All Things Digital

“We feel that we have recreated the mass media.” That’s how Google’s Kim Malone Scott, in a moment of Zuckerbergian modesty, described the company’s video syndication service that will debut this fall and, shortly thereafter, transform online content distribution.

Working with Seth MacFarlane, creator of the “Family Guy” animated series, Google (GOOG) will in September begin distributing “Seth MacFarlane’s Cavalcade of Cartoon Comedy,” a series of digital shorts
to be embedded on Web sites as free, ad-supported streams.
About two minutes in length, the shorts–which MacFarlane describes as “animated versions of the one-frame cartoons you might see in The New Yorker, only edgier”–will be syndicated through Google’s AdSense advertising system, which will target them at MacFarlane-friendly segments of the Web. Some will be accompanied by standard pre- or post-roll ads, some by “brought to you by” tags, and others by original commercials created by MacFarlane.

The shorts are essentially like little Assisted Ad Delivery Devices, intelligently targeting advertisements at those receptive to viewing them. “We believe the revenue could be formidable,” said Karl Austen, a lawyer who worked on the deal. “What is exciting is that this is a way to monetize the Internet immediately. Instead of creating a Web site and hoping Seth’s fans find it, we are going to push the content to where people are already at.”

Boy, that was fast. Yahoo’s (YHOO) limited two-week test of Google’s (GOOG) AdSense for Search service has yielded wondrous results. So wondrous, in fact, that we’re only a week into it and “people familiar with the matter” are already telling The Wall Street Journal that the trial may well lead to a broader outsourcing deal between the two companies.

Five bucks and a Yahoo Insta-Yodel! says the Net portal’s having another sit-down with Microsoft this week.

Anyway, by some estimates, a deal with Google would increase Yahoo’s cash flow by more than $1 billion a year. A nice little spike in revenue like that would certainly bolster Yahoo’s efforts to spur Microsoft (MSFT) into increasing its unsolicited buyout bid for the Internet pioneer. That being the case, why didn’t Yahoo forge such a partnership with Google last July when it was restructuring the company’s “ecosystem” and slaughtering sacred cows? Perhaps government approval was a concern?

Well this ought to cause a chair-tossing tantrum or two up at Microsoft HQ. This afternoon Yahoo (YHOO), which has been searching for alternatives to Microsoft’s (MSFT) unsolicited $44.6 billion acquisition offer, said it will explore a search-advertising partnership with its greatest rival–Google (GOOG).

The Internet portal will soon begin a “limited” two-week test of Google AdSense with an eye toward a broader search-ad outsourcing arrangement. That said, this tentative first step is by no means a harbinger of a larger deal. “… The testing does not necessarily mean that Yahoo will join the AdSense for Search program or that any further commercial relationship with Google will result,” Yahoo said in a statement.

It certainly doesn’t. Not if Microsoft has anything to say about it. In a hastily issued statement Brad Smith, Microsoft’s general counsel, cried monopoly over the exploratory alliance.”Any definitive agreement between Yahoo! and Google would consolidate over 90 percent of the search advertising market in Google’s hands,” Smith said. “This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.”

The Internet has evolved from open standards, having a diversity of companies. And when you start to have companies that control the operating system, control the browsers, they really tie up the top Web sites, and can be used to manipulate stuff in various ways. I think that’s unnerving.”

That’s what Google co-founder Sergey Brin had to say about Microsoft’s hostile bid for Yahoo. Apparently he doesn’t see the Web as an operating system. Or the irony of leveling such accusations at Microsoft when the Web today is driven in large part by “made-for-Google-AdSense” online ad-supported business models and Google is the search market’s undisputed master.

(Googlebot illustration by Tyler Jordan, eVisibility Insider)

We really need to move the thinking about the social graph. This exists out in the world, and has always existed. We didn’t invent it. How can we ‘own’ it? We’re just trying to map it out. We have a model of the social graph that we’re constructing.”
–Facebook CEO Mark Zuckerberg

We have address books, and the sum of the address books is the social graph.”
–Google CEO Eric Schmidt

Turns out that the “social graph” about which Facebook CEO Mark Zuckerberg so often speaks these days isn’t just a decades-old computer science term, it’s the basis for the monetization platform that will someday justify Facebook’s $15 billion valuation. Or so the theory goes.

On Nov. 6, Facebook will make a major announcement at the ad:tech conference in New York. And ad-industry executives familiar with the company’s plans say it will revolve around an advertising network reportedly called SocialAds. As described in Facebook’s Sept. 24 trademark filing of the term, SocialAds are “advertising and information distribution services, namely, providing advertising space via the global computer network; promoting the goods and services of others over the Internet.”

But–again according to those faceless ad-industry executives–the SocialAds network may be quite a bit more than that. It might use permission-based demographic targeting to deliver ads to users on Facebook–and off, says Altura Ventures’ Lee Lorenzen, who offers this hypothetical breakdown of the service:

• Facebook (with Microsoft’s help) will offer a competitive solution to Google AdSense for non-Facebook Web sites.
• You can think of this service as an open-source AdSense solution where Google can provide ads into it (if they document what the Web site owner will earn) but Google (and any other ad providers) will have to compete with ads that Microsoft can provide that are Facebook-enhanced.
• The innovation here is that Microsoft’s ads will be able to pick up the user’s Facebook cookie (for the 50-million-growing-to- 200-million users who already have a cookied-Facebook account).
• This means advertisers in Microsoft’s adCenter can offer a much higher CPC or CPM payment to the Web publisher because they will know that the user viewing the Web page is actually a Facebook user that, for example, happens to be an 18-year-old male with a birthday in three weeks who mentioned Xbox on his profile page.

If Lorenzen’s right, SocialAds might easily justify Microsoft’s $240 million investment in Facebook.

Google hasn’t yet figured out a way to find and remove video content posted to YouTube and Google Video in violation of copyright, but it may have finally figured out something far more important: how to advertise on it.

This morning, the company announced a new service that allows publishers to embed ad-supported YouTube videos in their Web sites. The videos will be distributed through Google’s AdSense network and will carry two ad placements: a banner at the top of the video player that can be either text links or a graphical display, and a text link ad at the bottom. Ad revenue will be split between site publishers, video publishers, and Google. The ads themselves, according to Google at least, will be relevant to both video and site content, as well as “unobtrusive.” A win-win service for everyone involved.

“Content distribution on AdSense improves the overall Web experience by connecting consumers with more relevant information and entertainment on the sites they visit,” Google explained. “This new program is a scalable and cost-effective way to distribute content online, creates a new revenue opportunity for publishers and content owners, and helps advertisers reach their target audiences in new and innovative ways. It will also allow AdSense publishers a unique way to enhance their sites with fresh, dynamic content.”

Or gum them up with behemoth video ads fattened with Google Analytics code, something Google would never do to its own famously spartan pages. Remember, text ads save lives, flashy ads take them, as Rough Type’s Nick Carr aptly notes:

I’m sure I don’t have to remind you of how Google used to brag about the way its refusal to serve banner ads was literally saving people’s lives–a claim that earned it some fawning press coverage. Sergey Brin would point to the case where a fellow was in the early stages of a heart attack and went online to find out what he should do. As Fortune Small Business reported:

“ ‘He started using one search engine, but it was too slow because the banner ads were loading, so he switched to Google. After getting the information he needed, he headed to the hospital immediately … “Not only did our search engine save his life, but it shows that these decisions–like whether to use text-based or graphical ads–matter,” says Brin, the co-founder of Google.’

“I don’t think Brin talks about this story so much anymore. While Google has yet to incorporate graphical ads into its search pages, it does serve millions of them up to outside sites through AdSense. I wonder how many people in the throes of a medical emergency have rushed to a health-care information site only to find themselves helplessly waiting for some big animated AdSense ad to load (and, as well, the Google Analytics code to run). Now, these poor souls are also going to have to endure the loading of YouTube videos and their accompanying ads. I can only hope that they’ve kept up with their life insurance premiums.”

In its latest attempt to organize the world’s information and make it universally AdSensible (har-de-har-har), Google is introducing a rich-media, dynamic ad widget. Google Gadgets, as the company calls them, are essentially content-heavy interactive ads tricked out with the contextual targeting capabilities of Google’s AdSense network. “Web sites within Web sites,” as Google explains.

Or rather promotional Web sites within Web sites. Imagine Facebook’s “Top Friends” widget if it were instead filled with a list of, say, Clorox products. “Consumers are pulling in content from multiple sources,” said Christian Oestlien, the Google product manager overseeing the Gadgets program. “It is what we are calling the componentization of the Web. The Web is sort of breaking apart into smaller pieces.”

The announcement of this new ad avail is a timely one. According to online measurement company comScore, more than 48% of Internet users in the United States–over 87 million people–use widgets. That’s the sort of audience metric marketers swoon over. And Google knows this all too well, although apparently it’s a proconsumer initiative and not a money-making one when viewed through its “don’t-be-evil” lens. Said Oestlien, “We’re not trying to monetize every single event that happens in a creative, [we want advertisers] to make rich creative ads that are really useful to the end user.”

Larry and Sergey believed we could develop a better product than the existing online advertising offerings, but we knew that [DoubleClick] could be a fallback if Google’s ad program did not work.”

– Omid Kordestani, Senior Vice President of Global Sales and Business Development at Google, October 1, 2005

Odd how things come full circle, isn’t it? Years ago, before Google AdWords became ubiquitous across the Web, there was DoubleClick, an ad management and reporting company that did big business serving up banner ads (perhaps “GET YOUR FREE X10 VIDEO CAMERA! CLICK HERE!” rings a bell?). So much business, in fact, that Google founders Sergey Brin and Larry Page thought of it as a safety net if Google’s AdWords program were to fail. Ironic then, isn’t it, that the search leader today said it plans to buy DoubleClick for $3.1 billion in cash.

$3.1 billion. That price seems bit steep for DoubleClick, which fetched just $1.1 billion when it was last sold in 2005 and has since divested some portions of its original business. It’s also quite a premium over the $2 billion Microsoft was reportedly willing to pay for the the online-advertising company. But for Google, paying $3.1 billion to snatch DoubleClick from Microsoft’s waiting arms was likely money well spent. After all, such an acquisition would have given Microsoft an instant and strong position in the market for serving display ads on other companies’ Web sites. Thwarting that was a nice strategic coup for the the search giant–boosting its presence in the area of Internet display advertising and dealing an ugly blow to Microsoft in the process.