The week in review

originally posted last friday on www.totalcontentandmedia.com....

It’s a testament to the current market dominance of Google that every day seems to bring a new story about the company. This week the news flow included items on Google ads in video games, on billboards and music videos; Google partnering with the BBC; Google accidentally releasing user data; and Google on top in searches, again (it will report its figures on the 31st so next week is bound to contain more stories).

But more interesting, I thought, was the news coming out about its competitor-in-chief, Yahoo.

After a burst of dealmaking at CES earlier this month, things have taken a dimmer turn. The week didn’t start off too well, when on Monday a story emerged that Didier Lombard, the CEO of France Telecom, said that the operator was considering ending its Yahoo contract and potentially trying to develop services themselves. France Tel is one of Yahoo’s biggest customers in Europe and uses Yahoo advertising products on its Web portals. Even if we don't know the actual terms of their agreement, it's high profile enough to be a problem for Yahoo, which is trying to win lots of new customers in the telco space.

Things didn’t get any better when Yahoo reported that net profit was down 61% on 2005—largely because of one-off investment gains last year—and revenue rose a mere 13%, to $1.7bn from $1.07bn in the fourth quarter last year. To compare, online business competitor Ebay reported net income growth of 24% on the back of similar revenues of $1.72bn. To further Yahoo’s regional woe in Europe, the MD for the area said growth in the UK market, one of its biggest worldwide, is likely to stagnate. Suddenly that exclamation mark they use starts to look especially out of place, doesn’t it? Yahoo!

Yahoo tried to make up for any further grumblings, about its new ad system or anything else, by announcing that it would actually be coming on line earlier than originally promised.

The silver lining to all this seems to be that Yahoo’s joint venture in Japan with Softbank is still coming up strong, reporting a 20% rise in profits over the same period last year. There, a big appetite for online shopping seems to be offsetting stagnating growth in search advertising.

Japan made some other notable appearances this week. The European Commission released its latest report on the digital economy. Online revenues in the region will grow to E8.3 billion by 2010, it forecast, but Europe will still lag behind the US and Japan, where people have proven to be tech crazy. Plus, the connectivity that people are getting both for at-home Internet and on-the-go wireless massively outpaces developments in Europe.

As a juggernaut, however, nothing can compare to China. This week, the country’s ministry of information industry said that Internet users grew 23% to 137 million. In a country with a population of more than 1.3 billion, the potential is still largely untapped.

Back in Japan again to note that Nintendo, the games company, has reported that it’s reached its full-year profit targets in nine months, underscoring how aiming modestly can sometimes pull off magnificent results, particularly compared to its rivals in the games area, Sony and Microsoft. While the Wii was largely written about as a simpler, cheaper new games console compared to its competitors, Nintendo clearly wants to bring its own stamp onto the idea of convergence, launching a news service that can be accessed through an graphic map, a Wii player, a broadband connection and an Opera browser.

On the subject of Nintendo's game's competitors, Microsoft had some bad news this week: a drop of operating profit (tho still profitable!). In the area of new products, AT&T pointed its finger at the software behemoth for ongoing glitches in its IPTV services.

Endemol sell-off buzz continued to be pushed out this week, with rumours that Disney is interested in bidding for the company in the same consortium that includes the company’s founder John de Mol. Such a buy would secure Disney a major producer of reality TV and game shows, which have so captivated audiences around the world (and cost relatively little to put together, and definitely less per episode than an instalment of Lost).

No one has brought up whether Disney would come up against any shareholder problems stemming from how some of the Endemol shows’ content might conflict with its corporate image of offering family entertainment.

News Corp. is another big media player rumoured to be interested in taking a stake of Endemol, but the company has denied interest. One other M&A play the company hasn’t ruled out, though, is throwing its hat into the ring for the Tribune Group in the United States. According to reports, News Corp. would buy almost only for the purpose of consolidating operations between Newsday and the New York Post, two Big Apple dailies that are not keeping analysts happy with their numbers. I wonder if they might also be a little interested in some of their television stations and maybe a sports team or two?

Indeed, the connection between how sport can be used to drive media domination is one that Murdoch has played to perfection in other markets, namely the UK and Asia. Now in the latter market, sport is being used again to try to grow a business—this time around it’s HDTV. It looks like it will be a challenging game, though: so many people get their content through free pirated signals that some think it will be hard to get companies to ramp up investment in costly HD services that have little chance of being sold.