp. (NWS) and NBC (GE) announced they were joining forces to build a YouTube competitor, and the same month we heard rumors that Comcast (CMCSA) may actually dump Google for Microsoft.
Of course, Google is quick to dismiss any claims that it's out to dominate traditional channels such as video, radio, or print. Google Chief Executive Eric Schmidt recently insisted, "We're not competing with newspapers, we're not competing with television stations, and we're not competing with the Viacoms of the world. We're trying to partner with them." Google certainly takes offense at suggestions it's holding a monopoly over rivals. It's quick to point out that users are free to switch to companies such as Yahoo, Microsoft, and Time Warner's (TWX) AOL.
And while Google continues to win favor from the general public (its U.S. market share grew to 64.13% in March, according to Hitwise), there are increased murmurings that the company is becoming too powerful, too demanding. From allegations that it bullied local governments into providing greater tax incentives, suggestions that it approached partnership negotiations with arrogance, and polls that indicate it has an "unhealthy dominance" in the search engine marketplace, Google is finding its business practices fully in the spotlight.
Of course, there's little doubt that Google is one of the world's most respected and admired brands. Its growth has been unparalleled, its dominance impressive, and its consumer loyalty envied. Indeed, the coming years will continue to see the search engine giant command a position of strength over peers.
But that strength is subject to erosion insofar as Viacom plays party-pooper and looks for opportunities to demonstrate that business can go on without Google—that technology can be built, that alternatives are available, and that smaller companies can compete in a space that many had already conceded to Google.
Whether Viacom is deliberately playing that role, many other companies are quietly pulling for the media company to continue winning against Google. The success of Viacom, now that it has turned its back on Google, will determine whether other companies feel emboldened enough to seek alternative deals and partnerships. Google may not ever face a foe as mighty as itself, but if others see that there is strength in numbers, it could find itself fighting lots of little battles, and not winning many of them.