March 23, 2007 / 12:47 AM / 12 years ago

Control of advertiser at stake in Media vs Google

NEW YORK (Reuters) - Behind a media industry furor over Google Inc.’s (GOOG.O) popular video-sharing site YouTube lies a deeper struggle over who controls the relationship with advertisers that will take years to resolve.

In the meantime, many new models will be tested to determine which is worth more to advertisers — the television shows and movies or the Web sites that show them.

The uncertainty means new battles between well-entrenched media companies and fast-growing Internet properties, said Jeff Lanctot, general manager of online agency Avenue A/Razorfish.

“The deals aren’t in place and the ad models really aren’t established,” Lanctot told Reuters. “The strategy major media companies need to take is that distribution trumps destination” to any particular site.

News Corp. NWSa.N and NBC Universal took a major step in trying to negotiate that new relationship on Thursday, announcing an advertising-backed service to provide movies and TV shows online through three of Google’s biggest Web rivals.

The news followed a decision by media rival Viacom Inc. VIAb.N to sue Web search leader Google and YouTube for $1 billion over unauthorized uploads of its entertainment.

“This will probably be the largest advertising platform on earth,” News Corp. Chief Operating Officer Peter Chernin said. “We believe this will be a state-of-the-art revenue split.”

The venture will have its own Web site and distribute programs to be featured on a video player on sites belonging to Yahoo Inc. YHOO.O, Time Warner Inc.’s TWX.N AOL, Microsoft Corp.’s (MSFT.O) MSN and News Corp.’s MySpace.

The venture will also have a dedicated advertising sales division to monitor traffic and grow revenue. Most of the advertising dollars will go to the owner of the programs rather than the distributor, but no details of the split were given.

Industry executives say control over ties to the advertiser has been a major sticking point as they tried to negotiate similar ad-sharing deals with Google and YouTube.

“In our space, we absolutely sell everything that’s going to be anywhere around our content,” said one media executive who has negotiated online advertising deals. “We feel very strongly in the right to sell our own content.”

SEARCH KING, VIDEO KING?

Google aims to parlay its dominance of selling Internet ads linked to text terms into a platform for video advertising. The company bought YouTube last year to harness its explosive growth and is building technology to help sell ads on the site.

Television networks and producers view Google’s goals as among the biggest threats to their decades-long hold of the advertising market, as more viewers move to the Web for their favorite entertainment.

But Google will find it doesn’t have the same power with video as it does in search, advertising experts said.

“You can’t do search without Google,” said Joe Barone, managing director of agency Neo@Ogilvy. “You can very easily do video online without Google.”

What will likely emerge is a much broader range of pricing for video when it comes to Internet ad sales, experts said.

Prime programing like sports highlights and blockbuster shows can already draw prices approaching $40 per thousand viewers on the Web, a standard ad measure, compared with less than a dollar per thousand for the homemade videos popular on YouTube, industry experts said.

The practice of paying a greater share to the content producer may also undergo a shift, if online distributors can prove certain video is only popular because they have made it available to Internet audiences.

“If the potential audience on YouTube is bigger than the original broadcast audience, then Google may have more leverage,” said Barone.

NBC is controlled by General Electric Co.(GE.N) , with a minority stake held by Vivendi (VIV.PA) . AOL is part of Time Warner Inc.TWX.N , MSN is a unit of Microsoft Corp.(MSFT.O) and MySpace is part of News Corp.

Additional reporting by Kenneth Li

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