Potential ad deal between Google and CBSJanuary 12, 2007 According to some news reports, there could be a potential advertising deal brewing between Google and CBS. The deal could be wide-ranging for both companies. In an initial brief issued by broadcast analyst Jessica R. Cohen and her equities research team, Merrill Lynch suggests a Google/CBS deal would include both advertising and content components. "Although no concrete deal was announced so far, we believe that the two companies are still negotiating the specific terms of an advertising agreement," wrote Cohen, referring to CBS chief Leslie Moonves' keynote address on Jan. 9 at the CES (Consumer Electronics Show) in Vegas.  "Some of the stumbling blocks could revolve around who will have control of the advertising sales, and the overall size of a revenue guarantee that Google would pay to CBS for being able to monetize its TV content through YouTube and other Google properties", Cohen added. As for the details of the advertising sales arrangement, Merrill Lynch speculated that it would basically involve CBS' radio inventory and would not likely include any network or local television station time. For its part, Google has stepped up efforts recently to expand its presence in offline ad channels, especially radio and print media. Last year, Google acquired radio ad sales company dMarc and has conducted a number of tests to extend the reach of its online search advertisers into both radio and print. Google is also expected to tackle TV advertising sales soon. "We would expect a deal to include some low-quality radio inventory for use with Google's dMarc service, but do not believe a deal for CBS' TV network or station advertising time is likely," Cohen speculated, adding that the deal would be "incrementally positive" for CBS but that it would not fundamentally change CBS' business in anyway.  Furthermore, Cohen estimated that a Google deal to sell 10 percent of CBS Radio's advertising inventory would generate approximately $200 million in revenues and that the upside for CBS would be two-fold:
Such an advertising deal would not be without consequences for Madison Avenue, which has been expressing many concerns over the growing presence of its "friend-enemy" (Google) into offline media sales. Cohen added "this could involve disintermediation of traditional advertising buyers over time." A Google/CBS ad agreement would likely intensify Madison Avenue's worries towards Google.  It would also come as a group of major advertisers is poised to conduct a test early in 2007 of an online media buying exchange using eBay's website. Such an advertising test, which initially was championed by former controversial marketing diva Julie Roehm, has caused confusion among both buyers and sellers of media, who fear it could create an auction-like model driving down the value of advertising. "The biggest risk, in our view, from a potential Google deal is commoditization of advertising time and related pricing pressure," cautioned Cohen. "Given the proliferation of advertising-supported media, we are not particularly concerned by incremental commoditization of advertising inventory. Overall, advertisers already have a significant amount of alternatives for their advertising dollars." Source: Media Post 
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