An Analysis of the Google/Viacom Video Deal

Aside from Google’s gigantic search market share (made even bigger with the MySpace.com partnership), AdSense is what makes the search giant a special company. The depth and breadth of its affiliate network, as well as its targeting technology, have served thousands of advertisers well through the years. For a while, it seemed Google could do no wrong — until the Google Video launch.

Languishing in video market share behind Yahoo Video, MySpace, and YouTube, Google Video is a competitively positioned product that hasn’t yet caught on with the majority of Internet users. Ask the average online video viewer why that is, and he probably won’t be able to tell you. It’s just that when it comes to audience preference, YouTube is the Google of video.

If Google’s going to be a major player in the video space, it would be wise for it to build on its strengths rather than simply launch competitive services (Microsoft, anyone?). That’s what it did with its recent Viacom deal. Viacom’s content will be distributed throughout Google Video’s affiliate network, with MTV Networks responsible for selling ads in front of the content. The most interesting part of the deal is the revenue will be shared with the affiliates hosting the content.

The money affiliates make won’t be staggering by any means. Participation in the AdWords program will likely generate more revenue for them. But the important thing here is a major content producer and the largest advertising network in the world have partnered to try to prove a syndicated video ad model can work.

Whether it can remains to be seen. There are several questions that remain unanswered about this relationship’s potential outcomes. We’ll have to see how those outcomes materialize.

Will Pre-Roll Advertising Affect Viewership of Viacom Content?

As I mentioned in my last column, the threshold of consumer tolerance for pre-roll advertising is lowering. If Viacom’s goal is to expose more people to its content and eventually to get more people to its broadcast sites, will pre-roll ads make that goal more difficult to achieve?

Will Ad Revenue Be Significant?

Affiliates who place this content on their sites (initially, some blogs and entertainment-focused content sites) will expect to earn some revenue as a result. The jury will certainly be out on whether adding sometimes-relevant video content to these sites will be worth that ad revenue. Odds are, realized revenue will begin as a trickle.

Who Wins?

There’s definitely not a loser. Viacom gets to expand its content reach by leveraging the power of the world’s largest affiliate advertising network. Google gets to prove a business model.

If I had to pick a bigger winner here, it would be Google. It gets to use Viacom content (e.g., MTV, Nickelodeon, and Showtime) to lure affiliates, as well as other content providers, into joining the program.

Does It Stop at Viacom?

Will the ad-supported content stop at Viacom? Will ads creep into consumer-uploaded video? If Google finds ad revenue in the long tail of video content, it will have to innovate beyond pre-roll ads into less invasive, less impeding forms of advertising.

What Does This Have to Do With MySpace?

The Google/MySpace deal adds an interesting twist to the Viacom arrangement. If Google powers MySpace’s search, can video be far behind? MySpace already has an embedded video player with no advertising in it. In theory, Google could power this, too. MySpace search cost Google $900 million. How much would video cost?

Many other questions remain unanswered, and some are still unasked. Stay tuned. I’ll revisit this relationship as it unfolds in coming months and continue to gauge the effect this has on the online advertising industry.

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