Wednesday, October 14, 2009

Listen up!

Mel Karmazin (C.E.O. Viacom) meets with Google (Larry Page, Sergey Brin, Eric Schmidt)...

Google offers each advertiser a free online tool to assess overall effectiveness of an ad by tracking, hour by hour, the number of clicks and sales, the traffic produced by the key words chosen, and the conversion rate from click to sale. "Our business is highly measurable" Schmidt said " We know that if you spend x dollars on ads you'll get y dollars in revenues per industry, per customer."

Most America media - television, radio, newspapers, magazines - depend for their existence on a long-entrenched advertising model. That model, at which Karmazin excelled, depended on salesmanship, emotion and mystery. "You buy a commercial on the Super Bowl, you're going to pay two and a half million dollars for the spot," Karmazin told the Google team. "I have no idea if it's going to work. You pay your money, you take your chances." To turn this lucrative system over to a mechanized auction posed a serious threat.

"I want a salesperson in the process, taking that buyer out for drinks, getting an order he shouldn't have gotten." He added, "You don't want people to know what works. When you know what works or not, you tend to charge less money than when you have this aura and you're selling this mystique."

The Google executives thought Karmazin's method manipulated emotions and cheated advertisers. Just as egregious, it wasn't measurable and was therefore inefficient. They were convinced that they could engineer a better system.

By then, Karmazin knew there was probably little that Viacom and Google could do for each other. " I was selling twenty-five billion dollars' worth of advertising," he recalled. "Did I want someone to know what worked and what didn't?" Karmazin looked at his Google hosts and proclaimed, only half in jest, " You're fucking with the magic! "

Thanks, John, for the tip! Extract from article by Ken Auletta in the Oct 12 edition of the New Yorker "Searching for Trouble - why Google is on it's guard."

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