“We don’t do traffic for traffic’s sake. It has to be highly monetizable.”
Salman Ullah, head of Google’s M&A deal team, via
Bloomberg.
Valleywag’s take on it, is that “in one simple statement, Mr. Ullah crushes the spirit of web entrepreneurs with high bandwidth bills, dreams of free lunch at the Googleplex, and not much else.”
Indeed, the first few months of 2007 have been rough on Web 2.0 dreams, when MySpace shattered the Web 2.0 Koolaid Party, we asked if it marked the
End of Web 2.0 Innocence, but no one should be surprised by the trend:
This was really one more in a series of events that mark a shift in the Web 2.0 mantra:
- Guba admits that YouTube won the prize, and that it’s time to move on, which is what the CEO did |
our two cents.
- Revver’s backers forced out two out of three founders while the CEO was on vacation |
our two cents.
- Metacafe - not worth $200M, not going anywhere.
- Photobucket - not worth $400M, shut out by MySpace |
our two cents.
And the truth is, while distribution and content are both valuable, there is a lot of traffic out there, but not a lot of monetizable content that is not in the hands of major publishers who won’t let Google dictate terms to them.
Yesterday, for example, CBS announced major deals where it got 90% revenue share. This came on the heels of News Corp./NBC’s video project that also kept the bulk of ad revenues to content owners.
So we can all say what we want about the tug of war between content and distribution, but you don’t need a Ph.D to realize that content’s value is on the rise…
For Google, I am not certain internally they think that the answer (from their perspective) is content, but all I know is here is a site with 50-80% market share and reach in search, they do not need more traffic. They need to position themselves for the next wave of growth and find ways to monetize video, display/banners etc.
Content is one way to go about, the other is ad networks, hence the talk about buying DCLK, though at a valuation of $2B, I don’t think that will happen. dMarc and YouTube were billion dollar babies, I just don’t see another one of those happening…
The problem with ad networks, or brokering, is that ad networks don’t make publishers money, they make ad networks money (they make publishers money in aggregate terms, I don’t see many individual publishers generating anything substantial from networks). As such, long term, the network/brokering role is somewhat under attack.
As I write this and you read it, please note, I am biased. Like I say, everyone is biased but there’s usually one side that has a bit more of the truth on its side.
Google played the video card by buying YouTube, it got traffic and content, but the not-so-secret is that YouTube’s traffic and content are not easily monetizable. In other words, Mr. Ullah’s comments are an admission or reflection of that reality.
Does it make sense for Google to own content? Google is undeniably a technology company, but it’s also a media company in that it makes 99.9% of its revenue from advertising. Imagine if it had inventory it owned and did not have to share with a publisher. If Google pays out anywhere from 10 to 100% of revenue to a publisher, then it might not be so foolish to own ad inventory. After all, it keeps 100% of search ad revenue on clicks generated on Google’s flagship property
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