Blog Post

Did Murdoch just KO Google?

When one is asked about Google’s incredible success to date, and what they did so right, the obvious answer will likely involve an explanation of the brilliant technologies that make up PageRank and Adwords.

But if one looks under the hood, there’s also a not-so-obvious reason that played an equally critical role in Google’s success: the fact that the web has been predominately comprised of text. Text affords Google the friendliest technological and legal environments to apply and optimize its superior algorithms.

But what happens in a future where video, not text, is the fundamental element of the web? If Google cannot translate and convert the advantages it had in a text-dominated web into a future web of videos, Google is in trouble.

In a web comprised of text, Google could dominate the market in terms of aggregation, search, and distribution without the need to strike one single agreement with content owners. All Google had to do was crawl and index.

But, in a web comprised of video, Google must deal with content owners and strike licensing and distribution agreements, as neither its technologies nor current copyrights laws enable it to autonomously automate the aggregation of a video library without the explicit consent of content owners.

With that in mind, let me now jump to the big news of last week — the announcement that Rupert Murdoch’s News Corp and NBC Universal would launch an online library of big media video assets that could be licensed by any online distributor, provided they accept the terms and conditions set forth by big media. Towards such ends, the new big media joint venture also announced that Yahoo!, MSN, AOL, and MySpace had signed up as licensees and distributors.

Given the significant difference between a web of text vs. that of video for Google, the big media companies made a very smart move last week. Although not necessarily a checkmate, it was a “check” on Google. If all the other media companies fall in line as well, then it could become a “checkmate” against Google when it comes to big media content.

In other words, Google would have no choice but to accept the demands of the big media companies for the licensing and distribution of their content. The only way for Google to regain leverage against the big media companies, at that point, would be to change the game altogether (e.g. by owning content and becoming a full-fledged media company, as I had suggested they might in my last post).

But at the end of day, it may turn out that both sides of this titanic struggle were merely pawns in a higher-level game benefiting one single player… Rupert Murdoch.

Using Google as the red herring, Murdoch may actually have succeeded in rallying all of his competitors to join forces by contributing their combined digital video assets into one pool (which he has significant control over). But through his ownership of MySpace, Murdoch is in a very unique position relative to all his big media brethren.

Namely, he will be the only one that ends up owning both content (via the new joint venture) and distribution (via MySpace) in any material and meaningful way.

Owning the whole value chain has always been a strategy that has served him well, and by the looks of it, he’s going to continue enjoying such advantages. Not only that, Murdoch could very well have out-maneuvered Google by positioning MySpace to ultimately become what YouTube was supposed to be.

35 Responses to “Did Murdoch just KO Google?”

  1. Here’s my take: Most people are having a field day pissing on this whole “big media” collaboration. That means expectations are low. That means an upside surprise is easier. My money’s on an upside surprise. Big time. Thoughts / comments?


    PS: I wonder what they’re going to name this thing when it comes out? If you were “big media” what would you call your video site? I don’t think so. In fact, I think they’d get maximum impact by taking a big slap at all the stupid Web 2.0 names that are so prevalent now that they’re a joke. I mean everybody and their dog has had their turn at that crap it’s stupid (and boring and annoying). I say what would stand out is a clean, simple and descriptive name. I mean in a land where everyone is using stupid made up names the way to stand out is with the opposite of that. I.e. if you are going to have a site showing big media video, why not call it what it is. Everyone will remember the name and know what’s there: Big Media Video. I.e. Seems like a “duh” to me.

  2. To label Google as strictly a text based search engine is quite misleading. Google co-owns and majority controls You Tube. Google is using new sets of server decks with video image sorting capabilties that has Google way out in front of any competitors and leading the charge to power video search for years to come.

  3. The automobile industry (just one industry, albeit one of the higher spenders when it comes to advertising dollars) spends approximately $7 billion annually in advertising dollars. Less than 10% of this, however, is spent on Internet advertising. However, studies show that approximately one third of automobile sales involve the buyer initially researching by utilizing the Internet. In overall advertising dollars, across all industries, just short of 10% is being spend in online advertising, but this figure is growing. So, let’s put this into perspective. More and more each day, people are reading their news on the Internet rather than in print. More and more each day, people are watching TV shows and movies online rather than watching TV (although this is moving at a much slower rate and needs much more time to catch on, due to bandwidth and subsequent quality limitations, as well as less-than-seamless experiences versus currently expectations). Simply put, more and more people are spending more and more time on the Internet versus other traditional forms of media (print, radio, television). With this shift, more and more advertising dollars will be spent online, also being shifted from these other mediums. Furthermore, as more and more Internet-based services and products are being created, there will be more and more need to market these online. As this “less than 10%” spend grows into 10%, moves into 15%, and continues past 20%, etc… everyone is hoping to get a piece of that pie. In the meantime, however, it is Google who is getting the majority of that pie while, at the same time, nibbling a little bit more of that pie from its competitors each and every quarter. Sure, perhaps at this rate, Google could only double or triple in revenue before the advertising market becomes saturated. However, there is another revolution Google started that will continue to unfold. It’s a lot harder to charge money for something that you can get free elsewhere. Magazines are usually entirely free when you count the advertising dollars. The only real reason to continue to charge a subscription fee for a magazine is to ensure your advertisers that only well qualified eyes (those willing to pay for the magazine) are seeing the ads. If the magazine were free, the circulation numbers would be bloated and the advertisers would have little to go by regarding targeting their ads or knowing what the TRUE circulation readership is. Google changes this paradigm by turning advertising from a “circulation” or “impression” model into a pay-per-action model. Let me be clear that Google already utilizes a pay-per-action model… it just happens that the current “action” is an “ad click”. They are testing more qualified actions (such as signups, inquiries, purchases, etc…) Even an ad click, however, is more targeted than an ad impression. However, nobody talks about “ad impression fraud”… so, they’re focused on easing the concerns of click-fraud. In any case, even if a video download site appears on the Internet containing 15 times as many quality videos than You Tube, they will need something very important. Eyeballs. To get those eyeballs, they will need to advertise. To advertise, they will likely send a bunch of money toward Google’s bank account. When competitors are unable to compete with Google on a particular vertical, Google wins because they get more eyeballs. When competitors beat Google at a particular vertical, Google partially wins because they get more advertising dollars. Their advertising worthiness goes up the more eyeballs they attract. YouTube was an acquisition to gain eyeballs. However, in a sense, Google NEEDS someone ELSE to be #1 in a handful of the other verticals because if Google is the only company around, there will be nobody with money to spend on advertising (taking an extreme world example.) So, Google is merely sparking interest in various verticals to keep the activity going (on the web.) As soon as Google started scanning books, everyone else started doing the same thing, preparing to crush Google. As soon as Google (and YouTube) started putting videos online, everyone else started doing the same thing, preparing to crush Google/YouTube. What will Google start putting online next, to get everyone else to follow suit?

  4. Very interesting article. I also had a similar opinion.

    Anyway I’m not so sure that “in a future video, not text” will be “the fundamental element of the web”.

    You have to consider how much texts and videos do increase in the net at this time.

    For the moment, just considering old-styled websites, blogs, the “google books” project and so on, I believe the amount of texts is increasing hugely more then videos.

  5. Murdoch is missing one big piece of the pie and that is Last Mile Broadband links. This is where Google will eventually rule this Content Distribution space. Their major new Data Centers and Nationwide Fiber distribution network will allow them to negotiate very favorable terms with Local Service Providers, who own the Last Mile, and therefore be sought after by any content owners. Especially if they plan to deliver any quality (Low Latency) Video. Murdoch will eventually realize that he will need to deploy his MySpace service on Google new distribution network if he wants to compete.
    It will be Content vs the Best Distribution and distribution will win, in that Murdoch will not be able to control all content.
    Wait until Google gets access to the new 700Mhz Wireless spectrum via a Partnership (with someone to deploy and operate the Wireless Network) by investing $ 3-5 Billion to help its team win the Nationwide Spectrum. They will then own all VoiceIP/Video and High Speed data distribution to the end user.


  6. Umopapisdn, I didn’t say that Googe is failing in what they want to do, because they do search and online ads better than everyone out there. That being said, the advertising market is only so big, sure, more content draws more people to the web (eventually) making the pie bigger, but how big can the advertising model grow?

  7. Steve Bryant
    1. Video will not replace text. First: it’s not a zero sum game (there will be both). Second: Video is not as efficient (either in production or consumption).

    2. Google will get better at indexing video. Remember the Blogger acquisition in 2003. That acquisition helped GOOG understand conversation networks and index those conversations better. Result: A HUGE percentage of search referrals to blogs come from Google. Same dynamic will apply with video.

    3. Joost and Google don’t play in the same sandbox. Joost is broadcast in a P2P model over the Web. It’s not (apparently) a collection of user-generated content or a powerful search for all types of video content.

    4. There will always be search. Search will always require text.

  8. I think that it’s a bit short-sighted to call Google’s rise to power based on text alone. True, it indexes text, but indexing link text (rather than just tags or alt text) allowed Google to dominate search for things other than text. Brin and Page address this directly as one of the main strengths of PageRank in their academic paper.

  9. I find it funny (and sad) to hear people say things like “Google gets 99% of their money from advertising, so it is clear they have been unsuccessful in all of their other ventures.” In reality, every time Google creates a new service, the GOAL is to simply get more eyeballs looking at pages that have their ads. Whether these pages are hosted on their servers, or hosted on third party websites that happen to display Google Adsense ads, is mostly irrelevant. Google is not necessarily TRYING to be number one at video hosting and number one at online office applications. What they ARE TRYING to do is to get more and more people to make more and more content. As people make more and more content available, and spend more and more dollars, and try to figure out how to monetize it all… a good percentage are going to turn to the easy (and well researched and successful) service of Google Adsense. I am sure the folks at Google are laughing all the way to the bank as they see reports about them being the #3 news aggregator, for example, when the #4, #8, #10, and tens of thousands of other “news aggregators” on the web use Google Adsense to stay afloat. Google is the catalyst to get others to grow the web. And since Google advertises on such a large portion of the web, as the web itself grows, so does Google’s income. Taking this a step further, if a video website exists and has tons and tons of videos… let’s say ALL of the videos in the WORLD… after browsing it for a bit, it will seem entertaining… but what if I am LOOKING for something SPECIFIC? I want to SEARCH. And SEARCH requires TEXT. Sure, I could go to video site #1 and do a keyword search… then go to video site #2 and do a keyword search… then go to video site #3 and do a keyword search… and on and on until my arms get tired. OR I can do a search on Google Video, and find all relevant videos found on search sites #1, #2, #3, #4, #5, etc… the same that I would do on the standard Google Search Engine. And right along with my search results are some relevant ads. Google is a lot smarter than most give them credit for. They WANT competition, when it comes to content. Because, again, the more content that exists on the web, the more content they can link to… and they can provide the most powerful and useful “searchable card catalog system” of all information on the web (text or video or otherwise) possible. By owning YouTube, it simply gives them lots of video to analyze and perfect such systems as voice recognition to automatically tag videos with relevant keywords either heard or seen (OCR) in the video itself.

  10. A great post. I do believe that the entity that controls video will control the Net…not this Net though…the Future Net. I say this as we already know that the Internet as it is cannot handle the massive data requirements of video.

    The announcement by News Corp. is a significant bit of news and has serious implications for Google. However, I do believe that Google has way too much cash…cash that will allow it to withstand any attempts by Murdoch and Co to derail the “GooTube” train.

  11. It is a fallacy to consider video to be next big thing that is going to succeed text. This maybe true from engineering’s perspective. We have mastered processing text in computer system for quite some time. On the other hand video technology is still immature with much room for improvement. Just a small and blurry picture stream through the Internet is enough to wow people.

    From anthropology’s prespective, it is just the opposite. Many animals have vision, some have much better vision than human. It is language that set us apart from animals and it is the fundamental of our intelligence. Written language is the ‘next big thing’ in the history of civilization. Text will continues to be central in the Internet era. Indeed it is playing a biggest role than ever in the history. It is in no way threaten by video clips.

  12. I agree with Jay, that your premise is flawed, but for a different reason.

    Robert, you wrote:
    “But, in a web comprised of video, Google must deal with content owners and strike licensing and distribution agreements, as neither its technologies nor current copyrights laws enable it to autonomously automate the aggregation of a video library without the explicit consent of content owners.”

    How does copyright law make a distinction between video and text, for Google’s purposes of aggregation/search? Technologically, if you remember the original “Google Video” was a text-based search of broadcast television that would show clips of video that was recorded. Yes, at that time, the way the search knew what the searcher was requesting was based on close-captioning, but there’s no reason to think that this can’t be more advanced. Look at and

    Sorry, Robert, I just disagree with your premise. As long as the searching and indexing of media is legal under principles such as fair use, (despite Perfect10’s attempts to make it illegal), the content holder isn’t going to be able to require a license.

  13. AgnosticMaven

    Robert – In this crystal ball gazing, you could be right but the hypothesis is a little weak.
    While the Web continues to evolve to human cognitive abilities – Video is visual imagery. The important thing is that for humans too – language drives thinking, not images. You can try it out – you have to ask the brain in some language context to conjure an image. There is no image based searching the way we think. So until you ask the brain – ‘the game last night’, ‘great car’, ‘tasty food’ – it will not fetch any images. So it will not be a correct assumption that video becomes the dominant web element and not language(text). Multimedia support will keep increasing but it can always be accessed by smart tagging. Thats what Flickr pioneered with pictures. Googlers will get smarter in tagging video (or acquire a smarter company).

    The point which most folks still miss today about the attraction of video on the net – its about the user control of both content production and delivery. While Viacom and the media cartel can put up their best offense, Google remains well-positioned with the YouTube acquisition.

  14. My cordless crystal ball needs batteries; so, I can’t be quite as certain as Jay – but, mostly, I agree. As far as my own taste is concerned. Which is why I don’t visit YouTube. Then, I don’t visit MySpace, either.

    Content, intellectual stimulation, even aggravation, knowledge and understanding ain’t bad qualities to serve up online. Everything else is the latest news about Anna Nicole Smith.

  15. I think the fundamental assumption you have made is wrong. Video is NOT the future of how we share information. Text will continue to be the preferred mechanism for doing this.

    Video is really inefficient and the cost to produce professional video that is actually worth watching is high. Vlogs are mostly useless. You can’t skim a Vlog – you CAN skim text. There is too much information for me to watch videos. Why would I watch CNN when I can go to the site and read the relevant articles?

    Video is only useful for live events such as sports broadcasts or press conferences. I really don’t want to see 99.9% of people on video – please save my eyes and ears.

    Everyone seems to be running and screaming towards video. Great. A few good companies will emerge and the rest are just fools.

    The future is text, not video. Mark my words.

  16. Google has another issue with video — an architectural issue. Google infrastructure is optimized for centralized indexing servers that then serve up snippets of information very quickly. The kind of video services most people want almost surely won’t work in such an architecture. P2P of some sort seems inevitable — looks to me like Joost is on the better path.

    My guess is YouTube is the of this era . . .

  17. The talks between NBC and News Corp are important to both Viacom and to Google. If Viacom wins the lawsuit, YouTube would be at the mercy of the content providers. If YouTube signs on with NBC and News Corp, YouTube would have good content and leave Viacom with no access to the huge audience that YouTube brings to the table.

    Success at Google has almost been taken for granted, but when you look at it, what outside of search and ads have they done well in? I think 99% of their revenue still comes from advertising. Can they expand out into video? I just don’t see that happening. Content is king, I think that the Viacom lawsuit is just the first step of the content owners plan to monitize content.

  18. Jesse Kopelman

    Fox’s ownership of MySpace is what is likely to break the coalition, though. If the other media barons see viewers migrating from YouTube to MySpace and not back to them, they will turn on Murdoch pretty quick. Anyway, the real question is not who wins under todays bogus rules, but who develops the technology to actually search video (I’m not talking tags but raw video). They will be the next Google. Of course, it might be Google themselves who make this breakthrough . . .