may have gotten its MTV, but investors don't seem too excited.
The largest search engine and MTV parent
are planning to test video advertisements. Starting next month, Internet publishers will be able use clips of shows such as "SpongeBob SquarePants" with commercials embedded in them on their Web sites and blogs. Google also will sell downloadable episodes of MTV programs to expand the cable network's reach on the Web and give Google an additional source of advertising revenue.
Shares of Viacom, down 15% for the year, fell 12 cents to $34.25, while Google was up $3.93 to $377.78.
"If this same announcement was made a year ago, the shares would have been up meaningfully," says Ben Schachter, an analyst with UBS, who rates Google shares neutral, in an interview.
Scott Kessler, an analyst with Standard & Poor's, who raised his rating on Google to buy from hold, adds: "I can't remember when this type of news was greeted with such a resounding yawn."
Investors may not be keen on the partnership since it isn't exclusive. Viacom already has a similar arrangement with
AOL and is interested in pursuing others, says Michael Wolf, MTV Networks chief operating officer.
Still, MTV believes that Google will help it expand its audience more efficiently than it could have done otherwise, he says, adding that many details are still being worked out, including whether the ads will be at the beginning or the end of the clips.
The companies plan to rotate the clips to encourage repeat viewing. Rafat Ali, of the
PaidContent.Org site, argues that this will make it difficult for publishers to generate buzz for their sites because users won't be able to share videos with their friends.
Allowing people to comment on videos is one of the reasons why
YouTube has surged in popularity, he says.
The New York Times
reports that YouTube, the No. 1 video site, plans to test advertising in a few months.
Establishing a foothold in Web video advertising is a priority for Mountain View, Calif.-based Google, which is shooting to gain a bigger share of the advertising market. Video ads are priced at a premium to text-based banners, since they keep users on Web sites longer than they would remain otherwise.
"Google is one of the few companies that bring together the advertising aspects along with the technology capabilities," Kessler says.
Google is under pressure from Wall Street to diversify its revenue outside of search advertising, which is showing signs of maturing. So far, efforts such as Google Finance, its business news portal, haven't excited much interest in users. Shares are down 9% this year after more than doubling in 2004 and 2005.