Big Media’s love affair with the Internet ebbs and flows with the markets. When they see money pouring into Web startups, they feel threatened and rush to do the same. They ramp up their digital divisions, which usually are no more than venture arms, and hope to strike it rich. When the markets are down, as they are now, their attention drifts elsewhere—exactly at the time when they can pick up innovation on the cheap.

“M&A is gone,” the digital media chief at one of the largest media companies tells me. Other than a few targeted acquisitions to fill out business or technology holes, “you look foolish making any purchases,” he says, “especially if prices are still going down.”

And those prices are way down. Consider, for example, that CBS’s entire market capitalization is now only $2.5 billion, which is not much more than the $2.1 billion its digital division CBS Interactive paid in cash over the past two years for Cnet ($1.8 billion) and Last.fm ($280 million). (It also made a number of other smaller acquisitions and investments). As of December 31, 2008, CBS only had $419 million in cash on its balance sheet.

When it bought Cnet last May, CBS’s market cap was $16.5 billion. If CBS had instead paid in stock for CNET, that stock would be worth only $273 million today—less than what CBS paid for Last.fm two years ago.

But the media company that went on the biggest buying spree was News Corp. Its digital division, Fox Interactive Media, was lucky enough to pick up MySpace, which paid for the rest of its acquisitions. Now that FIM doesn’t seem to be buying much anymore, it is not clear why it exists. Most of its properties could be integrated into other News Corp divisions or sold off. It does have some ad targeting technology and a budding ad network which is seeing some success, but that could be a stand-alone business or combined with MySpace.

And that is kind of the whole point. It is not clear why media companies even need separate digital divisions anymore. Even the digital media chief I spoke with thinks that “it is silly to have a separate division.” Disney, Viacom, NBC, and News Corp. each have digital revenues that are close to or are approaching $1 billion. But that revenue is typically spread across many different businesses. And, as big as it is, the digital side of the media business is still overshadowed by the many billions of dollars more brought in by the traditional side of the business—TV, movies, radio, even print.

The executives leading those businesses have too many other fundamental problems to deal with to worry too much about having a Facebook strategy or how to market their movies through Twitter. The last time the big media companies pulled back from the Web, it was because the Internet sector led the downturn. And every Web-related business became toxic. Now, it is more that the general economic crash is hurting overall revenues across the entire media landscape.

Media executives are going into self-preservation mode. They know that all media businesses are going digital, eventually. But right now, they are more concerned with sheltering their core business than with pushing forward a digital business that will leech attention and profits from the core business.

So the digital divisions have to transition from M&A mode to business-building mode. But without money or attention, the most talented executives in those divisions may not stick around for long. Mika Salmi, who sold Atom Entertainment to Viacom and then became the president of Global Digital Media at MTV Network, is already headed out the door. NBC lost its digital chief last November. And digital media executives with M&A backgrounds like Quincy Smith at CBS don’t have a lot of money to spend these days.

That leaves building the digital part of the media business to the old-school executives in charge of the other businesses. How many of them get it?

(Photo by atomicjeep).

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

MTV Networks has acquired the remaining portion of Social Project that it did not already own. Terms were not disclosed. Previously, MTV Networks was a minority investor in Social Project, which is behind the Flux social-networking platform powering many of its sites, including MTV.com, TheDailyShow.com, and ColbertNation.com. Social Project, which competes with Ning and KickApps, had previously raised $47.5 million, mostly from MTV’s parent company Viacom.

Social Project started life as Tagworld, before partnering with Viacom to add social media features to its sites. Last November, Flux was launched as a joint venture to let people create their own niche social networks and tap into Viacom’s vast library of video content. Since then, Flux has added about 2 million members, bringing the total to 7.6 million across about 1,000 different sites. The biggest one is MTV.com, with 600,000 registered members. Of those, 250,000 40,000 signed up on one day alone, the day of the MTV Video Music Awards on September 7. (You have to be registered to leave a rating or comment.). And, according to MTV Networks, engagement levels across all of MTV.com (as measured by time spent on the site and pageviews) are up 20 percent, and up 140 percent among Flux members.

Compared to other social networking platforms, Flux still powers a relatively small number of sites. For instance, there are 475,000 individual Ning social networks, compared to 1,000 for Flux. But the number of people each one reaches may not be so far apart. Although Ning does not break out its total number of registered members, comScore measures 6.9 million monthly unique visitors worldwide. That is not an apples-to-apples comparison to Flux’s 7.6 million registered users. Monthly visitors and registered users are two different things and, unfortunately, comScore does not do a good job measuring Flux. (For a point-by-point comparison of Flux and Ning, see Last year, Ning CEO Gina Bianchini analysis that we published last year on TechCrunch).

Flux, for its part, is trying to position itself more as a platform for sharing social media in than a social network per se. For instance, if I am a Flux member on MTV.com and then I join your Flux social network, I can automatically bring my entire collection of videos and other content that I’ve already organized on MTV.com with me. I’m not sure how much people will want to organize their social lives around Viacom content, but this acquisition does give the media company a way to add social networking features to all of its sites without relying on a someone else’s technology, whether that be Ning, Facebook, or MySpace.

Crunch Network: CrunchBase the free database of technology companies, people, and investors

It is not enough to be a destination site anymore. Everyone now wants to become an ad network. MTV Networks on Monday announced that it has expanded its vertical ad network strategy by building ad networks around the service’s core properties.

Each vertical ad network will be called a “Tribe.” Much like In contrast to what LinkedIn is trying to do with its new ad network (reselling access to its audience no matter where they may roam on the Web), MTV.com is basically reselling access to its advertisers audience. It is striking deals with other sites that share a similar audience (i.e., speak to the same Tribe) and offering its existing advertisers inventory on those hand-selected sites.

Each Tribe is made up of the partner sites and the people who visit them.  In this case, the “MTV Generation Tribe” is supposedly made up of sites targeting that hard-to-reach youth demographic that is interested in music, movies, videogames, sports, and sneakers. According to MTV Networks, each of its online properties has users that are staggeringly similar and can form the basis of an advertising Tribe. (Yeah, we thought tribes were made up of people, but MTV thinks that Websites can be grouped into tribes as well. Who knew?)

Once the Tribe is formed, MTV will sell advertising inventory and packages using demo-targeting, geo-targeting, day-parting and contextual targeting that it believes will capture the right audience for the right advertiser.

The MTV Tribe ad-network, which is anchored by MTV.com, launched today with Pepsi as its hallmark sponsor. CMT, Spike, and VH1 Tribes will be launching later this month and the Comedy Central Tribe will launch during the first quarter of 2009.

MTV Networks’ decision to categorize each service into Tribes is following a trend across the Web. In essence, companies are taking a destination site’s targeted audience and repackaging it into an ad network in the hopes that it will garner more revenue for all parties.  The strategy assumes that advertisers will want to spend money targeting that specific audience based on their shared interests.

This will only work for destination sites that attract enough unique visitors that have enough overlap with other Websites to make them want to sign up as advertising partners.  (MTV had 9.4 million U.S. visitors in August, according to comScore).  That is why both MTV Networks and LinkedIn are only signing up partners on a case-by-case basis.

Does every niche destination site need to become its own ad network, though?  Ultimately, it would make more sense for an existing ad network to offer a way to target all of these different communities of interest.  But then the ROI on the ads would have to more than make up for the fact that the money would be split at least three ways. (In MTV’s case, since it has its own ad sales force, the money is only split two ways).

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

Silicon Alley Insider is reporting that Comcast has bought newsletter service DailyCandy for an unconfirmed $125 million. The site caters to women interested in fashion, food, travel and other cosmopolitan topics.

Comcast apparently beat out Viacom with its willingness to pay $5 million more than Viacom’s offer of $120 million. Bob Pittman of Pilot Group Ventures, the holding company of DailyCandy, says the service was expected to hit $25 million in revenue this year with an EBITDA of over $10 million.

DailyCandy is understood to have been on the block for years, with speculation from just last month that it would sell for $75 million.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

After an online uprising against the order, Viacom tried to assert that they never requested personally identifiable information (they did), and later promised not to use the information to sue individuals. The value of that promise was questioned by us and many others.

The new order, filed this evening, states that Google will substitue user id’s and IP addresses for anonymous but unique identifiers. The full order is below, but the key language is:

When producing data from the Logging Database pursuant to the Order, Defendants shall substitute values while preserving uniqueness for entries in the following fields: User ID, IP Address and Visitor ID. The parties shall agree as promptly as feasible on a specific protocol to govern this substitution whereby each unique value contained in these fields shall be assigned a correlative unique substituted value, and preexisting interdependencies shall be retained in the version of the data produced. Defendants shall promptly (no later than 7 business days after execution of this Stipulation) provide a proposed protocol for this substitution. Defendants agree to reasonably consult with Plaintiffs’ consultant if necessary to reach agreement on the protocol.

Without IP addresses and user names it will be significantly more difficult for Viacom to determine which individuals may have viewed any particular video. I for one have no further objections to this data being handed over from a privacy standpoint, although I still urge Viacom to stop the endless litigation and consider more innovative business models around their content.

google viacom youtube agreement – Get more Legal Forms

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

We and others cried out in protest, since the data being delivered included username, IP address and identifiers of all videos viewed on YouTube. And the entity it was being delivered to has a penchant for litigating over copyright infringement (some of their many lawsuits are mentioned in the original post). The fear is that if data is turned over to Viacom, any YouTube user who has watched a copyrighted video would be subject to a lawsuit.

Viacom’s first line of defense when the negative press hit was obfuscation. They said “Viacom has not asked for and will not be obtaining any personally identifiable information of any YouTube user. The personally identifiable information that YouTube collects from its users will be stripped from the data before it is transferred to Viacom.”

Sounds good, right? The LA Times mentioned it in their article on the issue and quoted Viacom. A number of other publications then followed, saying that Viacom wasn’t going to collect all the data they were entitled to under the order.

But not really. Everyone involved in the lawsuit (except the users, who weren’t asked) agreed that a YouTube login ID isn’t personally identifiable. The original Stanton order summarized: “Defendants do not refute that the “login ID is an anonymous pseudonym that users create for themselves when they sign up with YouTube” which without more “cannot identify specific individuals”.”

So Viacom didn’t abandon any of their data rights, but they sure went out of their way to suggest they did. And anyone who watched the 2006 AOL search debacle will know that users were absolutely identified based on nothing more than a list of the search terms they entered. Does anyone really believe that a motivated plaintiff couldn’t identify individuals based on a user selected ID (mine is “TechCrunch”), IP address and a list of all watched videos?

Now Viacom is talking again, and saying that they won’t use the information to go after individuals.

Here’s the problem – I don’t know if Viacom will live up to their promise, or not. The fact that Google is unwilling to hand over employee data tells me they’re not so sure, either. And frankly I shouldn’t have to care or have to worry about Viacom’s trustworthiness. As a user I interacted only with Google, and there are implicit and explicit promised by Google to protect my data. If Google hands my data over to Viacom, it doesn’t really matter to me if Viacom uses it or not. All I will remember is that Google gathered and stored information without my consent, and then handed it over at the first sign of trouble.

Google’s self imposed code of conduct is “Don’t be evil.” It doesn’t say “don’t be evil unless there’s important litigation at stake.” Google’s reputation is on the line, and how they respond will show their true character. They’ve shown they’ll go to bat for employees, now it’s time for them to show they’ll go to bat for their users.

Crunch Network: CrunchBase the free database of technology companies, people, and investors

But if it can’t, perhaps it should comply with it in a creative way. The data in question are data logs containing the records of every video watched on YouTube, by whom, and at what times. The court is also ordering that Google hand over all videos that have ever been taken down for any reason. The logs alone take up 12 terabytes. Google should print them out and deliver them on paper.

It would literally fill up the Library of Congress. That is roughly the equivalent of all the printed books in the Library of Congress (by one estimate, others put it at 20 terabytes—either way, it’s a lot of paper). The court order never states what form, the data must be delivered in.

(Photo via, appropriately enough, the Library of Congress And hat tip to reader Paul Christiansen for the original suggestion).

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

Louis L. Stanton, the senior judge on the United States District Court for the Southern District of New York, issued the opinion and order, which is here (PDF).

That data includes every YouTube username, the associated IP address and the videos that user has watched on YouTube. Google will also be required to hand over copies of every video removed from Youtube for any reason (DMCA notices or user-initiated deletions). Stanton dismissed Google’s argument that the order will violate user privacy, saying such privacy concerns are merely “speculative.”

Meanwhile, the judge denied Viacom’s request that Google turn over YouTube’s source code as it could “cause catastrophic competitive harm to Google by sharing them with others who might create their own programs without making the same investment.”

I can understand why Judge Stanton, who graduated from law school in 1955, may be completely and utterly clueless when it comes to online video services. But perhaps one of his bright young clerks or interns could have told him that (1) handing over user names and a list of videos they’ve watched to a highly litigious copyright holder is extremely likely to result in lawsuits against those users that have watched copyrighted content on YouTube, and (2) YouTube’s source code is about as valuable as the hard drive it would be delivered on, since the core Flash technology is owned by Adobe and there are countless YouTube clones out there, most of which offer higher quality video.

YouTube’s core value is in it’s network effect – the library of content along with its massive user base.

The privacy fallout of this ruling is spectacular. The EFF has already chimed in, noting that the order is highly likely to be in violation of federal law.

Judge Stanton doesn’t seem to care much about that law, for now. And he clearly doesn’t understand that far more data is being transferred than is necessary to comply with Viacom’s core stated concern, which is to understand the popularity of copyright infringing v. non-infringing material. Viacom has asked for far more data than that, and there’s only one use for that data: to sue individual users (or shake them down via the threat of lawsuit, which has been perfected by the RIAA) who have watched a few music videos or television shows on YouTube.

I say this with the utmost respect, but Judge Stanton is a moron. And Google simply cannot hand this data over without facing a class action lawsuit of staggering proportions.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

When it comes to market share gains in advertising dollars, Google outstripped every other media company in 2007, whether you look at the Web, TV, print, or radio. Earlier this morning, Henry Blodget compared the advertising revenues of 17 major media businesses (including News Corp, Time Warner Cable, Viacom, Google, Yahoo, Microsoft, AOL,, the New York Times, and CBS Radio). He left out Disney for some reason, but otherwise it’s a pretty good set of data (see the spreadsheet here). According to his calculations, total online ad revenues across these 17 companies grew 9% last year, online revenues grew 28% (versus 3% for offline ad revenues), and Google’s online ad revenues grew 44% (versus 15% for the combined online ad revenues of Yahoo, Microsoft, and AOL).

But let’s take a deeper dive into these numbers. Google added $2.6 billion in advertising revenues last year. Next in line and far behind was News Corp., which grew its ad revenues by $915 million. To better visualize how much Google is creaming every other media company, I put together the charts above and below (click on them to see a larger version). And here’s a table with each company’s ad-revenue gains (or declines), in descending order:

Now, what about absolute market share? Google does pretty well there too, with 14.9% of the total $58 billion represented by all 17 businesses. That is up from an 11.3% market share in 2006, and makes Google No. 2 behind News Corp’s 16.5% market share. (No.3, actually, behind Time Warner, but Blodget separated Time Warner Cable, Time Inc., and AOL, which combined would have a 15.2% market share).

Looking at the absolute numbers in the pie chart and table below really helps you put these businesses in perspective. For instance, check out Yahoo in the No. 4 spot, with $4.7 billion in ad revenues last year. It is right behind newspaper company Gannett, which is still a cash cow, but saw its advertising dollars decline by $338 million last year. Yahoo, in contrast gained $361 million in ad revenues. That’s still a fraction of Google’s growth, but looking at the absolute numbers let’s you see why Microsoft wants to buy it. A combined Yahoo-Microsoft would be No. 3 on this list.

And here are the underlying numbers:

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

Viacom obviously wants to strengthen the hand of other video Websites against Youtube by spreading its videos everywhere except on YouTube. Viacom has a $1 billion lawsuit against YouTube for copyright infringement and yanked its videos from the site last year. As Comedy Central’s own Jon Stewart said last night regarding his parent company’s lawsuit against YouTube, “A billion dollars? What are they four-year olds?”

I’ve embedded the clip below (which is mostly about the Hollywood writer’s strike) from The Daily Show’s Website. The comment is about four minutes in:

Crunch Network: CrunchBase the free database of technology companies, people, and investors

Third party ad serving markets are highly competitive. [No argument there].

Privacy not a part of the merger review. [You lucked out, boys].

Data combination wouldn’t pose problems. [That means Google won't be hobbled by any separate-but-equal clauses keeping Google and DoubleClick data apart, which would have probably squirreled the deal].

Advertisers and publishers aren’t concerned. [Well, at least not enough to complain publicly about it to the FTC].

Now that the U.S. is cleared, Google still has its toughest hurdle ahead. The European Commission won’t bow out so easily. It could very well delay a decision until April. (Those Old World regulators like to take things at an Old World pace). In the meantime, Microsoft will keep trying to steal away more business from DoubleClick, as it did yesterday with its Viacom deal. Oh, and it will be spending a lot of time lobbying its good friends at the EC as well. The longer the delay, the more Microsoft can use that time to try to catch up. But come April, DoubleGoog will start to punch back.

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

Here is the short version of today’s deal. (Bear with me). Microsoft’s Atlas business (part of recently purchased aQuantive) will serve display ads across Viacom’s U.S. sites, which include MTV.com and ComedyCentral.com, and get an exclusive right to sell remnant inventory as well. The value of the deal is $500 million to Microsoft, but it is hard to tell exactly where that comes from because there was a lot of bartering going on. For instance, as part of the deal, Microsoft agreed to purchase TV ads on Viacom’s cable networks like MTV, Comedy Central, and BET, as well as some of those online ads that it will be serving. Microsoft will also license video from Viacom TV shows and movies on MSN. (Round and round is the name of the game . . . ). So the $500 million is most likely the net amount after the value of all of these sub-deals were calculated.

Media companies love doing complicated deals. They used to call it synergy, but they usually turn to be sub-optimal. Rather than striking the best online advertising deal, the best TV advertising deal, or the best content licensing deal on a standalone basis, everything gets cobbled together in a take-it-or-leave it proposition. Inevitably, some of the underlying business units from both sides end up getting screwed. But by that time the corporate biz dev guys are onto their next deal.

In other Viacom news, MTV Networks signed up Hollywood producer Jerry Bruckheimer to make video games. I think we all know how that’s going to turn out. Hollywood has been trying to get into the videogame business for years by bringing star power to the medium. The results have been largely uninspiring. What most Hollywood types tend to ignore is that in videogames, the stars are the players themselves.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

I don’t think we are quite there. Google can do things very quickly when they want to. I guess they haven’t wanted to up to this point., Maybe they will join the consensus that they need to be a part of, either voluntarily or involuntarily.What no one wants is a proprietary system that benefits one company. What we need is to work together to benefit the consumer.

If the media companies (and Microsoft) actually have a competing copyright protection system to offer up rather than some vague guidelines, they should do so. An industry standard that works across all media and technology companies is preferable in theory to one imposed on everyone else by a single company. But someone needs to create that system. (A startup called Attributor thinks it has the answer. Maybe the media companies should take a look at it).

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

Although it would be easy to mock Comedy Central’s I can’t believe 2004 called launch of free Daily Show clips, the offering is slightly better than it first appears; the site includes 13,000 clips representing every minute of the show since it launched in 1999, according to the LA Times.

Comedy Central content has long been a favorite illegal upload on YouTube, and BitTorrent provides ample downloads of most of Stewart’s back catalog.

Previous Stewart understudy and South Carolina Presidential Candidate Stephen Colbert has long had his own website at Colbertnation.com, and offers a program that is preferred by some. Its later time slot never seems to prevent high peer and seed ratios on BitTorrent.

Comedy Central’s parent company Viacom sued Google for copyright infringement on YouTube in March.

Crunch Network: CrunchBase the free database of technology companies, people, and investors

Google is noted as not being a member of the grouping, but in discussions to join.

The group will address copyright-related issues including video piracy, with a focus on using technology to eliminate copyright-infringing content and blocking any infringing material before it is publicly accessible.

Google launched anti-piracy technology on YouTube Monday.Viacom sued Google over YouTube content in March.

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

We earlier predicted that there was no way Google would agree to a settlement with Viacom that involved any damages, and assumed that they would work to sign a licensing deal instead and convince Viacom to simply settle the lawsuit. Viacom later signaled that they weren’t much interested in a deal when they agreed to provide content to Joost and then did a search advertising deal with Yahoo instead of Google.

I have visions of bloggers fighting to get a good seat at the trial, and live blogging the entire thing. The fate of YouTube’s buisness model, as well as many other web startups, will likely be linked to the outcome of this litigation.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

Today Viacom snubs Google again, choosing to work with Yahoo on search advertising. There are few details of the deal, but it doesn’t appear that Yahoo is making any revenue guarantees, which are becoming standard in large search advertising deals. Google gave Fox certain guarantees in a $900 million deal announced last year, and Microsoft almost certainly guaranteed revenue to Facebook in order to get access to their search traffic.

In this case at least, YouTube appears to be a liability to Google, and Yahoo gets the benefit of being the next strongest player.

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

Though near consensus opinion credits copyrighted content as the foundation of YouTube’s success, the competition may be less direct today than some might think.  Original and user generated content now plays a very important roll in making YouTube thrive.  OK Go, Lonelygirl15 and countless other YouTube-born stars have taken on a life of their own.

Viacom pulled out of an effort by major broadcast stations to build a YouTube rival in December, effectively bringing that effort to a halt.  While moving back into safer territory online (if the unlaunched Joost can be called safer) can’t be the company’s ideal solution.  Viacom CEO Philippe Dauman told the WSJ that this partnership was evidence that the company is more than willing to work with online distributors who protect their copyright.

It would be a real loss to the world if the two tiers of creativity, professional and user generated, were forever bifurcated in different distribution channels.  YouTube has signed a number of distribution deals with music studios and others, but its viability as a distribution channel for copyrighted content appears to have decreased since being acquired by Google and failing to bring to market an effective copyright protection technology.  The emergence of viable online alternatives like Joost could spell trouble for any hopes that we will soon be able to watch Beavis & Butthead and Chad Vader all in one convenient location.  

Crunch Network: CrunchBase the free database of technology companies, people, and investors