Did NBC Open Pandora's TV Box? - The Charlie Warner Report

A reader of my blog and a former student asked me "…what do you think of the Google TV model? (Dish Network beta and now NBC Cable properties)?" Here's what I wrote:

I think Google will sell some inventory. Some questions are: Do the advertisers who buy via Google have effective enough commercials to get results? Will the cable inventory that NBC gives Google to sell have audiences big enough to get advertisers results? Will the smaller advertisers who buy via Google's auctions stick with it long enough to get results? Will large advertisers and/or their agencies buy via Google's auction instead of buying from salespeople in the hopes of saving money?

The potential for Google's auction model is to disintermediate salespeople, regardless of what NBC might say to reassure its sales force.

Google has its foot in the network TV door, or, probably, a better metaphor is that Pandora's TV box has been opened. NBC TV executives will reassure its sales force that this decision will in no way effect their jobs and that there is no way that they will ever give valuable prime time MSNBC or NBC TV Network inventory to Google to sell.

But the situation reminds me of the time when a younger, thinner Bill Gates (not Seinfeld's current TV buddy) offered to buy Encyclopedia Britannica so he could digitize the information and sell it on a CD. The CEO of EB was horrified and said "no" emphatically because it would decimate EB's "most valuable asset" – its 25,000 world-wide sales force. The dummy thought EB's most valuable assets were the door-to-door salespeople who manipulated parents into buying a bookshelf full of information printed on dead-tree paper and not the intellectual content on the paper.

So Gates, said, "OK," bought World Book, created Encarta on CD, and put EB out of business and its 25,000 salespeople out of work. The Web then put Encarta out of business, and now Google is trying to put Microsoft out of business, and, thus, the Gates-Seinfeld commercial.

The Internet was a disruptive technology that no one could have predicted beforehand, and that no one at the time it was created could have predicted what consequences it would subsequently have. Did Tim Berners-Lee think when he conceived the Internet that it would eventually put newspapers out of business? Of course not. When Brin and Page created Google, it was a disruptive technology that no one could have predicted, and at the time it was created could have predicted that it would become the biggest advertising medium in the world.

The Internet and Google are black swans, which according to Nassim Nicholas Taleb in his extraordinary book, The Black Swan: The Impact of the Highly Improbable, are highly improbable events that are impossible to predict but have huge consequences.

Selling TV by means of Google's online auction model is a black swan. No one can predict what eventual effect it will have on the sale of broadcast and cable TV network, national spot television, and local television inventory. My sense is that if advertising agencies and advertisers find they can buy TV inventory faster and cheaper without engaging in the time-consuming buying, selling, and negotiating process, they will force the salespersonless auction model on sellers.

But we'll see, now that NBC has opened Pandora's TV box and let Google in.