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Google and Viacom agree to team up

PARTNERSHIP Google's ambitions to become a major player in video advertising received a massive boost after it agreed on a package with media giant Viacom


Google has struck a deal to allow Web site owners to put video clips from Viacom, including SpongeBob SquarePants and MTV's Laguna Beach: The Real Orange County, on their pages. The clips will be accompanied by advertising, with Viacom, Google and the site owners dividing the ad revenue.

Viacom, one of the biggest creators of television programming, is giving a significant endorsement to Google's ambitious plan to become a big player in video advertising.

The deal may also be a sign that Google is getting better at dealing with the producers of news and entertainment, which have sometimes claimed that Google uses their content without appropriate consent and cooperation.

After the test with Viacom, which will start at the end of this month, Google hopes to allow any video programmer to use its system to distribute programming with advertising. It also plans to add ad-supported programs to its own video site.

The deal allows Viacom to extend the reach of its video programming to a host of new sites.

Google and Viacom are trying to create a legitimate business model for one of the hottest trends on the Internet: bloggers and others with Web pages are putting video clips on their sites. Many are using sites like YouTube, which store and play back video with little advance review of whether the content is copyrighted. And indeed, many of these clips are recorded from television programs without the owner's permission.

"There hasn't really been a legal alternative along these lines," said Tom Freston, Viacom's chief executive. "This is the way that people are consuming content these days."

Already there is competition to provide ad technology for video programmers. And Viacom chose Google, at least in part, because it offered the best financial arrangement.

Eric Schmidt, Google's chief executive, said Google would pay a majority of the advertising revenue to Viacom.

"The content owners do the work," Schmidt said. "Distribution businesses should get a minority" of the advertising revenue, "and the creator should get the majority," he said.

An executive involved in the deal said Viacom would receive more than two-thirds of the revenue. The executive spoke on condition of anonymity because the deal terms were confidential.

By contrast, most of the other companies that are trying to build video advertising networks -- including AOL, Brightcove and Revver -- are proposing to pay about half of the revenue to the content creator. Revver, the smallest of them, has agreed to give as much as 70 percent of the revenue to big media companies, said its chief executive, Steven Starr.

Both AOL and Brightcove have other video deals with Viacom and have discussed providing video advertising to it as well, according to executives involved in those negotiations.

In this deal, Viacom will sell the advertisements through its existing sales force at negotiated rates. Google in general wants to handle selling advertisements for partners in its program, and it plans to use the same sort of auction system it uses for the other ads it sells.

Google will not say what portion of the advertising revenue from the program will be paid to the sites that host the videos. Schmidt says this is the same policy the company has with its text advertising network.

"We don't give people percentages," he said. "Just all of a sudden the money shows up, and it's a lot."

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