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Tim Peter

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December 20, 2006

What Google, Yahoo, and Microsoft will buy in 2007 and why…

December 20, 2006 | By | No Comments

This past week, Darren Rowse put his readers up to creating fearless predictions for 2007. While, so far, I think Brandon Wood has the best set of predictions (especially where we agree :-)), I see another series of emerging trends that will influence your experience on the Web next year, primarily with media. I’ll also take a stab at e-commerce trends sometime next week.

The reason media is particularly interesting is that 2007 provides a stepping stone leading up to the most significant media year in some time. 2008 represents an enormous year for media, both in the U.S. and globally. Not only will 2008 offer a U.S. presidential election, it’s also got the Olympics, this time in the most populous country in the world. So 2007 provides all players their opportunity to secure an appropriate foothold and position their brands effectively prior to the Summer Games and fall political season. In theory, consumer-generated media stands to grow significantly among its users, while mainstream media topples further. Of course, it’s unlikely anyone in mainstream media intends to stand by and watch that occur without some kind of concerted effort at reversing the trend. In fact, some already have taken those steps. Here’s what it’s leading to.

Bold Prediction #1 — Convergence breeds consolidation. As many MSM companies seek to regain lost share, the easiest place to turn are the new media sources they’re losing that share to. We’ve already seen it with Fox purchasing MySpace and the New York Times Company’s spate of acquisitions, including About.com. That acquisition alone added “…22 million monthly users to the Times Company’s 13 million…from The New York Times, The Boston Globe and more than 40 other Web sites.” Of course, old media might represent the hunted, not the hunter. Google’s purchase of YouTube represents (functionally) a new media player seeking to gain control of the audience as the box from which viewers consume content shifts from TV to computer. With its ready cash reserves available, don’t be surprised if Google picks up its own MSM networks, instead of the other way ’round. CBS, which already owns a significant share of viewers on YouTube, might make for an attractive buyout target for Google. Notably, CBS’ content on YouTube has led to “…an increase in their TV viewership, not a decrease as many networks first feared.” It’s even possible Google could buy The New York Times Company outright. Don’t expect Yahoo and Microsoft to sit idly by while this is going on, either. MSNBC might have greater meaning now than in the past for both its parents. Or Microsoft and Yahoo might simply merge.

But why would new media need old media? Don’t those media represent dinosaurs trapped in the tar pits, fossils not yet aware of their doom? Maybe not. The intellectual property and brand equity provided by some of these once-proud marks may go a long way to provide consumers a single, familiar face for accessing their programming choices. Consider this data, which indicates fewer sites attract a greater share of audience attention, precisely the opposite of what conventional wisdom would suggest. Perhaps the growth of new, non-traditional sites simply represents the next phase of mainstream media. After all, Google hasn’t gained its dominant share because consumers want lots of search engines. Consumers want the best search results. As the expression goes, no one needs a drill; they need a hole. The site/channel/medium that provides consumers the quickest, cheapest, most portable access to the programming they want will win. And they won’t care what name it goes by. But if it’s a name they can trust, all the better.

The lesson of AOL/TimeWarner isn’t that new media/old media mergers don’t make sense; it was that they were ahead of the curve.

Of course, these new networks still will require compelling content, something the CGM crowd seems to supply in limitless quantities lately. Which leads to…

Bold Prediction #2 — The art of the (micro) deal. Maybe, as some lunatic suggested, JibJab’s election-year animations were the first hit television shows of the new millennium. More important, it demonstrated the model we’ll begin to see more of in 2007, the micro-deal. In many cases, these new content networks (GooBS, Micro-hoo!, whatever) will need content proven to draw an audience. The proliferation of affordable tools permits budding producers the ability to create consumer-ready content. At the same time, publishing and distribution tools such as YouTube, WordPress, FeedBurner, etc., provided audiences to find the content that most appealed to them. When these networks come a-calling upon these new, upstart producers, the blockbusters cited earlier don’t make economic sense. Picture instead something akin to the Hollywood production model, where the networks will provide some modest upfront money to a relatively independent producer and pay the rest based on audience response. Amanda Congdon’s deal with ABC News looks awfully like what we’ll see more of in 2007. I wouldn’t be a bit surprised to see additional consolidation between producers and networks along the same lines. Picture a Michael Arrington/Cnet deal or Daily Kos/CNN arrangement. Oh, and if old media gains some new media cred to go along with the audience these producers provide, all the better to smooth the transition to the new MSM outlined in BP #1.

Micro-deals do lead to one particularly interesting outcome, which is the subject of…

Bold Prediction # 3 — Content creation no longer confined to Hollywood. Or the U.S. for that matter. I think Richard MacManus is dead on the money regarding the growth of content networks outside the U.S. When equal access to network connectivity, tools, and audience exists anywhere on the globe, assuming the big stars of new MSM will originate from the traditional media marketplaces seems unlikely. I think that user-generated Olympic coverage, displayed on YouTube, MySpace, what-have-you, will provide some of the compelling storylines and new faces of the 2008 Games. In all likelihood, user-generated media will offer a fresh take on the somewhat stale, pre-packaged coverage we’ve grown accustomed to. It also seems likely that the person to create that content is someone who hasn’t grown up on the traditional approach, which almost by default excludes media-saturated Americans. And that’s OK.

Unfortunately, every silver lining has a cloud…

Bold Prediction #4 — If we’re reliving the late 90′s again , 2000 has got to be around here somewhere. Sooner or later, the bottom is going to drop out of this latest hootenanny, just as it has in the past. It’s not that we’ve already achieved “irrational exuberance,” but we’re certainly headed down that path. When Newsweek and Time put the growth of Internet technology and its societal impact on their respective covers within the same year, it’s definitely a trend. If they share both covers in the same week, I’d start short-selling everything with a dot-com in its name or boldly-colored gradient fill in its logo. I don’t think 2007 will be the year that this bubble pops, but I think it’s likely to before the end of this decade. Only two factors make this somewhat more palatable than the last time. First, since the majority of acquisitions lately revolve around private equity or projected small deals (see BP #2), the actual impact to the public markets is probably limited. Second… OK, there is no second. I just wanted to soften the blow a bit.

Of course, none of this will matter if we’re too absorbed in Second Life to care.

Comments

  1. Most of the facts you mentioned are true . I really appreciate that you made a big research before creating the article . I bookmarked your blog. Thanks!

  2. You were right but now google as the advantage and won’t be dethroned that easily.

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