The Real Media Consolidation: Google

| About: Alphabet Inc. (GOOG)
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Erick Schonfeld at TechCrunch and Ashkan Karbasfrooshan at HipMojo make critical calculations about Google’s (NASDAQ:GOOG) growing advertising hegemony. Bottom line: Google controls nearly 40 percent of online advertising.

Now pair that news with the folding of TimesSelect. Consumers, as we used to be called, won’t support media and journalism with their money. Advertising will. We will become entirely dependent on advertising. And what happens when Google controls the majority of online ad revenue in this country? They’re headed there, for as a TechCrunch commenter points out, Google’s online ad revenue and share of revenue are growing faster than online advertising as a whole.

On the one hand, we should be grateful to Google for enabling the support of much new media. On the other hand, we should fear the vise in which Google holds our privates. That’s where media power is consolidating — not in old conglomerates (some of which now depend for a good bit of revenue on whom? — on Google.)

I’m not blaming Google for getting to this point. Big, old media handed them this opportunity on a platter. Google was the one company that truly understood the economics of the open network. It understood that it could grow much bigger enabling than controlling. We in media should have followed that model. We should have asked WWGD - What Would Google Do?

So what do we do now? We need new networks that identify and create new marketplaces for new value — greater value than the coincidence of words on a page, which Google sells. We need to create our own high-value networks (e.g., hyperlocal news). We need open networks that compete with the closed aspects of Google; openness is water to the witch of an opaque network like Google’s.

TechCrunch’s facts & figures, built on HipMojo’s calculations:

$3.98 billion (Google’s U.S. revenues in the first half of 2007)/$9.99 billion (IAB’s estimate of total U.S. online ad revenue in 1H07) = 39.8 percent.

For the first half of 2006 the numbers are: $2.732 billion (Google’s U.S. revenues in 1H06)/ $7.9 billion (IAB’s estimate of U.S. online ad revenues in 1H06) = 34.6 percent.

Update: As one commenter points out below, this means Google is out-pacing the growth of online advertising by a wide margin. Total online advertising revenues grew 26.5 percent year-over-year, while Google’s ad revenues grew 45.7 percent.

Now add in Bob Garfield’s chaos-scenario contention that ad spending as a whole will fall because companies will have more direct relationships with customers around media. I saw some things at Dell that back this up (more on that when my story appears in two weeks or so). Google will get an ever-bigger slice of an ever-smaller pie.