Net threat to oldline firms

Google and others threaten publishing and media firms

Business and the internet | Bubble 2.0 | Economist.com:

Sep 22nd 2005 | NEW YORK
From The Economist print edition
A spate of expensive internet deals is creating a sense of deja vu

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Google is so highly priced in large part because of its mastery of one of the few truly profitable internet business-models: the sale of effective online advertising. But its striking success is alerting rivals to the dangers that Google and other peddlers of online advertising pose to their businesses—which is prompting them to explore how to fight back, which in turn could hurt the now thriving firm's profits, and expose any overvaluation.

Newspaper, television and radio companies, for instance, have all recently started to understand the threat posed to their traditional advertising revenues by online advertising. A speech by Rupert Murdoch earlier this year on the need for media firms to embrace the internet showed that the industry is not willing to give in easily to its new enemy. The traditional telecoms and cable companies have also started to wake up to the potentially massive threat posed to their revenues by cut-price internet telephony of the sort offered by Skype. They, too, are looking for ways to fight back."