The rumor mill banked on Time Warner announcing an investment deal for AOL before Christmas…but the rumor mill also banked on an AOL-Microsoft deal. With less than four days to go before December 25, Time Warner announced the victor in the high-stakes bid for AOL and the winner is Google. Actually, the real winner is Time Warner, which gets:
— $1 billion from the Mountain View search giant for a 5% ownership stake
— the rights to sell search ads using “white label” Google technology
— the ability to make AOL content “more accessible” to Google’s web crawlers
— a highly skilled partner to work with on video search
— distribution of AOL video content via Google Video
— interoperability between AIM and Google Talk (a new deal point not revealed in the voluminous press leaks leading up to this announcment)
— $300 million in advertising on Google’s properties
Google gains something in the sense that it didn’t lose AOL’s business and, more importantly, it didn’t get bested by Microsoft. But the chatter points to a chink in Google’s armor. Alan Murray in the Wall Street Journal calls AOL’s demands “ransom” and, like others, worries that this means Google is now vulnerable to more demands by other partners and customers, a situation that could bring its sky-high stock back down to earth.
Shouldn’t that be a clear warning sign that Google’s costs of acquiring business are going to rise, and its triple-digit profit increases are bound to slow?
Another downside for Google: the perception that its agreement to make AOL content “more accessible” in the search results compromises the company’s vaunted and widely respected search algorithms. But in this AP article, Google CEO Eric Schmidt seems to be saying that Google will do nothing more than a little, well, search engine optimization with AOL’s stuff.
That arrangement already is raising questions whether Google will rig its algorithms so that AOL ranks higher in its search results — a prized position that Google has repeatedly said can’t be bought. In Tuesday’s interview, Schmidt brusquely dismissed that notion. He said Google just wants to ensure some AOL material that’s difficult to index, such as video, finds its way into the search results. “We are not giving (AOL) preferential treatment, nor did they ask for it,” Schmidt said. “I am making this clear: we will not let a business deal interfere with our search engine results.”
I believe Schmidt when he says Google will protect the integrity of its search rankings, but isn’t ensuring that content finds its way into the search results the same thing as giving AOL preferential treatment in the results? Google needs to start getting more specific about this aspect of the deal and explain a little better about this “more accessible” business.
Update: The Washington Post today (12/21) quotes Dick Parsons as saying that Google might help digitize Time Warner video content to make it more searchable on the web.
“We knew more about how to tease out the opportunities for both sides,” Parsons said. Over time, the Time Warner-Google partnership may include digitizing Time Warner’s television shows, movies and print news to make them searchable and usable by online viewers, he said.Posted by Cynthia Brumfield at 9:24 PM | Print | Comments (0)
Om Malik got bitten by some kind of a broadband speed bug — he posts an extensive and excellent thought-piece on whether consumers need faster broadband. Backed by his own analysis of Bernstein Research data, he categorizes the transfer speeds for various kinds of content. Om concludes that sometimes there is such a thing as too much bandwidth:
What this shows is that as we increase the speed, the real impact of the speed on what we do with it is marginal. Can your eyes tell the difference between a web-page loading in one second or 0.27 seconds. I guess not. If you can download a music file in 1.08 seconds, does that really mean you will be buying music all the time. No you perhaps will be buying better quality, and perhaps marginally more music.
I’ve heard this same analysis from cable chieftains — they say cable can throttle up to 100 Mbps download rates, but it’s not exactly clear to them that people want that much capacity. But here’s the countervailing view: as bandwidth-heavy content and applications migrate to the web, and as homes share a single broadband connection via a wireless router, 10 Mbps, 20 Mbps or more seems like the right speed.
In our house we have two VoIP lines, and up to three PCs working off of one 3 Mbps connection, and I can tell the difference when massive downloads on one PC affects the capacity for other devices. Imagine if everybody in the house wanted to watch a different video feed?
So maybe there isn’t a meaningful difference between .27 seconds and one second, but if the congestion on my connection causes that one second to stretch into five or ten seconds, that I’d notice.
Moreover, I think the real bandwidth killer application is in the upstream, particularly when video self-publishing tools such as Brightcove get off the ground. I’ve been testing Brightcove and the upstream capacity in my Comcast connection (364 kbps) is just not enough. That’s why the second Verizon’s FiOS, with its 1 Mbps upstream speed, is available, I’m jumping ship.
Posted by Cynthia Brumfield at 5:43 PM | Print | Comments (0)Michael Gallagher, head of the National Telecommunications and Information Administration and theoretically the President’s telecom policy advisor, is stepping down. No replacement has been named, and Gallagher hasn’t revealed his next steps. But a lobbyist slot seems as likely as any other career move — Gallagher joined the Commerce Department (NTIA is an arm of Commerce) in 2001 following his stints as a lobbyist at AirTouch and Verizon Wireless.
Posted by Cynthia Brumfield at 5:20 PM | Print | Comments (0)
Elinor Mills has this item in CNET today about a new program from Reuters that will allow bloggers and other online sites to publish Reuters videos. The Reuters video affiliate network, powered by rising video publishing star Brightcove (see here and here), is still in a hand-picked beta, which is free to web site owners, although ads may be incorporated into the videos.
It’s no surprise that as part of its pact with AOL, Google will begin to offer forms of advertising that depart from its traditional, indeed signature, text-based ads. Saul Hansell has this piece from the New York Times noting that under its deal with Time Warner, which is expected to be announced today, AOL will get around $300 million worth of advertising on Google, and some of the ads will be experimental, containing graphics and logos.
This expansion in ad format was apparently part of the plan all along, but accelerated by the AOL talks. Google will make the new ad options available to all advertisers, according to the piece. Can video advertising be far behind, particularly given the increasingly video-oriented focus of AOL and the film and TV content properties owned by Time Warner?
Update Related to Google-AOL Deal: Carl Icahn is at it again, as expected. The combative Time Warner investor says the Google deal is a big mistake.
“The real risk for Time Warner shareholders is that a Google joint venture may be short-sighted in nature,” Icahn said, adding that a broader set of deals should be considered to “ensure a bright future for AOL.”
If the pitting of Google against Microsoft and Yahoo, with Comcast somehow thrown in for good measure, isn’t Time Warner’s effort to get not only a broader set of deals but the best possible deal, I’m not sure what else qualifies as savvy negotiating.
Posted by Cynthia Brumfield at 12:32 PM | Print | Comments (0)
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