Google is evolving into a media company

Google is evolving into a media company

Google is evolving into a media company

Today’s quiz:

What company derives 96 percent of its revenue from advertising, has a video platform that is currently negotiating with the National Basketball Association, a movie studio and various celebrities, and is developing a subscription service that would be plug-and-play for publishers and consumers the world over.

Time Warner? News Corporation? Viacom? Nope. Google.

Up and down its ranks, Google executives will tell you without fail that Google is not a media company, that its organizes and manages content, but stays away from producing it. It’s an article of faith at the Internet giant. But it’s also beginning to show strain as Google moves into new territory.

In February, Google announced a subscription service called One Pass to enable consumers to buy professionally produced news and information across the Web with a single click. And a great many new-media consuming devices featuring Google software called Honeycomb are about to come into the market, making that information all the more attractive and mobile.

Nowhere has Google’s growing media proficiency been more apparent than on YouTube, which is a platform that is looking more and more like a network for a postbroadcast world. YouTube’s home page, which used to be a user-generated free-for-all, now has a clear hierarchy of channels, with an array of topics — “Entertainment,” “News and Politics” and “Sports” — that doesn’t look that different from the menu guide on my cable set-top box. Al Jazeera English, which can’t seem to find carriage in the broadcast and cable universe, has found a home on YouTube, where it has become the No. 3 news channel.

The company is also putting time and effort into expanding deals with the N.B.A. and the National Hockey League, because as everyone — including Rupert Murdoch — will tell you, sports are a great way to build a network for the long term. And as part of a deal that the company has with Lionsgate, clips from the company’s library could start showing up on YouTube with a split of advertising revenue and, eventually, a way to buy the movie or television show featured.

There have also been reports that Google has set aside $100 million for incentives for well-known celebrities to program their own “channels” on YouTube to increase the amount of high-profile content on the platform. And the media initiatives are not entirely new: Britain’s Channel 4 signed a three-year deal back in 2009 to make entire programs available for streaming on YouTube.

“There is no doubt in my mind they are becoming a media company,” said Mike Vorhaus, the president of the media consulting firm Magid Advisors. “They are providing content to consumers and selling ads against it — sounds like a media company to me.”
So what, you might ask. What difference does it make what occupation Google writes down on its driver’s license?

For starters, being in the media business means looking at media a little differently. Google has been spending a lot of time and some significant money trying to help traditional media businesses stay in business, in part because Google does not want its search engines to crawl across a wasteland of machine-generated info-spam and amateur content with limited allure.

With that objective in mind, the company has also tweaked its vaunted search algorithm to point toward new, real, trusted content and away from link-bait generic content cranked out by so-called content farms. Even if it is a machine doing the executing, the company’s push for one kind of link over another is fundamentally an editorial exercise.
In essence, Google, which has cracked the code on the Web advertising model, has come to realize that if content becomes just a commodity, then advertising will follow suit.

“Google depends on the high-quality content created by wonderful Web sites around the world, and we do have a responsibility to encourage a healthy Web ecosystem,” the company said, sounding more like the pronouncement of a media executive than a statement from a tech company.

Jonathan Glick, chief executive of Sulia, a media company that filters and publishes real-time content from Twitter, said that Google is in a new land.

“They are moving down a road where they are now thinking of the motivation of people who produce content in addition to the content itself,” he said.

When big companies bump into a ceiling in an area they have dominated, they tend to shift into new pursuits that may help their core business. RCA commercialized a spectacular invention called radio, but by the mid-1920s the company realized its new wonder needed great content, so it bought and merged several radio stations to form a media company called NBC. Later, RCA did the same trick with another catchy invention: television.

As content bolts across both platforms and technology, doing taxonomy on media and technology companies is more complicated than it used to be. Apple is spending an enormous amount of effort to enroll media companies in its subscription plan for the iPad. I was on the phone with a very senior official at Apple a few weeks ago for half an hour, and we talked about new subscription models, the prospects for newspapers, and the pros and cons of various media apps. The new iPad that was about to be unveiled hardly came up.

Netflix may be in the business of dishing up movies and television programming, but the company triumphed through technology, pivoting over the course of a few short years from being the biggest user of the postal service to the largest source of broadband traffic. And Netflix is not satisfied to just negotiate access to content produced by others: Last week, Netflix announced that it had obtained the rights to an original television series starring Kevin Spacey and directed by David Fincher.

Other than Apple’s Steve Jobs — who seems to have a knack for the content business, if Pixar is any indication — this is unfamiliar and foreboding territory for technology companies. Making content is kind of a software business, but a very unruly one known for fickle talent and fickle audiences.

The story of the last decade or so has been a huge shift in value from the media companies, which produced the content, to Silicon Valley, where companies like Google and Netflix came up with newer, more convenient and far less lucrative — at least for the media companies — ways to distribute it.

Before Google gets in too deep, the company may want to compare its valuation over the past decade with that of, say, Time Warner or just about any newspaper company in the country. “We are in the business of media distribution, but I don’t think that we would be very good at media creation,” Hal Varian, chief economist at Google, said in a phone call.
“I think it’s one thing that we have astutely avoided in the last 12 years,” he said, adding, “the media business is a tough business.”

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