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Google: The search returned no hits

Google: The search returned no hits
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First Published: Mon, Apr 09 2007. 12 05 AM IST
Updated: Mon, Apr 09 2007. 12 05 AM IST
The reasons to be sceptical about Google’s newest initiative, to break into television advertising, are legion. They have names like d’Marc, GoogleVideo and Orkut. These are just a few of the many unsuccessful brainchildren of the firm’s skunk works and venture capital-style deal-making. Google’s attempts to diversify—into radio advertising, online video and social networking—have flopped, leaving it dependent on its online ad business for nearly all its profits. That’s a problem because investors, who value the company’s stock at over 35 times forecast 2007 earnings, clearly expect some of these ventures to pay off.
Consider radio. Google purchased d’Marc early last year for just over $100 million. It planned to use the firm’s technology to automate the purchase of radio ads nationwide. But the effort was such a disaster that d’Marc’s frustrated founders fled the company. Radio industry heavyweights feared Google’s technology could usurp their valuable relationships with major advertisers and commoditize radio ads. So, Google has been relegated to selling bad time slots in small markets.
Or look at GoogleVideo, a service launched with limited content two years ago. This grabbed only a miniscule market share and never made a profit. After it floundered, Google paid $1.65 billion for YouTube, which, despite being the main Internet video destination, lacked revenues. It also came with substantial legal liabilities in the form of copyright infringement lawsuits. And the unit will face serious competition later this year from a new online video consortium led by General Electric’s NBC Universal and News Corp’s Fox, which are banding together to create “a YouTube killer”.
Another disappointment has been Orkut, Google’s social networking site, launched in 2004. Unlike MySpace, which appeals to a younger demographic; Facebook, which attracts college students; and LinkedIn, aimed at business professionals, Orkut lacks a clear brand identity. It doesn’t even appear in various rankings of the top social-networking sites. And in the one place it really has caught on, South America, it has been accused of acting as a conduit for drug dealing.
With the online advertising market growing at more than 30% a year, and Google dominating the space, it may be able to pour money into these ventures for a while. But unless some of them—such as its new effort to automate TV ad sales on DishNetwork’s 125 satellite channels—begin to pay off, the search giant’s shareholders may re-evaluate the massive multiple they award the company.
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First Published: Mon, Apr 09 2007. 12 05 AM IST
More Topics: Marketing and Media | Advertising |