Many wary as Google turns 10

Media insiders concerned about firm's growing power

NEW YORK -- Google celebrates its 10th birthday on Saturday amid kudos from industry insiders for how it has redefined the media space.

But many in the media and entertainment sector also have expressed concern about the growing power Google is wielding on their turf, making the Internet bellwether a partner as well as a challenger. Martin Sorrell, CEO of advertising conglomerate WPP Group, has famously expressed this uneasy relationship by calling Google a "frenemy" and a "froe."

The firm's growing importance is also evidenced by its market capitalization. Ahead of its 10th birthday celebration (there is a long-running debate about what date constitutes its real birthday, but the company has in recent years settled on Sept. 27), the company's stock Thursday closed up 1% at $439.60. That is much closer to its 52-week low of $406.38 than its high of $747.24.

Nonetheless, that gives Google a market cap of $138.23 billion, ranking it at the top of The Hollywood Reporter Showbiz 50 index. That's well ahead of Apple's $116.87 billion and more than twice the market value of the closest entertainment giant -- Disney, with about $61 billion.

What has made Google an increasing focus of attention for ad and media folks alike is not only the acquisition of the popular YouTube site but its success in making key ad processes more effective and attracting money that traditionally had been spent elsewhere.

"Google truly defined contextual advertising in a way that no one else had until then," said Robert Nolan Jr., managing partner of private equity firm Halyard Capital.

This has made Google "a primary keymaster of online advertising," Miller Tabak analyst David Joyce said. "It continues to take share of the overall advertising market, which grows 3%-6% globally depending on the economy, but is still resulting in 40%-plus growth for Google for now."

What has media and entertainment CEOs particularly concerned is that Google has started helping marketers as well as newspaper, radio and TV companies bridge the gap to the digital world. While this could streamline the media-buying process, some fear it could also reduce ad rates and reduce the power of the traditional gatekeepers.

Google's recent move into the mobile world should also extend its power to that expanding digital platform. Jefferies & Co. analyst Youssef Squali, who has a "buy" rating and $600 price target on Google, estimates it could fetch mobile ad revenue of about $1 billion by 2010.

Overall, "the traditional advertisers will probably continue to put up a great deal of resistance to giving any decent inventory to this 'frenemy' and risk increasing transparency and thus commoditization," said David Bank, analyst at RBC Capital Markets.

Two online rivals that have already had on-and-off talks about possibly challenging Google are Yahoo and Time Warner's AOL unit. Microsoft's MSN also appears interested in growing its online business.