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The Internet’s Pyrrhic Victory Over TV

The battle isn’t finished, but the internet is losing

Round One: The First Battle of YouTube

But first, a review of history is in order. After their 2004 IPO, Google grabbed more and more of the direct ad dollars that once went to newspapers and magazines. By 2006, they had definitely realized that TV represented a giant pile of money. Thus in 2006, they spent $1.65 billion on YouTube. At the time, there was not much talk about this being an offensive move against television: most of the business chatter was around MySpace, Yahoo, social networking in general and bringing search to video. But the television industry knew of the risks. Michael Wolff, in his excellent survey of the battle Television is the New Television, noted that “The horror, to every television executive, was manifest. By the time the potential of YouTube was clear (and it very quickly became clear), the video-focused part of the media business well knew what had happened to the music part of the media business.”

Round Two: The Battle of Media Buying

Round two in the battle began even before round one was over. In 2008, Google extended its assault on assault on television advertising money with Google TV Ads. Google believed that the problem with television advertising was efficiency and transparency in the buying process: they offered the means of “easily and efficiently buying more accountable and measurable TV advertising.” They would apply the efficiency of their direct advertising-based web auctions to the television market.

Google TV Ads product, 2008

Round Three: Content

By 2011 the lawsuits were clearing (though some would linger), and Google realized that monetizing cat videos and music videos— the core “user generation content” of YouTube — was a difficult proposition. They started to wonder if the reason TV wasn’t still winning was because – gasp – they had good content. So it announced a $100-million war chest to fund 20 or so new channels on YouTube that offered quality content. One day an entire book will be written about this period, I hope. If no one else does it, I’ll get to it in a decade or so, but please, someone do it before then. So many of my friends lived off this fund for years. It was awesome.

Side Skirmishes: Ad Formats

Along the way, Google experimented with ad formats. Would pre-roll work? Post roll? Mid roll? These skirmishes still linger today, without much resolution. The internet has not, in a decade of experimenting, found anything that works any better than the good old 30-second television spot. Television wins again.

Round Four: Enter Facebook

So where are we today? Television is still king. None of Silicon Valley’s efforts have slain the king. But it’s not given up. The Valley’s main general today is probably Mark Zuckerberg, who has rapidly learned the lessons of his predecessors, and has entered the fray with millennial faith and energy. “I see video as a mega trend,” Zuck declared this year, and he’s rallied the Facebook troops to give Facebook a top-down video-focused re-do. Zuckerberg “wouldn’t be surprised if you fast-forward five years and most of the content that people see on Facebook and are sharing on a day-to-day basis is video.”

TV is the Internet is TV

The lessons from the first content battle, too, have been learned. Google watched Netflix put an actual dent in Television’s audience, and got a more accurate market for how much money they would need to spend on content. And it was a lot more than a hundred million. Netflix is spending $6 billion on content this year. Amazon is spending $4.5 billion. Google is getting into the hundreds of millions — still not enough. Apple is getting in on the game.

Is television the tech industry as we know it?

For Google — and the ad industry — this has several ramifications: First, bringing Netflix into the equation brings up another topic. Netflix and HBO are showing that television may not need advertising at all. There is a small, but real chance that, over time, the greatest ad medium we’ve ever invented may not exist in 20 years. This is probably hyperbole — Americans have shown, time and time again, they are willing to endure ads to consume content for free. And some popular content is cheap to produce, thus being easy to support with advertising: talk shows, reality shows, etc. In the end, both on Television and the Internet (an increasingly irrelevant distinction), content will be a mix of free and paid.

Where We Failed

So. Where did the internet go wrong?

author, @agencythebook, @mannupbook. writing an ad economics book. reformed angel investor, record label owner, native alaskan. co-founded @barbariangroup.

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