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Google's big private-label move

December 07, 2006

Google's new tie-up with British Sky Broadcasting is, says Google CEO Eric Schmidt, a "really, really big deal for us," claiming it could, "if it works," become "our most lucrative deal from the get-go." The partnership is indeed interesting, and far-reaching. Google will, according to the Financial Times, license YouTube's video-sharing tools, as well as other Google technology, such as email and internet telephony, to BSkyB for incorporation into the broadcaster's recently launched broadband internet service. Sky will, for instance, set up its own private-label video site, based on YouTube technology, allowing its customers to store and share their creations, through both PCs and mobile phones.

But that's only for starters. Down the road, Sky expects to use a video version of Google's AdSense program to feed custom ads to viewers of its television programming. The ads would be stored on the hard drives of users' set-top boxes and inserted into programming based on users' profiles and behavior. In addition, reports the Guardian, the two companies are exploring the possibility of an advertising service for mobile phones.

Google and Sky will split the revenues from the deal. Although the terms of the revenue split weren't disclosed, it's expected, says the FT, that Sky would "take the lion's share of the revenues." That would be consistent with other Google ad deals.

The advertising aspects of the deal are notable, not least in underscoring, as the New York Times recently reported, that "the future of advertising" is taking shape not in the U.S. but in Britain. But it's the licensing aspects that are most intriguing to me. The deal shows that Google is happy to be an infrastructure provider, to allow others to slap their brands on its technology. We've known this before, of course. Its "Apps for Your Domain" service allows companies and universities to use Google products like Gmail under their own names. But the Sky deal goes much further down the private-label path, particularly in allowing Sky to set up a separate video portal under its own brand. In a way, Google is giving Sky the technology for building a competitor to Google's YouTube service.

And this is no one-off deal. Eric Schmidt sees it as the first of many private-label arrangements, according to a Reuters report:

"I've been waiting for this for a while," [Schmidt] said at a meeting in London, adding that the significance [of the Sky deal] was boosted as it marked the first time Google had sold the use of the back-end technology of YouTube and GMail. He said that Google was planning similar deals with other large media firms and content providers. "If we can get this structure right over the next few months and it rolls out, then it becomes the index case for every other country and every other operator."

In a new post, John Hagel argues that the big Internet players are mistaken in believing they can be all things to all people. To be successful in the long haul, he argues, they have to decide whether they're going to be "customer relationship businesses, product innovation and commercialization businesses or infrastructure management businesses." Google will be a good test case for Hagel's theory. Right now, it's pursuing all three of those types of businesses, and, as the Sky deal indicates, it doesn't appear to have any plans to narrow its sights.

Comments

Google is in the advertising business. Their goal is to push their advertising whenever possible. The technology is a just a tool to promote the advertising part of their business and they're willing to share revenue with anyone that will display their ads.

Posted by: sfbushie [TypeKey Profile Page] at December 7, 2006 02:49 PM

Echos of AOL

The internet is an open platform. It cannot be walled off...AOL tired this and failed.....Other media companies have also tried this and failed....Are B sky B users so naive that they will think that B sky B and google are the internet and that all of the good videos are only withing this walled garden...The openness of the internet will assure that their will be more content outside of the silo than inside of the silo no matter how many disk or siloded b sky b boxes that you give away..

Posted by: william [TypeKey Profile Page] at December 7, 2006 05:29 PM

Hi,

The really interesting bit about the Sky / Google story is this bit (Quote from FT)

“The companies plan to extend the partnership to BSkyB’s core television platform, however, by replacing traditional 30-second television adverts with targeted commercials stored on hard drives in BSkyB’s set-top boxes.

Google’s AdSense technology, which brings up adverts relevant to search terms of users, would be deployed alongside BSkyB’s knowledge of its customers’ profiles and interests.”

This is an interesting new take on how to do Interactive, Online Ads.

I had a go at explaining this on our blog broadstuff here The Adman in your Set Top box (its a bit long to type again..)

Nice blog by the way, I see we share similar views on DRM!

Posted by: Alan Patrick [TypeKey Profile Page] at December 8, 2006 05:40 AM

This seems a logical step for Sky, who have never been reliant on the traditional TV advertising model for their revenue, unlike the commercial broadcaster ITV in the UK.

This is a good example of how digital media is breaking down the traditional broadcast advertising model.

It will be interesting to see how TV production models (especially in the UK) will evolve as advertising revenue moves away from ITV type companies (commercial content creator/broadcaster) to platform owners like Sky (primarily in the business of distribution).

Posted by: Iremonger [TypeKey Profile Page] at December 10, 2006 07:20 AM

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