November 15th, 2006
Is Google's multi-billion dollar free ride over?
UPDATE: Google has set aside $200 million, or 12.5 percent of the shares issued to pay for YouTube, to cover "certain indemnification obligations" that may hit the video sharing site. Will that be enough, asks fellow ZDNet blogger Larry Dignan.
It is a $144 billion (market cap) irony that a media company which derives all of its revenues from selling ads against others’ content garners headlines for weighing compensation to content owners for the right to exploit their content.
In “YouTube Google: Paying off content owners?,” I recount the recent flurry of “news” that the soon owner of YouTube may find itself having to pay content owners because it makes money off of their property.
Only in the Google world would such a “revelation,” be "newsworthy."
Why? As I have oft said:
Google’s inordinate 26% profit margins are due, in part, to its shrewd, but not content owner friendly, Google business model by “fair use” and “safe harbor” (see “Google ’safe harbor’: ‘Nice’ way to do business?”)…
A business model fueled by selling ads against content it has not compensated rights holders for and that it has no explicit legal rights to use.
If Google’s acquisition of YouTube results in Google paying to play in online video, Google could find itself being pressured by Web content owners to fork over compensation due them as well.
Google has deftly skirted paying owners of the information that Google uses at Google.com to fuel its multi-billion dollar text ad business.
How has Google managed to get away with selling billions of dollars of ads against content that it has not paid for?
1) “Fair-use” and “safe-harbor” legal gamble,
2) Google search traffic "carrot."
In “A ‘Dire Straits’ Web barter economy? Links for nothing, content for free,” I underscore that Google is the only guaranteed winner in its link barter based business model:
Google dangles promises of bountiful search traffic eagerly clicking on news “headlines” and book “snippets.” Google’s promises of link love, however, are merely ephemeral IOUs, without any tangible, guaranteed return on copyright exploitation.
What is certain, however, is that Google gains no-cost access to content, which it can sell ads against.
In “Google vs. Web 2.0: Cache as cash can,” I put forth that Web content owners lose in Google’s cache economy:
Google’s caching of third-party Web content, and display of the copied, cached content in Google’s core search results without content owners’ explicit permission, usurps management, control and ownership of the content from the actual creators and owners of the content…
Google’s copying, caching and displaying of third-party Web page content makes Google the must-go-to destination for the world’s expired content, while also stripping content owners of full interest in, and control of, the content they created.
Google copies, caches and controls Web content from perhaps millions of content owners, without their explicit authorization. If Google YouTube concedes to compensating some video content owners, Google.com may find itself also having to pay to play with the Web content of those millions.
Are the days of Google's free ride numbered?
Will Google pay for the right to "organize the world's information" in order to sell ads against it?
OR, is Google's $144 billion market cap wave a free tide that can't be stopped?
SEE ALSO: "Google search advertising gold mine at risk"
"Google is NOT invincible: 5 reasons why"
