BuzzMachine

Erick Schonfeld at TechCrunch and Ashkan Karbasfrooshan at HipMojo make critical calculations about Google’s growing advertising hegemony. Bottom line: Google controls nearly 40 percent of online advertising.

Now pair that news with the folding of TimesSelect. Consumers, as we used to be called, won’t support media and journalism with their money. Advertising will. We will become entirely dependent on advertising. And what happens when Google controls the majority of online ad revenue in this country? They’re headed there, for as a TechCrunch commenter points out, Google’s online ad revenue and share of revenue are growing faster than online advertising as a whole.

On the one hand, we should be grateful to Google for enabling the support of much new media. On the other hand, we should fear teh vice in which Google holds our privates. That’s where media power is consolidating — not in old conglomerates (some of which now depend for a good bit of revenue on who? — on Google.)

I’m not blaming Google for getting to this point. Big, old media handed them this opportunity on a platter. Google was the one company that truly understood the economics of the open network. It understood that it could grow much bigger enabling than controlling. We in media should have followed that model. We should have asked WWGD. What would Google do?

So what do we do now? We need new networks that identify and create new marketplaces for new value — greater value than the coincidence of words on a page, which Google sells. We need to create our own high-value networks (e.g., hyperlocal news). We need open networks that compete with the closed aspects of Google; openness is water to the witch of an opaque network like Google’s.

TechCrunch’s facts & figures, built on HipMojo’s calculations:

$3.98 billion (Google’s U.S. revenues in the first half of 2007)/$9.99 billion (IAB’s estimate of total U.S. online ad revenue in 1H07) = 39.8 percent.

For the first half of 2006 the numbers are: $2.732 billion (Google’s U.S. revenues in 1H06)/ $7.9 billion (IAB’s estimate of U.S. online ad revenues in 1H06) = 34.6 percent.

Update: As one commenter points out below, this means Google is out-pacing the growth of online advertising by a wide margin. Total online advertising revenues grew 26.5 percent year-over-year, while Google’s ad revenues grew 45.7 percent.

Now ad in Bob Garfield’s chaos-scenario contention that ad spending as a whole will fall because companies will have more direct relationships with customers around media. I saw some things at Dell that back this up (more on that when my story appears in two weeks or so). Google will get an ever-bigger slice of an ever-smaller pie.

I’ve been meaning to mention the elephant in the room: that naked butt to the right, the happy ass. Some of you like it. It led Scott Heiferman to click on it and find “transcendent navigation.” Stowe Boyd sees a connection between an ad for toilet seats and reading newspapers. But this appropriately self-described curmudgeon was offended, so much so that he couldn’t bare bear to link to me and chose to steal a post of mine. That’s fine.

I’m proud of the ad, not because I’m a customer for $1,000 toilet seats (not made for the Navy) but because it represents my return to Blogads, where you should feel free to buy an ad and replace that ass. Hint, hint.

This means I’ve left Federated Media. I have nothing but respect for John Battelle and FM, but it was not meant to be. I earned less there than I had earned at BlogAds and I think I know why. Battelle’s original vision was to sell high-value federations built around blog authors and topics. Of course, I liked the idea, it appealed to both my ego and greed. But it turns out that selling a federation of media wonks is hard. It’s possible, I think, if you find just the right advertisers who want to reach my dear fellow media wonks (read: you). But that would take a lot of effort, it would be an expensive sale as a result. Federated had more immediate success selling big advertisers like Best Buy, but I can’t compete with all its placements when it comes to traffic. Federated also went down a road they called conversational marketing, where I didn’t want to go. So I decided to shift. I wish FM the best of luck; I’m rooting for them to make blogs profitable, which will mean more blogs get made. God’s work.

I’m relieved that blog advertising pioneer Henry Copeland at Blogads would take me back. And that butt is my first ad, the fruit of Blogads’ sales. My second was for a serial killer (a Showtime show). And I’m happy to have both of them. If I make a lot of money on those ads, maybe I can afford one of those toilet seats, which are pretty amazing (but don’t take that as an endorsement . . . this isn’t Pay Per Post).

The New York Times director of acceptable advertising (a job title that sounds rather than being the minister of silly walks) gives a good explanation of policies that led to the pricing of the now notorious MoveOn Patreus ad — far better than the company spokesmen last week.

The MoveOn.org ad was published because it complied with our standards. This ad was also accepted because it is our ongoing desire to keep our advertising columns as open as possible to the public, which we believe is a First Amendment responsibility. I would also point out that this ad was similar to other ads that criticized President Bush, former President Bill Clinton, and countless other public officials.

Within the category of political or advocacy advertising it is common practice throughout the newspaper industry to offer a standby rate in addition to open rate advertising. When a group buys a standby ad, it can request a particular date for it to be run, but receives no guarantee that it can appear that day. The lower cost of such ads reflects the flexibility that gives us. Any political or advocacy group calling up today to request a standby ad would be quoted the same rate that MoveOn.org paid.

Internet usage is now approaching TV usage — in the US, the UK, Australia, Germany, and Japan — according to an IBM study to which Om Malik points us. Note also that TV networks’ share of online TV viewing is only about 33 percent, below YouTube and barely ahead of Google and social networks in the U.S. — and the alternatives are only beginning (in the life of internet video, it’s only 1954).

Why the hell isn’t online advertising approaching parity with TV advertising? Because advertisers are slow. Says IBM:

The global findings overwhelmingly suggest personal Internet time rivals TV time. Among consumer respondents, 19 percent stated spending six hours or more per day on personal Internet usage, versus nine percent of respondents who reported the same levels of TV viewing. 66 percent reported viewing between one to four hours of TV per day, versus 60 percent who reported the same levels of personal Internet usage. . . .

Despite natural lags among marketers, advertising revenues will follow consumers’ habits. . . .

Saul Berman, IBM Media & Entertainment Strategy and Change practice leader, said, “The Internet is becoming consumers’ primary entertainment source. The TV is increasingly taking a back seat to the cell phone and the personal computer among consumers age 18 to 34. . . .”

Unless, of course, your cell phone is a computer. Hat tip: Steve Jobs.

IBM, being a big-iron company, analyzes what this means to its fellow big companies. That’s where most of the consulting money will be. But it’s not where most of the change — and perhaps power — will be. Says IBM:

To effectively respond to this power shift, IBM sees advertising agencies going beyond traditional creative roles to become brokers of consumer insights; cable companies evolving to home media portals; and broadcasters and publishers racing toward new media formats. Marketers in turn are being forced to experiment and make advertising more compelling, or risk being ignored.

I prefer to look at the opportunities this profound disruption brings:

As we already know, of course, anybody can make TV (second hat tip Steve Jobs), distribute it (YouTube et al), and market it (via the link). The problem remains that even though the costs are a fraction of the old, big stuff, you can’t support it with advertising … yet. But that will come. Witness today’s announcement that YouTube has settled on its means of delivering ads. See also this from the IBM survey: 63 percent in the U.s. said they would watch advertising before or after quality, free content (34 percent said they’d be willing to pay). Speed up, advertisers.

As for advertising agencies becoming “brokers of consumer insights”: they should wish. Before, agencies and media were the gateways to the audience. Now, companies can converse directly with customers and get plenty of insights without gatekeepers. I’d rather be Facebook than an ad agency, wouldn’t you?

Cable companies becoming “home media portals” is a fancy way to say pipe. Period.

Broadcasters and publishers shouldn’t be racing to new media formats for one-way content. They should be racing to enable new kinds of relationships among communities of information.

And marketers shouldn’t just be experimenting with new forms of marketing — though they should. They should be trying new means of conversation with their customers.

Some more findings from the U.S. IBM survey:

* “Content” is now, at last defined as conversation as well. Use of content services: 45% social networks; 29% user-generated sites; 24% music services; 24% premium video content for TV (not sure what that means); 18% online newspaper. Ouch.

* 58% have already watched online video and 20% more are interested.

* DVRs are good for TV: 33% watch more TV as a result (58% the same)

* 74% contributed to a social network; 93% contributed to a user content site. Who says that forums are only for nuts, blogs for early adopters, and photo services for geeks? Everybody’s making content. Why do they do it? Feel part of a community, 31%; recognition from peers, 28%. Conversation.

* How is content marketed today? Peers. Primary reason for viewing content on a user site: 46% said the recommendation of a friend.

* But here’s the fly in my future-of-advertising ointment. Asked which ads “most affect your imopression of a product or company,” TV commercials on major networks got the lion’s share.

I perused the Viral Video Chart and came across a produced video dramatizing the divorce of a beautiful woman labeled “consumer” and her husband labeled “advertiser.” All he cares about is himself; he just doesn’t understand or listen to her.

It’s clever and slickly produced and it turns out it was produced by Microsoft to pitch its “digital advertising solutions” (which, by the way, will only expand when and if it takes over aQuantive). It’s the rare case I’ve seen where a company set out to create something viral and succeeded, at least as measured by the Viral Video people and by its ratings: 31,000 views as of today. The video links to a blog that is all about making the movie and explains why they made it: “We want to try and tell that digital media is not about technology but about quality of communication, about the interaction between 2 people. There is no better medium than a movie to symbolize the one-to-one communication between people, in this case between an advertiser and a consumer.” Precisely how Microsoft changes the conversation between advertisers and — note my word change — customer, I’m not sure.

Microsoft just bid big bucks to buy ad company aQuantive. The net of this:

Content is not king. Distribution is not king. Money is king.

Microsoft has tried to go into the content business and the distribution business and has failed at both.

Google went into the advertising business. It has won. So now others are trying to catch up: WPP buying 24/7 and Microsoft buying aQuantive. With Razorfish in its stable, this is also a service company that builds platforms for media companies. The great need now is to enable the commercial infrastructure that supports the activities of this world.

At a panel I moderated today at Streaming Media East, Robert Scoble says he is being paid “six figures every quarter” — that is, something above 400k — for his online video efforts.

: Robert adds, importantly, that his company gets paid that much by advertisers. Sadly for him, it doesn’t all go into his pocket. Cost of sale, as we say.

“We can’t expect consumers to come to us. It’s arrogant for any media company to assume that.”

Quincy Smith, president of CBS Interactive, said that in today’s Wall Street Journal explaining CBS’ smarter-than-most strategy for a distributed media economy.

This is the way all media executives should be thinking: Go to the people, don’t make the people come to you. That’s expensive for you and inconvenient for them and it’s just not going to happen — or, it’s no way to build a media business model anymore. Says the Journal:

A year ago, CBS Corp. announced the creation of Innertube, an entertainment channel on CBS.com designed to make the company a player in online video. It streams video of sporting events, news reports and reruns of shows such as the hit comedy “How I Met Your Mother.”

CBS’s new chief Internet strategist now jokes that the Web address for Innertube should be “CBS.com/nobodycomeshere.”

CBS, after a year of experimenting with various Web initiatives, says that forcing consumers to come to one site — its own — to view video hasn’t worked. Instead, the company plans to pursue a drastically revised strategy that involves syndicating its entertainment, news and sports video to as much of the Web as possible. It represents a stark departure for the TV industry. . . .

Starting this week, an expanded menu of CBS’s video content will be available for free to consumers on as many as 10 different Web sites ranging from Time Warner Inc.’s AOL to Joost Inc., a buzzy online video service that is just rolling out. The company calls its new venture the CBS Interactive Audience Network.

Importantly, they’re also going through services that let us embed and distribute their stuff. That’s the greatest win of all. Why not encourage your audience to recommend and distribute your good stuff. It’s free marketing. It’s the endorsement that matters most. It’s only wise. But media has always been about control, about selling scarcity. So it’s damned hard for these guys to shift their mental map of the world and realize that they are not at center, we are. What they defined as inside is outside. This requires them to turn their world inside out. CBS is doing that.

Meanwhile, see the Stuart Elliott column in today’s Times all about networks trying harder to keep viewers in, how to keep them from changing the channel or TiVoing. What they should be asking is how they can take their stuff out. Think distributed.

Note also that NBC is shifting an inch by airing one of the Law & Orders on USA first, then on NBC. That says that NBC isn’t the center of the universe. But this doesn’t go quite far enough. Why not air it online first? If you don’t, NBC, Dick Wolf will someday. That’s what the studios of the future are doing now.

I often watch the video podcast version of Australian Broadcasting’s Media Watch mainly because I’m amazed that the format works. Who’d think that media criticism, especially of print and even of online, could work on video? But it does, thanks to the tough attitude of the host, Monica Attard — I expect to see her come out in leather and studs some week — and to their entertaining conceit of having different people voice the clips they’re talking about, with attitude. Even its slogan is cheeky: “everyone loves it until they’re on it.” ABC Radio, too, has pretty good criticism and reporting in the Media Report, which is also available as a podcast. I have Aussie media on the mind because I’m talking at Murdoch’s Carmel confab of his worldwide editors this week. But even aside from that, I enjoy checking in with Australian media — as I do UK media, of course, on the Media Guardian podcast — because it’s interesting to see our parallel issues around the globe.

This week’s Media Watch has a great segment — with the best collection of examples I’ve ever seen — on unfortunate adjacencies of content and ads on TV and especially online. I pulled put two segments together here:

Click To Play

Note, too, that this is one of the inherent problems with contextual advertising. No machine will ever truly understand the context. Better to talk to people than around content, eh?

Just as it was to be announced, I learned about what could be an extraordinary deal between NBC and Fox to go a different way from Viacom in their relationship with online video.

The two networks/studios are creating a new company to distribute TV on the sites where large audiences already are: AOL, MySpace, Yahoo, MSN. All their entertainment video and some of their movies will be available there for people to embed in their own pages. This means that a MySpace user who’s an Office fan could put up a widget allowing her readers to watch the clips and even the shows on her page. The joint venture will create a destination site for all this, but this isn’t a portal play; it’s about finding a tolerable — for them — way to distribute content via fans’ sites.

I’m told that it’s likely this video also may be made available for embedding on lowly blogs such as this — and obviously, I think that will be key. You make the popcorn, and let’s get together to watch American Idol on IdolCritic, eh? I doubt that will come on the first day (and that first day, by the way, is about 100 days away).

The new company will also sell ads and will share revenue with the producers and with the distribution sites (whether that will trickle down to the actual users/distributors, I have no idea; I would imagine that would be up to each of the sites and if they are smart enough to share, then the distribution of this video will only expand and explode).

There’s no reason this arrangement cannot include other producers, networks, and studios. And there is no reason this cannot include other distribution points (read: Google/Yahoo and such). And though this starts with entertainment, I don’t see why it can’t expand to include news and sports. It should.

What’s smart about this is that it potentially provides an infrastructure for the viral, audience-controlled recommendation and distribution of video with the two elements the producers demand — control and monetization (mantras I heard from the big guys at the Video on the Net conference). If this makes this kind of viral distribution profitable, it will cut off objections to it. And that, I believe, will leave Viacom out there dangling naked on Main Street.

At first, the big guys will pick their own clips. I think they have to get quickly past and let us pick the clips, the moments we want to recommend and comment on. Every moment in a show should thus have a permalink that makes it a linkable part of conversations. At VON, I saw a company called Gotoit that enables just this: you can send people directly to that moment you want to talk about. That is vital: We, the people — not the producers, prorammers, and network execs — need to be the recommenders, not the producers; that’s the point of viral distribution

At first, this will also be about just the big guys’ shows and movies. As you can predict, I argue that if they want this to succeed, it also must include small TV, our TV, the TV we are reinventing. That doesn’t mean that they should air all the flaming farts. But the smart things to do will be to find the great new talent and give it a means of distribution and control and monetization — which the little guys want, like the big guys, a point made at the end of my VON spiel. And then the networks will like networks.

I don’t know what this means for NBBC, the very tightly controlled venture NBC started to distribute video. I suspect it will be involved.

If this is done right, it makes viral distribution of video a noninfringing activity. It will legitimize, enable, and exploit what we already want to do: recommend and watch their shows. That would only be smart.

If it is done wrong — if the networks try to maintain too much control and still tell us what to llike and where we can watch TV — then it will fail miserably. I’ll be keeping a close eye on this.

From the Wall Street Journal story:

“This is a game changer for Internet video,” News Corp. President Peter Chernin said in a statement announcing the venture. “We’ll have access to just about the entire U.S. Internet audience at launch.”

The venture will also start its own site, with a name that is yet to be announced, which will go up in the summer. The two companies said “full episodes and clips from current hit shows,” including NBC’s “Heroes,” “My Name is Earl,” “Saturday Night Live” and Fox’s “24,” “House,” “Prison Break” and “The Simpson”s will be available as well as programs from the companies’ TV libraries. Movies will also be available, including “Borat” and “Little Miss Sunshine.”

Here’s the LA Times report.

: LATER: I think some reporters are missing a key part of the story. I think this is less NBC/Fox v. Google in business and more NBC/Fox v. Viacom in philosophy. These guys, unlike Viacom, recognize the power — and the necessity — of the recommendation engine (aka us) as the new means of marketing and distribution. They are trying to do that in a way that feels safer to them and that they can make money on — echoing, once again, the themes I kept hearing from the big guys at VON: control and monetization. If they crack the monetization, then these guys will care (a bit) less about control.

They will succeed if they enable us to recommend, share, and talk about (positively or negatively) their good stuff.

They will blow it if they try to maintain too much control: if they give us only their shows, if they insist on which clips we can embed, if they don’t open up to more programming, if they don’t open up to our putting this stuff in our space (not just Rupert’s MySpace). So we’ll see.

But it’s all about the recommendation engine as the new network.

DuPont just launched a new series of internet-video ads — stories about science starring Amanda Congdon — that they are placing on blogs. Steve Baker of Business Week writes about it here and Josh Bernoff of Forrester here. Here are the videos with Amanda in a white lab coat, which has to be someone’s fantasy.

Full disclosure: I consulted on the effort. I was brought in because I know the folks at Rishad Tabaccowala’s think-do tank Denou at Publicis. When they started, they wanted to involve bloggers and I insisted that the only was to do that was through advertising on the blogs; it’s a clear relationship and it also gives respect to the medium and its people (I’m happy to see that Bernoff liked this). I introduced them to Amanda (which thrilled them; it was as if I’d snagged Oprah). And I gave some advice on the videos (obvious stuff: put your best stuff first, make them short and fun). And I suggested Bright Cove for the serving and Federated Media as an ad network. And they bought lunch.

I’m glad that we’re seeing internet video and blogs and ad money come together. This is the kind of new thinking you can bring to life in these new media. I will leave it to you to say what you think of the program and the videos:

: LATER: Radar goes after Amanda for shilling while also reporting with ABC. Legit discussion. But it’s not a first; she is making a Dove commercial at Blip and she made commercials for first first sponsors on Rocketboom. There are a bunch of different issues besides the one Radar raises, including how small shops will handle the sponsorship they get (a la Rocketboom).

: LATER STILL: See Amanda’s blog:

ABC and HBO both approved the DuPont spots. And under the “blogger” title, which is what I am, hello? I am not subject to the “rules” traditional journalists have to follow.

Isn’t that what new media is all about? Breaking the rules? Setting our own? I see nothing wrong with doing commercials, which is what they, quite transparently, are. If DuPont had tried to pass them off as authentic, homegrown videos, yeah, then that would’ve been wrong (and, of course, I would never have agreed to the project if that was the plan). . . .

It’s also about acting.

: THURSDAY UPDATE: Here’s an LA Times story about bloggers in ads out of this.

I’m at Seth Goldstein’s Open Data confab at the Reuters building. I love the mission on the wall: “Open data is to media what open source is to technology. Open data is an approach to content creation that explicitly recognizes the value of implicit user dat. The internet is the first medim to give a voice to the attention that people pay to it. Successful open data companies listen for and amplify the rich data that their audiences produce.”

Katie Neiderhofer of BuzzMetrics is presenting and is asked about opening up their data (because, of course, in the end, it is our data). She doesn’t quite get it, talking about sharing data with a company. Who owns the wisdom of the crowd?

She shows a chart that associates words with the concept safety and groups them: children, life, police, work, home… Bush, president, American, administration…. terrorism, Iraq, military, attacks… And she finds that the emotional words — dangerous, risk, fear, ensure — as associated with the personal words: children, life, etc. This is fascinating data that also becomes useful to associate words and concepts (and, I’d say, behind that the sites and people that talk about them). She shows something called Floodgate with a live view of blog tag clusters; unfortunately, this, too, is closed.

I ask whether they have tied together the work DataMining blogger Matt Hurst did when he was at Buzzmetrics, mapping the social (linking) associations of bloggers with what she shows: the mapping of topics. In other words, have advertisers come to them to find, for example, the most influential food bloggers? Yes, she says. So, Seth says, this becomes a “media planning tool for social media.” But there is also discussion about this being closed. If there is an influence metric, who owns that? I would benefit by knowing that I am an influential food blogger and if I am not given that information, I might shut off the closed network from exploiting me or I might join in an open, competitive network. See: The open-source ad network.

There is much discussion about the sale of our aggregate and/or anonymous behavioral data and issues of both privacy and PR.

Sanjiv Das from Morgan Stanley is about to explain agtorithms. He says that one cannot disrupt markets but must anticipate them (hello, Viacom). He says that data will become commoditized but organization will be proprietary. Amen.

Barak Pridor of ClearForest presents text analysis. For example, he shows search results that occur only in documents that meet some test. I ask whether he could give us things that have the tag X but only if it also has the tag Y. This would be extremely valuable for such things as Outside.in and Edgeio (e.g., show me posts tagged ‘mexican’ but only if they’re also tagged ‘restaurant’ and ‘new york’). I’m dying for that kind of multilayer search and analysis. It enables so much more.