On Google Finance and financing by Google

Jason Calacanis definitely gets it:

Google, of course, has taken a hard line from inception that they are not in competition with their content providers who run Google Adsense. However, Google Finance will certainly give pause to finance partners who run Adsense. Those partners have to now ask themselves "by running adsense are we supporting our competitor?"

If you're a decision maker at a media company with online presence, you better listen to Jason... this comes from the guy who built a ~$30M (estimated) media company by relying mostly on AdSense for revenue.

This reminded me of a short story on the topic. For the sake of simplicity, lets abbreviate the names of the companies involved to (btw - why are the letters A, B or X, Y always used?....) - companies F and G.

Baseline: F Company (or - "FC") is an online media company that has a loyal readership and has its own ad sales force. It has long standing relationships with many of the prominent advertisers in its space.

Year 1: FC decides to replace a bunch of its ads with ads provided by G Company (or - "G"). In parallel, it downsizes its in-house ad sales force and forgoes many of the advertiser relationships it had maintained in previous years. Year 1 turns out to be great - ad revenues are roughly the same as before, but costs are down due to the reduced sales force.

Year 2: The monthly check from G keeps coming, and FC decides to outsource its whole ad sales to G, while relieving its entire ad sales team. G now has direct ad relationships with most of the advertisers that used to advertise directly with FC in the past. Revenues are decent, even if somewhat stagnant.

Year 3: G rolls out a new channel with content scrapped from FC as well other sources on the web, making it superior to the content that FC provides. Users love it and flock to G's content.

Status of both companies at the end of year 3:

G - Has great content, a loyal and growing readership and a wealth of advertiser relationships.

FC - Has content, but readership is declining. It has no advertiser relationships at this point, and relies on one of its biggest competitors for revenues.

Is your company one press release away from leaving you obsolete and with no direct advertiser relationships?

Full disclosure: As co-founder of Quigo I will benefit if you make the wise decision and switch over to AdSonar after reading this blog...