Is Google's multi-billion dollar free ride over?

Is Google's multi-billion dollar free ride over?

Summary: It is a $144 billion 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. Only in the Google world would such a 'revelation,' be 'newsworthy.'

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TOPICS: Google
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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"

Topic: Google

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6 comments
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  • A more stunning fact:

    Perhaps the only fact that is more astounding than the financial markets' generous reward for Google's business model is the length of time that this writer has been wrong about the performance of that business model.
    meyerhd
    • She should just change the name of the blog

      She should really consider changing the name of this blog to I hate Google/YouTube...

      Note how her links are to her earlier blogs , which she uses her own blogs as cites. When she actually links to a story, except for Mark Cuban's, she misquotes them or omits crucial portions of what is said.

      She also does cutesy things like calls it "safe harbor" when in fact it should be Safe Harbor, Section 512 of the US Copyright act, and "Fair use" which should be Fair Use, section 107 of the US Copyright act. She pretends like this is not this is not the law, that these two sections do not exist in the statutes, and constructs some sort of distorted reality where copyright holders legally have 100% control 100% of the time, which is not the case.

      Oh also... Google and YouTube are not the only ones who have this model... most of the search engines and really most free web host have this model.

      She also leaves out [url=http://blogs.zdnet.com/Howell/?p=55]abuse of the safe harbor provisions[/url] by "copyright holders"; which is very very common.
      Edward Meyers
  • You are a little confused. Hotels pay travel agents for customers, NOT the

    other way arround. If web site owners do NOT like all of the traffic driven to their site by Google, they can easily opt out and Google will stop sending customers to their site. Just like a hotel could start telling travel agents to stop sending customers!!!

    Most people LIKE that traffic driven to their site!!!
    DonnieBoy
  • You have never got anything correct

    You have been complaining about the same thing for months now but sadly enough Google's profits get fatter and fatter.
    I think you should quit your job.
    Have you ever got anything correct? Your blog has no intuition, no perspective analysis and seems like a rant to me. I cannot even belive ZDNet is still paying you.
    cyberking2000
  • Google has much room to grow and Grow and GROW

    Statistical analysis has shown Google has barely tapped into a very large area of advertisement which all indications show that advertisement on internet has much room to grow and is to catch up with TV advertisement in the next few years. Google is the one holding the golden ring and will be the one who dominates this area. Google's real power is and will continue to be that a large part of the economy will be dependent on Google. Google will and must lead and dominate the pack for the good of the world. Google will not so much have to work with companies but rather companies will have to work with Google if they want to survive. This is good because Google's dominance will benefit the world as stated in their positive founders' mission statement.
    jackdaniels06
  • Content owners abused? I disagree

    I think you miss the fact that without Google, these content owners would largely have to generate and drive their own traffic. This would, more than likely, have to take the form of online campaigns that would in themselves cost money. On the contrary, the more traffic generated to a particular content owner, the greater the chance that person can him or herself become a media owner and sell media space on their site.

    I don't think Google does these people a disservice by allowing us to find their content as and when we need it. Indeed without such companies as Google and Yahoo, most of us wouldn't know where to start browsing the net.

    If the cost of such a service is the placement of (largely) unobtrusive ads, I for one do not see a problem.
    nausher@...