Google Is Bobbling Media Play - TheStreet

Google Is Bobbling Media Play

Its planned push into new markets hasn't been smooth.
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When it comes to pursuing new media markets, it's been one setback after another for

Google

(GOOG) - Get Report

lately.

And more than merely cosmetic, these blemishes have the potential to seriously hamstring the search giant just as it sets its sights squarely on pursuing rich markets

beyond its current staple of online ads.

The latest setback came Tuesday, when Belgian courts ruled that Google had violated copyright laws by posting snippets and links to Belgian newspapers without permission. Google plans to appeal the verdict, and any financial damages the company would be liable for -- the courts have ordered it to pay $4.3 million based on the length of the time it's been in violation -- would be negligible.

Still, the ruling is a banana peel for Google as it races to expand the distinctive style of targeted, measured advertising that has served it so well online to even bigger markets like print, radio, and video. That's because much of Google's success will ultimately come down to bets by the old guard on whether Google will eventually succeed.

If Google's triumph is inevitable, the conventional wisdom has gone, it's better for each established media company to play along and see what benefits can be reaped -- even if the incumbents aren't thrilled about Google's impending impact on their business.

In November, with its stock price hitting new highs and seemingly little to check its momentum, Google announced a pilot program to sell ad space for a select group of newspapers. At the time, it seemed shocking that the group, which is seeing its business battered due to advertisements migrating to the Web, would strike a deal that would eventually help line Google's pockets.

But if it's only a matter of time until Google upends the business, no particular company wants to be the one holding out and getting nothing in return.

The same went for Google's high-profile acquisition of rapidly growing video sharing site YouTube in October. When rumors of the deal were initially leaked to the press, pundits far and wide scoffed at the idea that YouTube --- chock-full of popular, copyrighted material and a potential hornet's nest of lawsuits -- would ever be acquired by Google.

But not only did the wave of supposed lawsuits fail to materialize when Google announced that it would indeed shell out a hefty $1.65 billion for YouTube, but for a while the old guard tried to focus on the silver lining on the cloud. Powerhouse network

CBS

(CBS) - Get Report

even went as far as to claim that YouTube increased the popularity of its TV shows and uploaded its own clips to the site.

Perhaps no company better illustrates the old guard's ambiguous, paradoxical regard for Google -- and a change of heart that may be in the works -- than

Viacom

(VIA) - Get Report

.

At the end of October, Viacom told Google to take down its popular clips like those of the

Daily Show with Jon Stewart

and

The Colbert Report

-- franchises that had in large part helped turn YouTube into a franchise of its own. But as the momentum around Google continued to swell, Viacom quickly decided it was better off trying to strike a deal with the company instead.

"We want our audiences to be able to access our programming on every platform, and we're interested in having it live on all forms of distribution in ways that protect our talented artists, our loyal customers and our passionate audiences," a Viacom representative told

AdWeek

at the time.

Last week, however, Viacom decided it was done negotiating with Google and was better off holding onto its own content. The company ordered Google to take down the more than 100,000 Viacom-owned clips that Google was hosting, and rumors began to bubble up that the major media companies may seek to develop their own answer to YouTube.

Viacom's perception that it can do better than YouTube -- and subsequently telling the company to take down arguably its biggest attraction -- could actually help make it so. The growth of YouTube's audience will likely slow as a result, making it a less valuable partner.

Google's flailing attempts to enter entrenched media markets were further underscored on Monday when

The Wall Street Journal

reported a management shake-up at dMarc Broadcasting, the radio ad technology company Google acquired last year -- and the centerpiece of its strategy to transform the $20-billion-a-year radio ad business.

Google's attempt to automate an industry that has long been dominated by personal relationships (and where limited information about prices has led to high margins) has only scratched the surface. The company has been given mostly the scraps of radio time that stations couldn't sell anywhere else. Here again, the perception of failure could very easily become a self-fulfilling prophecy.

Google's newspaper partners, which also have only offloaded their scraps to begin with, will be watching closely.

To top it all off, there's now cause for righteous indignation among the big media companies. On Monday, it was revealed that the likes of

Sony

(SNE) - Get Report

,

Time Warner

(TWX)

and

Walt Disney

(DIS) - Get Report

, among others, are charging that Google ad sales representatives assisted certain sites that were pirating the company's movies to garner more Web traffic by suggesting more effective keywords to bid on. The words included "bootleg movie download," "pirated," and "download harry potter movie," according to

The Wall Street Journal

.

Coming off a week like this, confident old-media incumbents will not only be less inclined to strike a deal with Google in the future, they will also be in less of a mood to do so.