Did NBC Open Pandora's TV Box?

A reader of my blog and a former student asked me "...what do you think of the Google TV model? (Dish Network beta and now NBC Cable properties)?" Here's what I wrote:

I think Google will sell some inventory. Some questions are: Do the advertisers who buy via Google have effective enough commercials to get results? Will the cable inventory that NBC gives Google to sell have audiences big enough to get advertisers results? Will the smaller advertisers who buy via Google's auctions stick with it long enough to get results? Will large advertisers and/or their agencies buy via Google's auction instead of buying from salespeople in the hopes of saving money?

The potential for Google's auction model is to disintermediate salespeople, regardless of what NBC might say to reassure its sales force.

Google has its foot in the network TV door, or, probably, a better metaphor is that Pandora's TV box has been opened. NBC TV executives will reassure its sales force that this decision will in no way effect their jobs and that there is no way that they will ever give valuable prime time MSNBC or NBC TV Network inventory to Google to sell.

But the situation reminds me of the time when a younger, thinner Bill Gates (not Seinfeld's current TV buddy) offered to buy Encyclopedia Britannica so he could digitize the information and sell it on a CD. The CEO of EB was horrified and said "no" emphatically because it would decimate EB's "most valuable asset" - its 25,000 world-wide sales force. The dummy thought EB's most valuable assets were the door-to-door salespeople who manipulated parents into buying a bookshelf full of information printed on dead-tree paper and not the intellectual content on the paper.

So Gates, said, "OK," bought World Book, created Encarta on CD, and put EB out of business and its 25,000 salespeople out of work. The Web then put Encarta out of business, and now Google is trying to put Microsoft out of business, and, thus, the Gates-Seinfeld commercial.

The Internet was a disruptive technology that no one could have predicted beforehand, and that no one at the time it was created could have predicted what consequences it would subsequently have. Did Tim Berners-Lee think when he conceived of the Internet that it would eventually put newspapers out of business? Of course not. When Brin and Page created Google, it was a disruptive technology that no one could have predicted, and at the time it was created could have predicted that it would become the biggest advertising medium in the world.

The Internet and Google are black swans, which according to Nassim Nicholas Taleb in his extraordinary book, The Black Swan: The Impact of the Highly Improbable, are highly improbable events that are impossible to predict but have huge consequences.

Selling TV by means of Google's online auction model is a black swan. No one can predict what eventual effect it will have on the sale of broadcast and cable TV network, national spot television, and local television inventory. My sense is that if advertising agencies and advertisers find they can buy TV inventory faster and cheaper without engaging in the time-consuming buying, selling, and negotiating process, they will force the salespersonless auction model on sellers.

But we'll see now that NBC has opened Pandora's TV box and let Google in.

Comments

[sueno]

The major networks are their own problem.
They are terrible! ABC, CBS in particular, most often don't tell the truth
and are bought and paid for by corporations, the GOP, party insiders, lobbyists
as well as biased reporters who seem on the take-
New Media is going to surpass these networks soon-
They made themselves irrelevent and dis-honest, and wonder why there ratings are nil-

[Chicagowill]

First, Microsoft licensed Funk & Wagnalls, an encyclopedia that sold in grocery stores and was made famous by Rowan and Martin's Laugh In. Encarta/F&W let parents assuage their consciences that they were helping their schoolkids at a price point they could afford, $99 instead of $2000 (1988 dollars).

Second, to answer the two posters above, I think it helps for a blogger to try to anticipate a trend, instead of reacting to the latest nonsense a politician puts out. In Freakonomics, Dubner and Leavitt explore the economics of information asymmetry, going so far as to compare the Klan to real estate agents. One could argue that buying advertising time via an auction rather than via an advertising agency attempts to remove another information asymmetry from the market. The economic toll takers, whether real estate agents or ad executives, can fight a rear guard action, arguing they provide needed services, but they just delay the inevitable. What Google is doing, I believe, should lead to the splitting of content from placement. It could also lead to a reduction in the fees paid to advertising agencies to broker the buying and selling of advertising, putting in play >$1 billion for advertisers and media to divide up, with Google taking a much smaller cut than advertising agencies did.

It will be fun to watch it play out over the next ten years. And, no, I disagree that this post was a waste of virtual ink. I found it quite thought provoking.

[LRonHoover]

@mezz1968: author doesn't seem to slant for or against this, just stating that disruptive technologies like TCP/IP, encarta, google + ads, etc are relatives of this new ad-space sales model, which is basically like google's adwords model where one can agree to pay a higher price for a click and thus receive a "better" display spot. incorporating TV sales into this model should be very interesting and hopefully will reduce overall costs for people/companies to advertise by removing middle-people sales folks who suck up 30% (or whatever, i don't really know) on your account.

globalization requires this type of streamlining on all scales and within every possible link of the global money chain, even in between Mr/Mrs Restaurant Owner and getting his/her ad on the local telly stations.

view my horribly thin, probably liberal blog: completelypissedoff.com

[mezz1962]

After reading your article I still don't have a clue what this would mean to the average American and why he would even care.

I can't believe you wasted your time writing this when theres only about a gazillion more important things you could have choosen

Oh and BTW if Google puts anyone out of Business guess what they become bigger and need a bigger work force. So know the Liberals want all companies to play fair to make sure no one goes out of business. If you want a communist system move to Cuba