Google, the dominant online ad distributor, plans to become a content distributor, too. Somewhere in Hollywood, alarm bells are ringing.
According to The New York Times, Google has struck a deal to help finance and distribute a new animated series, "Seth MacFarlane's Cavalcade Of Cartoon Comedy," on the Internet. MacFarlane is creator of The Family Guy television series.
Starting in September, Google plans to distribute "Cavalcade" video clips through AdSense, placing the videos on select sites in its publisher network. As the Times describes it, Google will try integrating MacFarlane's cartoon with several video ad formats, including pre-roll ads and banners.
Google didn't immediately respond to a request for comment.
In a recent blog post, John Battelle, CEO of Federated Media and author of The Search, wrote, "This will fail utterly."
Battelle explains that Google needs to work with publishers to place the show and its ads carefully rather than relying on AdSense to automate the process. And he argues that successful content distribution involves making it easy for people to find content rather than pushing it at them.
But as Cythia Brumfield, president of Emerging Media Dynamics and publisher of the IP Democracy blog, observes, vertical integration in the media business -- owning the distribution infrastructure and the distributed content -- has been proven to work. "What this does is wave a warning sign to Hollywood and other major entertainment companies that Internet companies are going to be in the content ownership business, too," she said in a phone interview. "And that's huge."
Brumfield acknowledges that this particular deal may be a money-losing proposition for Google. She points to the cable industry and its vertical integration efforts, noting that CNN was a money loser for years after it launched. "Google is going to spend a lot of money on this," she said. "I think it's going to spark a rush into content creation by a lot of Internet companies."
If and when Google turns a profit by funding AdSense content, the economics of media creation and the kind of content created are likely to change significantly. Google will be able to do things like interactive content that aren't easy for broadcasters or cable operators, Brumfield suggests.
"I had been expecting Apple to take this kind of step," said Brumfield. "That Google did it was a bit of a surprise."
Rebecca Wettemann, VP of research at Nucleus Research, cautions that Google's move into media creation could make IT managers wonder about Google's commitment to enterprise computing. "Can you be credible with the enterprise decision makers if you're also trying to appeal to the lowest common denominator?" she mused. "That's a delicate line to walk."