Google Forced to Compromise in YouTube Ad Sales Debacle

Several mass media companies have accused Google of benefiting directly from the sale of pirated movies and providing sales support to two Web sites that provide access to illegal downloads.

According to the Wall Street Journal, the high volume of traffic on and caught Google's attention and Google assigned the sites account representatives who suggested keywords they could bid on to stoke traffic further. This account of Google's activity was given in sworn statements by two defendants in a lawsuit filed by the media companies. A Google employee largely corroborated the story.

Make no mistake, this is embarassing for Google.

In order to make YouTube an indispensable media outlet, Google has been trying its darndest to ramp YouTube's traffic as fast as possible. Prior to today's revelations, the only public evidence of that strategy was integrating YouTube's videos in Google Video search, a move which increased YouTube's market share 18 percent, according to Hitwise. During Google's Q4 2006 conference call, CEO Eric Schmidt said the company was encouraging media companies to upload their content and judge the traffic for themselves.

However, by aiding and abetting traffic from Web sites that traffic in illegal downloads, Google is undermining its purported value proposition to the very MSM companies it is trying to woo. Whereas Google has been promising traffic from a valuable demographic, they've instead been encouraging traffic from an audience intent on finding pirated material. Oops.

Google has also just ceded the moral high ground. But the result may not be all bad. By hewing to a hard line, Google has been trying to force Viacom, UMG, etc. to give up a large degree of control. But today's revelations will force Google to give up some control of its own. That process is known as compromise.

As the Journal notes, Google has agreed to remove certain ads the companies objected to, create a list of approved advertisers and refrain from selling keywords used by rogue sites to lure users to pirated material. In addition, the Google lawyers said the company would introduce internal guidelines on monitoring keywords and train its ad sales force about how to avoid selling such ads.

Many of these concessions are the same ones that Viacom was purported to be seeking two weeks ago when it decided to pull over 100,000 videos from YouTube. So to the extent that media companies are happier with the terms of the ad selling arrangement, the less likely they'll be to issue takedown notices.

Of course, media companies won't be happy until Google a) establishes those long-promised content filters and b) eliminates the problem of "atrocious adjacencies" (inappropriate ads appearing next to video content).