Thursday, November 24, 2005
Google: Unknown Story -the next media empire?
I didn't update my blog in the past a couple of days, because I was trying to find more information related to Google and its competitors. I would like to broach a question, will Google become another media empire?
From the chart I extracted from many sources to make, we can see the top-25 media companies in 2003. Bertelsmann which is a German media conglomerate, is the fourth largest media company in the world in terms of revenue. Google's revenue in 2003 should rank 24th. However, actually, many companies in the above chart aren't media companies; they are media related companies, such as Comcast,Cox,Clear Channel, because their primary revenue source are from system operation or outdoor AD(Clear ChanneL). So, we can't count Sony as a pure media company, but it has much investment in the movie, record label industry. Thus, Google's ranking should be more forward.
I looked up those companies's financial statements respectively, and got the data in 2004, but some companies don't provide the number of AD revenue. If we see the revenue figure in 2004, Google will surge to the 19th in the rankings. And again, if we see the temporary statements of these companies in 2005, Google's revenue increased nearly 100% over last year, yet other companies increased slightly, almost at the rate below 10%. Therefore, Google probably would rank 9th replacing Gannett in the 2005's rankings. Furthermore, if we exclude these companies whose assets aren't purely from media (publications and programs) , or just base on their advertising revenues(it's an important indicator for media companies), Google's ranking will go up to 6th in U.S, and 7th in the world in 2005( Bertelsmann). And, if Google can go on keeping such growth rate in the next five years, it will be world's largest media company. It would be another legend that a company establish a media empire only in ten years!
How can Google do that? I wouldn't like to talk more about its content strategy, because there have been many reports about that. I just would like to talk about its advertising management strategy,which makes its overwhelmingly major source of revenue (99% of its total revenue). I don't see any graphic ads like Gif banner, flash,etc. on Google, yes, Google only provides text ads to its clients. With the growth of bandwidth, many advertising professionals hyped the so-called rich media advertising in the past, but Google still emphasizes the model of performance based text only advertising. And it did work!
Performance based advertising means that advertisers pay only if users click ad, call to them(Google has provides its newest advertising service-click to call. I might elaborate it later), or even buy their goods. Google has been making its pre-eminent search technology to boost its key word advertising, and it bought Applied Semantics who was an online advertising tech company in April 2003, both adsence and adwords have become one of its most important and profitable products since then. Meanwhile, Yahoo bought Overture which is competing search advertising tech company with Google On October 7, 2003, but Yahoo often lays behind with Google in the competitive strategy.
Actually, what Google did is almost same with that DoubleClick, who used to be a dominant advertising technology and network company. DouleClick has good AD server technology (plus netgravity. I once used their product and service) ,comprehensive network, and reputable clients. However, DoubleClick doesn't have much unique product, what it did can be easily copied (in China, a local notorious Chinese company has defeated DoublClick in this market). DC has been bought by Hellman & Friedman, LLC in April 2005. Somebody said ADsense is the representation of web2.0 compared with DC. It does make sense, but may be a little bit overstated.
However, I would say Google should go on making progress in the innovation both in the aspects of technology and business strategy. I would like to talk about the possible potential threats to Google later. The story will continue......