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12/28/2006
  Cuban understands Google
Mark Cuban is a great read if you want to understand advertising. He's in the Sports, HDTV & Internet business, and must live & breathe advertising. Fundamentally, he's a content creator, owner, distributor, etc. He spends a huge amount of time doing things to attract advertisers.

Here's an excerpt from a recent post that shows that he understands Google's grand strategy as well as anyone:

[Google's] actions in the user generated video space defines that I think will come to be their approach to capturing content markets. Pay a lot of money in a land grab for the best properties you can find and aggregate them in a manner that can pre-empt or displace the existing competition, and then give the content you just paid a boatload to license away for free, hoping to make your money back along with a return by selling advertising around it.

Simple:

In an earlier post about Google, Cuban summarizes why Google can afford to do this. In fact, he calls it arbitrage:

I think their ability to excel at monetization dramatically above and beyond their competition has put them in a unique position to arbitrage the financial expectations they have for a page view vs the expectations of everyone else on the net. Myspace, AOL and many others are on a list of partnerships that appear to be made on a simple principle of "We can pay you more for your traffic than you can earn for yourself".

Or as Cuban summarizes:

Get big, subsidize and monetize.

Google alone can leverage the 60%+ search share to send people to their content.

Furthermore - and this is key - Search is the most intentional behaviour on the internet. That's why they can afford to pay more for the content than others. Advertisers are happier getting leads from search activity than anywhere else. ( That's also why they invest so much in infrastructure.)

 


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