My Own Pirate Radio

Lots happening in search recently, especially in the local search segment.

• On Friday Google announced it acquired DoubleClick for $3.1B, beating out Yahoo!, Time Warner (AOL’s owner), and Microsoft in the bidding. This gives Google ability to place display ads (graphical ads) on sites, in addition to their existing text ads. In an ironic twist, both Microsoft Corp. and AT&T Inc. called for antitrust regulators to investigate the deal.
• Two days ago Google struck a deal with Clear Channel Communications to sell airtime on their 675 radio stations to Google’s advertisers. Clear Channel is America’s largest radio broadcaster.
• Also this week, Yahoo! expanded its agreement with a consortium of newspaper publishers to run their content on Yahoo!’s websites, and to place advertisements on the sites of the newspapers.
• In late March the News Corporation and NBC Universal struck a video content distribution deal with AOL, Yaho, MSN and MySpace. Some are casting this as an ill-fated effort to compete with YouTube (I agree), while the dealmakers claim it is more about creating a shared network of content and ads.

It’s neat seeing all the old media companies come around, albeit belatedly, to doing deals with the new media companies. It’s nice for the old media companies; they get a handy cash infusion, some positive PR, and new ad inventory to sell. But this is just a short-term fix. The new media companies get the better part of this deal, because:

1. They get to tap into the local sales force of the old media companies. This reduces a huge barrier to success in local search: the cost of creating and running a local advertising sales force, a.k.a. “feet on the street”.
2. They get to demonstrate their reach, innovation, and cost efficiencies to a new advertising base. (Google and Yahoo! are surely saying nice things about not trying to steal away advertisers from their new radio, television and newspaper publishing partners, but you’ve got to be skeptical about that in the medium to long term. Ad dollars are shifting online, fast. These deals only grease the skids.)

For an overview of US local search market trends, see LennAnn Prescott’s Hitwise blog post.

BusinessWeek also has more commentary on Google’s recent moves in the ad business.