Why Google Is a Media Company

by on August 11, 2008 · 14 comments

I used to get endless grief from pro-regulatory media activists here in DC when I put forward the argument in days past that Google was a media company and a major player in the battle for eyes, ears and ad dollars in America’s media marketplace. Increasingly, however, more people are coming around to seeing that point, even the crusty old media giants themselves.

In a smart essay over at the Freedom to Tinker blog, David Robinson takes the New York Times to task for an article today again wondering, “Is Google a Media Company?” As David rightly argues:

I hope the Times’s internal business staff is better grounded than its reporters and editors appear to be—otherwise, the Times is in even deeper trouble than its flagging performance suggests. Google isn’t becoming a media company — it is one now and always has been. From the beginning, it has sold the same thing that the Times and other media outlets do: Audiences. Unlike the traditional media outlets, though, online media firms like Google and Yahoo have decoupled content production from audience sales. Whether selling ads alongside search results, or alongside user-generated content on Knol or YouTube, or displaying ads on a third party blog or even a traditional media web site, Google acts as a broker, selling audiences that others have worked to attract. In so doing, they’ve thrown the competition for ad dollars wide open, allowing any blog to sap revenue (proportionately to audience share) from the big guys. The whole infrastructure is self-service and scales down to be economical for any publisher, no matter how small. It’s a far cry from an advertising marketplace that relies, as the newspaper business traditionally has, on human add sales. In the new environment, it’s a buyer’s market for audiences, and nobody is likely to make the kinds of killings that newspapers once did. As I’ve argued before, the worrying and plausible future for high-cost outlets like the Times is a death of a thousand cuts as revenues get fractured among content sources.

Exactly right. I’ve made a similar argument in Chapter 2 of my big “Media Metrics” report.

  • http://CITP.princeton.edu David Robinson

    I actually hadn’t considered this idea, which is facinating. Does google being a media company undermine the arguments against media consolidation?

    There may be an impertant ambiguity at work here. From a business perspective,which was the operative point of view in my post, the “media” encompass any and all firms that get their main revenue from the sale of audience attention, regardless of how that attention is attracted. In this sense, Google, the New York Times, and roadside billboard operators are all media firms because they all sell the attention of an audience.

    In the context of ownership regulation and media competitiveness, however, the word “media” has a different and more restricted meaning, which is simply to say that activists discussing the issue use the term more narrowly. They mean something like competing local sources of news and information. It’s not obvious to me, and I certainly did not intend to argue, that Google is or should count as a “media” company in this second, more restricted sense. Then again, I also didn’t intend to deny that Google lies outside this narrower categorry; I simply haven’t considered the issue.

  • Adam Thierer

    David… I don’t see how one could not consider Google (and other new digital media providers) when considering sensible media policy reforms today. If you take a look at the 3rd and 4th installments in my Media Metrics series, I used a variety of metrics to show how Google and those other new media operators are absolutely decimating old media giants in terms of stealing away ad dollars. And as you point out in the conclusion of your piece, “Google’s revenues come from ads, and that makes it a media company, pure and simple.” And the same could be said for many other digital media operators.

    Critics of this thesis would argue that Google and those other online operators don’t create any content; they just aggregate and distribute it. Thus, they aren’t “media companies.” But that’s irrelevant to the economic and legal question here which is this: Do old media companies — however defined — compete with Google and new digital media operators for the eyeballs, ear lobes, and ad dollars? The answer is yes, and that is all that really counts when it comes to questioning the fairness of archaic media regulations that unfairly penalize one set of media providers based on the outdated notion that they still somehow control all those eyes, ears, and ad dollars.

  • http://citp.princeton.edu David Robinson

    *In the last sentence above, I intended to write “inside” rather than “outside.” In other words, I hadn’t thought about whether or not Google is a “media” company in the sense of that word which is operative in the consolidation debate.

    On reflection, I do have a view, which I think is to agree with the spirit of Adam’s argument through perhaps a slightly different justificatory route. Google provides access to a huge range of varied media sources, and that’s a reason to view media diversity rules with additional skepticism. But Google itself isn’t a media company in the sense of being one such source–rather, it provides access to the sources. It’s not in the business of reporting on town council meetings, but it’ll show you the many blogs that do so report, helping create a convenient counterweight to any establishment media dominance that might otherwise exist in the market.

    Also, Google’s power to erode the case for media ownership rules doesn’t depend at all on its status as a “media” company. Even if Google were to derive revenue from other source, such as subscriptions or outright sponsorships—or event if a service like Google’s didn’t seek revenue at all, and were instead run as a non-profit—Google’s role easing access to many sources of local information would remain a potent factor that weighs against media ownership limits.

  • http://citp.princeton.edu David Robinson

    Adam: As perhaps is obvious, our comments crossed in the making. I hope my latter comment makes clear that we agree about Google’s impact—I simply mean to point out that Google’s role as a “media” source in the consolidation context doesn’t hinge on where the ad dollars are.

  • Adam Thierer

    Yep, we are in agreement on that point. I just wish others would see the light in this regard.

  • http://CITP.princeton.edu David Robinson

    I actually hadn’t considered this idea, which is facinating. Does google being a media company undermine the arguments against media consolidation?

    There may be an impertant ambiguity at work here. From a business perspective,which was the operative point of view in my post, the “media” encompass any and all firms that get their main revenue from the sale of audience attention, regardless of how that attention is attracted. In this sense, Google, the New York Times, and roadside billboard operators are all media firms because they all sell the attention of an audience.

    In the context of ownership regulation and media competitiveness, however, the word “media” has a different and more restricted meaning, which is simply to say that activists discussing the issue use the term more narrowly. They mean something like competing local sources of news and information. It’s not obvious to me, and I certainly did not intend to argue, that Google is or should count as a “media” company in this second, more restricted sense. Then again, I also didn’t intend to deny that Google lies outside this narrower categorry; I simply haven’t considered the issue.

  • Adam Thierer

    David… I don’t see how one could not consider Google (and other new digital media providers) when considering sensible media policy reforms today. If you take a look at the 3rd and 4th installments in my Media Metrics series, I used a variety of metrics to show how Google and those other new media operators are absolutely decimating old media giants in terms of stealing away ad dollars. And as you point out in the conclusion of your piece, “Google’s revenues come from ads, and that makes it a media company, pure and simple.” And the same could be said for many other digital media operators.

    Critics of this thesis would argue that Google and those other online operators don’t create any content; they just aggregate and distribute it. Thus, they aren’t “media companies.” But that’s irrelevant to the economic and legal question here which is this: Do old media companies — however defined — compete with Google and new digital media operators for the eyeballs, ear lobes, and ad dollars? The answer is yes, and that is all that really counts when it comes to questioning the fairness of archaic media regulations that unfairly penalize one set of media providers based on the outdated notion that they still somehow control all those eyes, ears, and ad dollars.

  • http://citp.princeton.edu David Robinson

    *In the last sentence above, I intended to write “inside” rather than “outside.” In other words, I hadn’t thought about whether or not Google is a “media” company in the sense of that word which is operative in the consolidation debate.

    On reflection, I do have a view, which I think is to agree with the spirit of Adam’s argument through perhaps a slightly different justificatory route. Google provides access to a huge range of varied media sources, and that’s a reason to view media diversity rules with additional skepticism. But Google itself isn’t a media company in the sense of being one such source–rather, it provides access to the sources. It’s not in the business of reporting on town council meetings, but it’ll show you the many blogs that do so report, helping create a convenient counterweight to any establishment media dominance that might otherwise exist in the market.

    Also, Google’s power to erode the case for media ownership rules doesn’t depend at all on its status as a “media” company. Even if Google were to derive revenue from other source, such as subscriptions or outright sponsorships—or event if a service like Google’s didn’t seek revenue at all, and were instead run as a non-profit—Google’s role easing access to many sources of local information would remain a potent factor that weighs against media ownership limits.

  • http://citp.princeton.edu David Robinson

    Adam: As perhaps is obvious, our comments crossed in the making. I hope my latter comment makes clear that we agree about Google’s impact—I simply mean to point out that Google’s role as a “media” source in the consolidation context doesn’t hinge on where the ad dollars are.

  • Adam Thierer

    Yep, we are in agreement on that point. I just wish others would see the light in this regard.

  • http://blog.actonline.org Mark Blafkin

    Adam: Couldn’t agree more with you and David on this issue. To further the case, however, I suggest simply comparing the NYT to Blogger (as I did in a comment to David’s original piece):

    The NYTimes produces its daily paper by:

    1. Paying a set of reporters to follow beats and write stories.
    2. Accepting the contributions of unpaid writers (op-eds and LTEs) who are looking to simply express an opinion or raise their profile.
    3. Selling the audience for those articles to advertisers

    Blogger works essentially the same way:
    1. Some bloggers are paid a percentage of ad revenue they bring in via adwords.
    2. Some bloggers are just giving away their content to express opinions, etc.
    3. Blogger sells the audience for these blogs to its advertisers.

    To argue that Google is NOT a media company simply because its model for getting/paying for audience-grabbing content is different than the NYT is completely nonsensical. Google has come up with a model for a media company that drastically reduces its costs for content production and broadcast network are looking to follow suit (see Reality TV). If you were to follow the logic of the dissenters, NBC would cease to be a Media Company if it operated as a public access channel with advertising around the best content…

    In the end, Google is an powerful competitor to media companies precisely because it pays so little for its audience attracting content. It doesn’t have to deal with unions, or strikes, or health care, or minimum wage. Essentially, its creative talent are ALL independent contractors that are working either for free or for a portion of the advertising revenue they help Google generate. If the NYT could get away with that, they would be in a lot better financial shape.

  • http://blog.actonline.org Mark Blafkin

    Adam: Couldn’t agree more with you and David on this issue. To further the case, however, I suggest simply comparing the NYT to Blogger (as I did in a comment to David’s original piece):

    The NYTimes produces its daily paper by:

    1. Paying a set of reporters to follow beats and write stories.
    2. Accepting the contributions of unpaid writers (op-eds and LTEs) who are looking to simply express an opinion or raise their profile.
    3. Selling the audience for those articles to advertisers

    Blogger works essentially the same way:
    1. Some bloggers are paid a percentage of ad revenue they bring in via adwords.
    2. Some bloggers are just giving away their content to express opinions, etc.
    3. Blogger sells the audience for these blogs to its advertisers.

    To argue that Google is NOT a media company simply because its model for getting/paying for audience-grabbing content is different than the NYT is completely nonsensical. Google has come up with a model for a media company that drastically reduces its costs for content production and broadcast network are looking to follow suit (see Reality TV). If you were to follow the logic of the dissenters, NBC would cease to be a Media Company if it operated as a public access channel with advertising around the best content…

    In the end, Google is an powerful competitor to media companies precisely because it pays so little for its audience attracting content. It doesn’t have to deal with unions, or strikes, or health care, or minimum wage. Essentially, its creative talent are ALL independent contractors that are working either for free or for a portion of the advertising revenue they help Google generate. If the NYT could get away with that, they would be in a lot better financial shape.

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