This week Google’s YouTube announced that they would begin sharing ad revenue with their partners – popular content providers. This news was buried in among all my daily media and entertainment nuggets like “Vivid Sues PornTube”, “Cisco Launches Entertainment OS” and “Mobile Game to Reach $6B by 2011”. While all Google news is News, this little tiny gunshot in the war that is the Digital Media Revolution should be heard loud and clear. This is the next step in their battle plan to move from the dominant player in the $40B on-line advertising market to the dominant player in the $400B entertainment / TV ad market and maybe the $1.4T Media and Entertainment world.
It is pretty clear to me that Google is executing a finely tuned strategic plan, one with little incremental skirmishes aimed at winning the war. Their motivation is obvious and I admit that I have not been inside any strategic planning sessions at Google but it is pretty clear to me how this plan plays out:
Step 1: The Trojan Horse: Acquire a popular Video Portal company with large audience using their stock as cheap capital. CHECK.
Step 2: The End Around: Roll out an ad model that expands on their dominance in on-line advertising to capture additional revenue from YouTube. CHECK.
Step 3: The Axis: Cut deals to make YouTube a prominent application on devices other than computers (mobile devices like iPhone). CHECK. Expect more to come – set top boxes, DVRs, televisions.
Step 4: The Secret Weapon: Start sharing revenue with content providers to motivate them to continue to supply content and make higher quality more compelling content. CHECK. Hmmm … now you have the model for Google setting the ad rates and revenue sharing model that is crucial to winning the war. This is the traditional Media and Entertainment company’s worst nightmare.
Step 5: The Blitzkrieg: Continue to drive people to YouTube so you become the Kleenex of content aggregation. Do for content aggregation what you did for search – become the first stop for entertainment. Become the “home page” of people’s IPTV applications – whether on the computer, phone, set top box, on the planes, trains and automobiles! Working On It.
Step 6: The Grassy Knoll: Orchestrate a writer’s strike where the battle line is over the very business model that you enable so that quality content dries up. Gratuitous Conspiracy Theory I Had to Throw In (but could it really be possible, is Google handing out stock on every street corner in LA to the writers?). Actually, I am flying back from London as I write this and I found an article about how the strike is going to lead to a “bleak winter in programming” and how it will have a ripple impact on television and movies for seasons to come.
Step 7: The Atomic Bomb: Begin “paying” for compelling content with either tiered-based advertising sharing or direct payments that cut out much of the entertainment supply chain. Accelerates the shift of traditional television advertising dollars to on line including YouTube. Coming soon to a press release near you.
Step 8: The Treaty of Versailles: Force the traditional content companies to syndicate on YouTube or risk total obsolesce. Google now dominates all entertainment advertising and controls all ad rates based on the auction model that it uses for on line advertising.
Step 9: The coup d’état: Force the cable and satellite operators to the table and dictate terms that force them to offer ala-carte pricing to their customers or risk becoming obsolete. Hmm – wonder why Google is interested in spectrum?
Watch for the following product or technology releases that cements their place:
• Contextual video search. The Holy Grail – if there are not a team of rocket scientists working on this in the Google labs, I would be shocked.
• Demographic / Ad tracking software that helps target content and ads – I know of a number of start-ups working on this and I would not be shocked if this is not in the labs as well.
• On-line Video Editing with a vast library of stock content that can be mashed up into custom advertisements at a low cost.
Not possible? Well, we’ll see, but something is going on that is bigger than those little gun shots you hear in the distance. The Digital Media Revolution is on and it’s being fought every day. Google’s motivation is clear to me, I am guessing Google has a plan that reads beyond 9 simple steps but I am sure it’s guarded with more security than the formula for Coca Cola. Wait – is there a man across the street on a grassy knoll looking in my window?
