Featured Post

Jennifer Aniston is 40!

Those of you who know me or have become frequent readers of Media Realism might be more than a little surprised by my People Magazine style ...

Wednesday, December 16, 2009

A Look at Ken Auletta's Googled

Last month, Penquin Press published Ken Auletta’s Googled, The End of the World As We Know It. Over the last few years, there have been several books of varying quality describing the Google phenomenon. What makes this one standout is the author, Ken Auletta. He is the media writer for The New Yorker magazine, and the author of Three Blind Mice (How the TV Networks Lost Their Way) which forecast the decline of the major television networks. Besides Auletta’s credentials and breezy writing style, he had unprecedented access to Google management. Of the 300 hundred interviews he conducted for the book, over 150 were at Google where he was allowed to sit in on many meetings and ask anything that he wished.

The book starts off in a conventional way describing as tech accounts often do of two grungy guys, Larry Page and Sergey Brin, who founded the company. They then brought in Eric Schmidt as CEO who was more buttoned up, mature, and could deal well with the outside world. But then Auletta really takes off as he describes how Google caused seismic upheavals in the media, entertainment, and eventually the retail world all in a stunningly brief time frame.

Auletta makes the point that the Google guys really are different. They have a different set of values that anyone else in tech or media. They are a bit na├»ve at times. But, most of all they are engineers. The engineer is king at Google. They worked very hard to develop and refine their search logarithm. As engineers, they need to quantify everything and continuously ask Why Not? They see most things in our advertising world as inefficient. “Why can’t we digitize books”, they ask. And, “why can’t we charge for advertising when someone clicks on it.” Their approach is not the old shotgun approach that all of us took for granted with broadcast or print. We sold sizzle and environment and emotion but they have replaced the shotgun with a rifle shot. (There is a very funny scene in the book where Mel Karmazin of CBS and later satellite radio fame tells Google executives that they have messed with the sizzle)

The Google team is engineering driven. Amazingly, more than half of their employees are described as engineers and 20% of their time or one day a week is free time where they can work on any project that strikes their fancy. In such an environment, many innovative ideas bubble up from the engineers.

Their business sense is also not what we traditional media types are used to. More than once we read “Google is not obsessed with killing competitors. They are obsessed with efficiencies.” One issue kept gnawing at me throughout the text. Is Google a media company? Or is it merely a media distributor? After all, most of the content is produced by others. With the purchase of You Tube, a de facto network, they are becoming a media company. And, their platform is producing its own content. Consider this blog, for example.

Some analysts see Facebook and Twitter as a threat to Google’s search engine. To me, that is rubbish. Surely, friends can direct you to things that they know will interest you but search will still dominate.

Google has ethics. To date, there is little evidence that they have abused the massive data that they have. They are being watched and carefully, but so far so good.

The tentacles of Google go far and wide. They now have affiliations with many companies that are described as being a “frenemy”. This new term describes companies that are both collaborators and simultaneously competitors to Google. They compete with phone companies, Apple, even on cloud computing.

Does Google have flaws? Auletta points out that as brilliant as they are they may lack emotional intelligence. We conventional types have a boatload of that. And, that makes us experts in branding. Can Google extinguish us all? My feeling is not if we hold on to our branding expertise. That can protect agencies, marketing consultants and brand managers. Google’s virtual ad kits for newspaper and radio commercials are fine for small retailers who may be able to do without a tiny local agency. But, there still is a place for people who can position brands, nurture them, and connect with people. Yes, social media can do some of that but the jury is out on how far it can go and whether or not it can it reach all strata of society.

Can Google be stopped? Auletta warns that they could face the normal means of self-destruction—they could become big and bureaucratic, the good engineers may jump ship for a lot more money or recognition, the competition could gang up on them, and, as happened to Microsoft, government interference could raise its ugly head if the growth continues and more people complain. Another danger, but a real one, is that two kids in a garage somewhere could knock Google off their perch with a better way of communicating via a totally new technology.

To date, their image has been wonderful as they are free. The public loves it. And, their content from Google maps to Gmail to You Tube to their new GPS competitor is excellent and free! The free aspect has instantly created a reservoir of goodwill that will be hard to dislodge.

When it comes to traditional media, Auletta is tough and he should be. He makes the marvelous analogy of media chiefs treating the internet in much the same way that the major networks did cable 20 years ago. They could have bought in more than they did to hedge their bets and now have lost a lot of their power. And now, NBC will soon be a Comcast holding! He describes tremendous insecurity among media executives with good reason. The speed of change this time is far greater than 20 years ago.

Auletta addresses the print issue nicely. When it comes to news and newspaper Google aggregates rather than creates content. If a substantial publisher such as Rupert Murdoch opts out of Google Search, he reduces the amount of people exposed to his papers. But, if he opts in his lifelong loves become a commodity. Ah, but Google might say, more eyeballs sell more on line ads. Yes, Murdoch counters but I only get a fraction per eyeball as I get with my newspaper. Both sides are right, says Auletta, and the conundrum for struggling newspapers only deepens.

Separately, the dollars tell the story. Of the $172 billion in advertising revenue last year, Google, with millions of often boring sidebar ads, had approximately $21 billion in advertising billings. This matched magazine billing which has since taken a nasty hit. Like a stealth bomber, this innovative search engine company is now poised to be the dominant media player. It is amazing but symptomatic of today’s world of communications. Google has so much money, cash flow, and no debt that they can buy virtually whatever they want. This week, Exxon Mobil received a lot of press for their $29 billion acquisition of natural gas leader, XTO. Well, Google is now the Exxon Mobil of communications. They apparently toyed with buying The New York Times but backed off when they said it did not fit their culture. And, with their deep pockets, they can buy and lose money for a long time as they fit a company into their expanding model. Look at You Tube. It has not been monetized properly yet but once the potential is tapped, it has the possibility of being a huge moneymaker. No one else in our world has the luxury of such patience that Google has.

Did Auletta miss anything? I believe he did and it was a big one. There is very little mention of Google TV ads. This is an arrangement with Dish Network where they sell advertising in several million homes. More importantly, I have seen some of the granular data that they can provide. The Google TV analysis gets you a lot closer to the truth than Nielsen ever has. We always knew that TV ratings overstated things and this was particularly true of commercial viewing. Google will likely charge as they did for search—you only pay for people who see your commercials. This could eventually put Nielsen in desperate shape and rock all current TV advertising. The topic is so important that I plan to devote a separate post to it shortly.

This criticism aside, this is a marvelous and important book. It is so rich and thought provoking that a review cannot do it justice. Auletta did a great service to all of us by writing it. Ignore Google and even this book at your peril.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Tuesday, December 8, 2009

Nielsen as an Economic Bellwether?

A few weeks ago a friend and Media Realism panel member sent me the following: “Don, what do you make of this? In the 08/09 season, television viewing in the US reached an all time high, up 4 minutes from the prior season and up 20% from 10 years ago according to Nielsen. The average household in 08/09 watched 8 hours and 21 minutes a day of television on average, which is an all time high as well. Why is television viewing at an all time high in a world with videogames, DVD’s, computers & internet, etc?”

I gave him a quick answer but promised this post to provide a more measured response. And, those of you who know me, brace yourselves. I will actually say something nice about Nielsen!

Many of us have been surprised over the years as TV viewing continues to go higher and higher. Part of it can be explained away by an aging population but with so many gadgets at our disposal and non-TV video options, the recent small move to a new plateau was surprising.

Here is my theory—Last Friday, the government excitedly announced that the official unemployment rate had dropped from 10.2 to 10.0%. Every believer in Obamanonics cited this as proof that the economy was on the mend and prosperity was around the corner as Herbert Hoover (sic) once said. Well, my take is a bit different. Yes, any decline in unemployment is welcome news and no one is cheering for a rebound next year more than I. But there are structural issues out there that indicate that things are still not great and the Nielsen annual data may be an indicator as well.

There are a handful of apocalyptic analysts out there who say unemployment is not 10% but closer to 20%. They exaggerate but make a good point. The real rate of unemployment is much higher than 10%. It does not include the following people:

1) Those whose unemployment compensation has run out.
2) The long term unemployed who are so discouraged they do not look for work anymore.
3) Recent graduates who cannot find jobs, live with Dad and Mom but are in no one’s statistics.
4) The young elderly who were downsized and began receiving Social Security on their 62nd birthdays.
5) Millions who work part time because they cannot find full time work.
6) The “underemployed” who make a fraction of what they once did but do a lesser job to make ends meet and have some form of healthcare.

What do all of these groups do? They watch a lot of TV. They cannot afford to do much else for entertainment. The Social Security Administration says that in the past year a record number of people applied for monthly checks. Why? They need the money and cannot find acceptable work. These early baby boomers include some who planned to retire that young, some who are burned out and wanted to leave but also a large group that knows few are going to hire a 62 year old in a meaningful job. So, they collect their checks and spend way too much time in front of the tube.

Here are a few more scary stats that make the case for record high TV viewing. Some 23% have negative equity in their homes (if they sold today, they would get less than their mortgage for it) and foreclosures continue to explode. The American consumer has never been further behind in virtually all yardsticks—mortgages, auto loans, credit card bills, and student loans. Finally, the saddest figures of them all—1 in 8 Adults are on food stamps and tragically, 1 in 4 U.S. children.

There is no shortage of things to do or ways to watch video other than TV. But directionally Nielsen is telling us something. People are stretched as never before in our lifetimes. They watch TV in record amounts because they have few options.

If we see TV viewing dip in late 2010 or maybe 2011 we have a very reliable indicator that the economy is truly on the mend.

Should you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com