Thursday, February 02, 2006

Big Media Held Hostage by Stockholders/Stakeholders

I recently responded to a post about how Google is stealing local advertisers out from under big media, and that big media is helping Google do it - via AdSense. Then it hit me, stockholders are holding big media hostage. Big media can't make the necessary changes to address the changing landscape, because they are constantly measured by standards set by stockholders.

Here's my train of thought -- Google's acquisition of dMarc Broadcasting will allow the company to replicate its AdSense model on radio, and if it works, I suspect they will later expand to TV. I also suspect the implementation for radio and eventually TV will resemble something similar to SpotRunner.com (but with peer-to-peer production). At issue, Google is going to establish more relationships with small local businesses, while broadcasters focus on big fish. Why? Because CEOs in these major media companies (except a few) are too consumed with issues in front of them (stockholders, margin, etc.) to understand, or react to this. It's like trying to turn the Titanic by committee. As CEO you may be captain, but you have to make sure everyone on board is OK with the move, or suffer the consequences. So, I bet big media (most, not all) will continue to let Google run AdSense ads on their sites (because it is free money), and will soon begin doing the same with their broadcast signals (because it is free money).

SpotRunner Worthy of Buzz - Harder Look

There's been a huge buzz around Spotrunner in thr broadcast industry, but most people miss the mark on the opportunity. The SpotRunner model could open the door to millions of dollars in new revenue for TV stations. What’s more, the existing model could potentially be extended to actually improve the efficiency of the production model, increase profits, and take money away from Google, which is making forays into our local markets.

A brief market analysis shows that the TV industry is suffering from squeezed margins. Advertisers are moving money to new platforms, including the Internet. Meanwhile, Google is taking money out of the pocket of local TV stations and newspapers. Google Adsense allows very small businesses in the local markets to purchase advertising simply and cheaply. What is most egregious is that many TV and newspaper Web sites run the Google ads on their sites, which actually helps Google build relationships with local businesses and take money out of the market. As a result, Google took millions of dollars out of local markets in 2005. SpotRunner’s business and production model sheds light on how local TV stations might fight back, using Google’s strategy against Google.

Currently, SpotRunner allows anyone – including very small businesses -- to create and air a TV ad for a fraction of what it would cost to hire an advertising agency and production house. The business simply chooses generic ads from an online database and customizes it with a company logo, a new voiceover or some different images. As a result, businesses that normally could not afford to buy on-air schedules can now do so. Stations benefit by (1) getting revenue from local businesses that normally do not spend money on-air, and (2) developing personal relationships with new local businesses.

The model could be improved to (1) increase efficiency, (2) offer a differentiated product, (3) find new money in the market and (4) combat Google’s forays into local markets. Here’s how:
1. Open video production to peer networks. Similar to how Grab.com allows users to develop/create and share games, offer a solution or service that allows users to create generic spots (based on set standards) and offer them to other users. Producers of spots get a nominal royalty every time someone uses their generic spot.
2. Allow businesses to purchase on-air schedules as well as online schedules for their spots. Similar to Google ads, but it uses video, this allows small businesses to get an online and on-air presence and do so with moving video, the most compelling of formats.
3. If TV stations were to implement a similar technology and strategy, it would allow TV stations to recapture ad dollars from small local businesses currently going to Google and Yahoo and recapture relationships with those businesses.

StreamingMedia.com - Missing the Point

Dan Rayburn with Streaming Media.com bashes Google’s new Video Store for having "clips from the NBA and CBS—right along with clips containing graphic sexual content and violence that appears to violate the company’s own video program policies. The end result? An embarrassment to the entire industry." Exploitation and criminal acts are no joke and should be dealt with by Google. With that said, these complaints sound more typical of an 'old media' player upset that Google is ignoring “the rules.” It sounds like Google wants the community to self-police as much as possible. This would be consistent with their strategies, and the successful strategies of Web sites such as MySpace (check their ‘content’ out sometime). What’s more, Dan is way off base about the potential for this product. Dan says "The real potential of the Video Store lies in offering mainstream content that people are actually willing to pay for." I’m certain Google has greater aspirations than to become an on-demand video jukebox for "mainstream" media. Think bigger Dan.