>>unidentified speaker: [italian language]nikesh arora, president, europe and italy's africa operationand senior vice president, google. >>arora: thank you. >>unidentified speaker: tsunami is comingfrom america. yes? you had that? >>arora: sunami is coming from america? >>unidentified speaker: yes. >>arora: i heard there are tremendous amountsof opportunity. >>unidentified speaker: [laughs]okay. the floor is yours. >>arora: thank you. thank you.good morning.
i understand half your cars were stuck intraffic jams, or trying to get here. so that bad news is, the room is half empty.the good new is, you will be the only few people with select informationon how to deal with all this crisis. right? [applause] >>arora: okay. let's talk about what happensnext. where are we going?the challenge in speaking after somebody who has so eloquentlytalked about the crisis is, i can't talk about the crisis.right? he already stood here and showed us
tremendous amountsof charts about what's going to happen. we've seen pictures of the crisis and discussionsabout the crisis all over the place. i was in davos with our founder, larry page,and he was asked by a journalist, "what do you think about the crisis?"for those of you who do not know larry page, who have not met larry page,larry is not an economist. he's an engineer.any engineers in the room? anybody here who is an engineer?who made a mistake before they came to the media?okay. none of you. good. so, he answered the question by saying, "ifyou think about the economy
from an engineer's perspective, nothing haschanged. we still have the same number of people inthe world. we still have the same amount of manufacturingmaterial in the worldã¢â‚¬â¦ gold, copper, oil.we still have the same capabilities as individuals. technology is continuing at the same pace.so, in an engineering context, none of the constraints have changed.nothing has changed. in fact, the prices of things have gone down.you can buy oil cheaper. you can buy lots of construction materialcheaper. so why has suddenly the world gone from thisway to this way?
and his hypothesis, which is fascinating,is that what has changed is consumer sentiment.suddenly all of us have become way more apprehensive, way more pessimistic, we're all thinking,"well, maybe i won't buy the next car now. maybe i won't buy the new house."and suddenly, as consumer optimism changes, it actuallyhas an impact on the economy. because all of us don't want to spend money.if you don't want to spend money, it impacts companies.it impacts our ability to keep jobs. so his view, which is interesting, is theway to get out of this crisis is actually to find a way to start makingconsumers more optimistic,
because engineering constraints have not changed.so let's see. so, hopefully, part of this exercise is to try and seeif all of you guys can go out there and create optimism in the minds of consumers.the thing about it; unfortunately, what is this doing to the advertising business?if you look at advertising around the world, the expectations arethat advertising is going to decline. surprise. surprise.everything is declining. the economies are declining.i think, for the first time, the world economy is supposed to growonly at half a per cent in 2009ã¢â‚¬â¦ the first time in 60 years.and as we go through the year, it might be
that the economyactually declines globally as opposed to going up.so we have a situation where advertising is going to decline in 2009.if you look at where that decline is going to come from,these are figures by xena topco media... i'm sure all of you are aware of.i think they're too optimistic. i think they're expecting a decline in televisionby 1.6%. if i look at generally, television is actuallydown between 10% to 15% in most major markets in europe,if you look at franceã¢â‚¬â¦ the u.k. it's down 10% to 15%.another competitor thinks that television
is going to be downabout 8% to 10% this year. so, life is going to look very different froma media perspective. there is one part of this, which you can seeis growing, is the internet, expected to grow at 12%.maybe it doesn't grow at 12%. maybe it grows at 5%.maybe it grows at 2%. as somebody said the other day, flat is thenew up. so if you can stay flat, it's a good thing.if you look at this, and see, what's happening? before this financial crisis came about, theone thing that was happening was we were going through some sort of a revolutionin the media industry.
things were beginning to change in the mediabusiness around us. and all that this crisis has doneã¢â‚¬â¦ithas actually put both effects into the same basket.it's going to both happen at the same time. we have a media revolution going on.we have a financial crisis, which is sort of we're in the midst of.if you think there are about 7 billion, 6-1/2 billion people around the world.there are 1.4 billion people who are online, around the world.that makes it the world's largest information, communication,and broadcasting network that has ever existed. the 1.4 billion represents over 85% of theworld's gdp.
if that was a country, it would be one ofthe most populace countries in the world, competing with india and china.so suddenly, where people are building goods and servicesfor 100 million people, or 40 million people in poland, now you canactually build a good and service for 1.4 billion, becausethey're all connected in the same way. if you look at the successes in the last tenyearsã¢â‚¬â¦ google, my space, facebook,you tube, skike. all these are businesses which have actuallybeen created to target the 1.4 billion consumers that exist on the internet.if you believe the 1.4 billion people are
online, which you have to believebecause they are, and you look at what else is happening around themã¢â‚¬â¦let me start at the top left. there are tremendous amounts of more interactivityin control in the hands of the consumers.for those of you who have children, they actually are way moretechnologically savvy and are able to interact with mediaa lot better than a lot of us can. they are on you tube; they are on my space;they are on facebook; they're talking to each other; they're interacting.this is media. facebook and my space are another form ofcontent creation.
we call it user-generated content, which isslightly different from professionally-generated content, but soã¢â‚¬â¦contentis being created, and consumers are interacting with that content.and they've taken over the control. it's using tremendous amounts of interactivityin control. if you look at the notion of content explosion,how many of you, as i'm sure, all of you know about you tube, right?how many of you have watched a video on the web in the last month?some of you have, at least about 50% of you. in the u.k., where i live, 80% of the peopleclaim to watch one video a week, at least, on the internet.one out of five have admitted to having watched
a full length television program,or a full length tv series, on the internet. fifteen hours of video is uploaded every minute,on you tubeã¢â‚¬â¦ 15 hours. if it makes you understand it better, equivalentto 86,000 movies being released every week by hollywood.that's the amount of content that is being created by consumersand uploaded on a minute by minute basisã¢â‚¬â¦15 hours of content.so, there's a huge explosion on content. suddenly, there's lots and lots of content.now what does that do for people in the media business?it increases the amount of fragmentation. it's very hard.i remember, i grew up in india, and i'm sure
this is not untrue in poland.twenty years ago, we had one channelã¢â‚¬â¦ one television channel.imagine the job of a media buying in television? you want to buy a media?yes. i've got one channel. i've got six slots.which one do you want? today, that problem is slightly more complicated.today, in the u.s., the top five channels account for only 31%of television's consumer viewing. in europe, that number is still in the 70%to 80%. but, as you look at the fragmentation, suddenlythere's competition for tv from you tube; from my space; from onlinejournalism; a whole bunch of stuff.
so if you take all of this together, we aregoing to a world where consumers will take control.there's tremendous amounts of content. and there's tremendous amounts of fragmentation.so where do we go? where are we headed?if you look atã¢â‚¬â¦ i'll give you four different examples.the first one, i think, as we go forwardã¢â‚¬â¦ today we make a mistake.we think of online as a different medium from print, television, newspapers, and radio.i think as we go forward it is a very important thing about onlineas a way of distributing our content, whether it's created for tv,whether it's created for radio, whether it's
created for magazines;because anybody who is creating content is actually putting it on the web,and using that just as another distribution mechanism.so online is not a different beast. it is actually part of the integrated contentcreation and content distribution strategy going forward.it has got to be more personalized and more participatory.the chairman of the bbc, mark thompson, said three years agothat we are five years away from fully individualized drag and droptv and radio stations. if you think about that, today in the u.k.,you can watch most
television programming that you have missed,you can watch it on the internet on the bbc's i-player, oryou can watch it on the sky-player. so what is happening is i'm no longer boundthat i have to watch this program on this channel at 9:00 p.m. on friday, and,if i miss it, life is tough. i just have to wait for the broadcasting guardsto decide to let me see it again. it's not happening any more.so as we go forward, it is not unlikely that consumers will designtheir own channels and design what they watchã¢â‚¬â¦ which, again, feeds into the idea of fragmentationof the media. here, roberta said something as interesting,"content alone can no longer win."
that is an interesting thing.if you look at the sudden surge in television programming, which is user managedã¢â‚¬â¦big brother and reality shows where consumers are getting involved,and getting engaged in the content. there's tremendous amounts of engagement.i will show you how an israeli musician, s/l kokadumanti, decidedã¢â‚¬â¦he went to you tube. he took a whole bunch of different clips fromyou tube, and decided to create his own album.he didn't create any content. he just mixed it.he went to you tube and found a whole amount of music at you tube;took a whole bunch of videos and put them
into an albumand released it through friends. it has now a few million viewers a day, andhe had only three guys who actually helped him.let's see if it works. [played audio/video] okay. well, again, the point of this videowas that this guy actually went to you tube, saw all these videos, andmade this himself. he just took different clips, re-edited it,made it into a cd, and he's now selling this as an album.he gave credit to all the people who are in here.the point i'm trying to make is that these
things havethe tremendous capability of changing the way contentis going to be discovered in the future and how we will find our next artist.it is not longã¢â‚¬â¦ you have to wear a hat and go to a bar in america,and listen to all the people playing overnight and decide who your next star is.in the future, people will find the future leaders, whether it's musicians,artists, etc., somewhere on the internet. at some point, if you follow the media industry,there is a very complicated structure in the past betweentalent agencies, producers, broadcasters, advertisers,and how talent was controlled and managed
in the past.if you look at what's happening today, everybody can go on the internetand go and target the audience, whether it's an 11-year-old girl singing,it's a 16-year-old girl, it's a 20-year-old guy, and it's kokadumanti from israel.everybody has the opportunity of going and targeting the 1.4 billion people.now, what this means for us from a media perspective is, in the futurewe won't be just going to television stations and trying to findthe content that we want to advertise on. we will have to figure out what the most popularform of content is and what the most popular way to get to that contentis going to be.
in the past, if you think about the way advertisinghas worked, we had television, print, and radio.internet advertising came on the scene about seven years ago.when google started, you could buy one link for $15 at the top,$12 in the middle, $10 at the bottom. that's it; you could buy three links on googlefor search advertising. in 2002, we decided to go into an action mechanism,and we started auctioning these ads. last year, google made $20 billion in searchadvertising. i think the total market around the worldis about $30 billion to $40 billion in search advertising.which begins to compete with print; and begins
to competewith radio, in 2007 and 2008. at that time, search was only used as a directmarketing tool. so, if you don't want to market in print,if you don't want to market in radio, you can do direct marketing on the web.what's beginning to happen, i think, is we're beginning to see different ways of advertisingon the web, which allows us to do brands related advertising.if you look at the display of mechanisms. if we are trialing things on you tubeã¢â‚¬â¦we're in the middle of a videoã¢â‚¬â¦ you can show an ad.you can associate your ad with the video. so you're beginning to see branding type ofadvertising come on the internet.
i think that is going to be the next big explosionin online advertising, where it begins to knock on the budget oftelevision; begins to draw on the budgets of brand advertising.and i think that, over the next three to five years, we're likely to go to a phasewhere there's just going to become one part of the integrated campaign.and what i'dã¢â‚¬â¦ rather than trying to explain how this works,let me try and show you what sony did. is anybody aware of the sony foam city campaignwhich they just did? yes? so they took, basically, a city blockin miami and started a foam machine which can fill up an olympic pool in about24 seconds, and then they gave
recording equipment to 200 bloggers and amateursand said, "go ahead and design the best piece of contentin ads that you can." they're using that content now as part oftheir online program; as part of their television programming; andthey're constantly re-using it. they've changed the way they involve users,engage the users; they've changed the way they involved agencies;they've changed the way they create the campaign. so online has become part of their whole strategy.before this, they had the bouncing balls campaign, if you remember.and the bouncing balls campaign did not have any online engagement,online mechanism.
this campaign is 40% online.this was one example; here we go. [music and video playing] this is a classical, traditional media campaigndesigned by users and where users have been engaged.i think this is possibly where we could be going to,if you think about how advertising is done. there is actually a website called openad.netwhere there are 11,000 media professionals who are available,and you can actually ask them to pitch an idea.and within two weeks, they give you a pitch, and then you can chooseamongst their different pitchesã¢â‚¬â¦which
one you want to adapt to your campaign.actually, agencies are beginning to use this as opposed to going outand spending four to eight weeks trying to design a concept.they put the idea over there, and there are 11,000 professionalsand they have to react to it whether they're individuals or agencies,and make pitches. it's going to be interesting to see how thiscomes out. so where are we going?i think you are going to see tremendous amounts of shifts towardinternet distribution, because internet is basically a distribution platform.it is not something that is owned by google,
or you tube,or my space, or facebook, or bevo. it is actually a platform where 1.4 billionpeople are connected. so it allows for very quick and cheap distribution.we are going to see a lot more personalization in the media space.we are going to see the content supply chain open up.content will be created by many, many, many different people out there.and, last but not the least, i think you are going to see a new eraof cross of cross-media advertising. now, what does that mean?what do we do? this is great information, what do we do asmedia agencies;
what do we do as advertisers; what do we doas content creators? i think there are four big things i wouldlike to make that i give you as parting messages.oneã¢â‚¬â¦ one has to get back to your core. it's very interestingã¢â‚¬â¦ i talk to lotsof newspapers, and when i'm talking to newspapers, they feel somehow the internetis destroying their businesses. and they feel that newspapers are going tobe in sequential decline, because their content is free on the internet;their circulations are declining. not quite so the case in poland, just yet,but definitely in the u.s. and the u.k. and they're sitting there and saying, "howdo we [inaudible word] current scenario? both
[inaudible word] economic crisis as well asthe advertising crisis?" and the challenge is, if you go back and think,when we had no internet, every country had four, five, six newspapers;you had regional newspapers. there were 12,000 newspapers around the world,right? and people who would come to a press conference,they would write articles, they would go back home and present them totheir audiences in the different countries.today, if you go to a press conference and you write an article,in about an hour on any given topic, you can find 150 to 500 articleson the internet about that same issue.
and as a consumer, i do not have appetiteto read 500 articles on the internet; maybe two; maybe three onthe same topic, but not 500. so the question becomes, "has the internetdistribution platform created an over commoditization in certain areas ofcontent? and a huge gap in certain other areas of content?"but if you go ask the newspapers, they still write about the same things.i get on a airplane; i pick up three newspapers at the door.by the time i have read my first newspaper and half of the second,i feel like i'm reading the first newspaper. so there's clearly an over commoditizationin that area.
so the question is, what is your true valueas a newspaper? if i go to a newspaper web site, they usedto produce a newspaper which had weather; which had the televisionprogramming; a bit of critics on television.it had a bit of international news and a lot of local news.if i go to the web and read their newspaper, and i want to readinternational news, i can actually read a newspaper in china.or in india in english, get more international news than i can getfrom the one page of the times in the u.k. so the question is, is the times rally propositionin the u.k. on the web
actually an international proposition, oris it a british proposition? the point i'm trying to make is that it isvery important to rethink in the online world, what is your core confidence?what are you doing which is better and different from other people around you,as opposed to what are you doing just because you've been doing itfor the last 10, 15, 20 years? second one is, i think it is very importantto challenge the rules. it is very important to go back and think,"what is it that we need to do differently?" i took the example of the newspapers.there is a principle that we have to do everything ourselves,that our true value is editorial.
but if you look at the content, there is atremendous amount of overlap of content, and tremendous amounts of commoditizationof content. the guardian in the u.k. has actually saidthat the current printing presses they have bought are going to be the lastprinting presses they will ever buy. their press will last about 25 years.so there is a probability, they think, that in 30 years they won't need printing presses.that's a bit hard to believe, right? can you guys believe a world where we maynot have a newspaper? i don't know. it may or may not happen.but, if you play this back, i moved to the u.k. nine years ago.i moved from the u.s., and i had just bought
myself two new vcrs.remember those things? vcrs? i had bought two new vcrs.and i moved to the u.k. and i plugged one in, and it blew.i didn't know that the frequency is different and the power is different,so i stuck it in, and it went boom. i was smart.i did not try that with the second one. i decided to go buy a vcr.so i went to this electronic store, and the guy, who was probably incentivized to selldvd players more than he was to sell vcrs, told me vcrs are history;buy a dvd player. so i said, "okay, i'll buy a dvd players."that was about eight years ago; nine years
ago.i bought a dvd players; i went to my local video store; and they hadthis big store for prime time video, and there was a corner with one rackwhich had dvds. and the only dvd you could rent was a classicdvd, because they felt that classics will alwaysbe in fashion, and people will watch them. but you can't buy the new ones because thereis not enough demand. now, i go there, nine years later, to my localdvd store, not my video store. i think some of the people who give me thedvds don't remember, or don't know what a vcr was.they're about 17 or 18.
i don't think they know what a vcr was.that was only nine years ago. and if i had come to you and said, nine yearsago, can you imagine a world where there will be no vcrs?and people would say, "well, you know there will always be 30% or 40% of peoplein the world who will have vcrs." how many of you have a slr camera?remember the ones where you put the reel and you put it around the other side,and you take pictures? remember that one?how many of you have one? how many of them have been used in the lastweek, or two weeks? i won't ask how many of you have digital cameras.you probably have more than one, and in your
phone, as well, right?do you remember a world when digital cameras came about, and people said,"oh, this is funny. they want to take a picture, and then they want to keep itin their computer, and not go to a photo store and actually print it and use itand watch it?" i think we take, probablyã¢â‚¬â¦ i was drivingup in the car from the hotel, and i took out my blackberry and took a picture.because i saw a big ad for google phone. i said, i have to take a picture of this.i could never do thatã¢â‚¬â¦i would never carry an slr camera with the filmand then put it in there, take a picture, and go get it developed,get it scanned, and send it to my colleagues.
not likely.so i'm taking four to eight times more pictures than i ever did.we all are. again, it's very hard to think about the worldten years out, and say, things are going to vanish.our tendency is, we always overestimate the short term,and underestimate the long term. you always do that.you always think that a lot more is possible in the next one year than it is.and you always think most of these things won't change in ten years, and they do.it actually happens in my objectives. my boss asked me, "what will you do in thenext one year?"
i give him long lists of what i can do, andthen i never do them. but, i think in ten years, i will get themdone. my point is, it is very important to questionevery assumption, especially in the current environment, ifyou are a media business, if you are a print business, because thingsare going to change tremendously because of the internet, in the next eightto ten years. and that applies to newspapers; it appliesto agencies. i'm told, you can't launch a new product withouttelevision. it's possible.google launches a product every few months.
we don't do any advertising.larry page's view is, if you can engage consumers, if you can make it usable,if you make the best product in the world, people will come up and take it;people will enjoy it. again, there are extreme views.i used to work in marketing before this, and i understand there are some productswhich do require some degree of support. but, the point i am trying to make is, thisis the time to go back and rethink about what are the core competenciesthat you have to offer? what is it that some of the fundamental rulesare, whether you're an advertiser, a print media owner, whether you're an agency,in terms of what you believe.
this is one which i think will make or breakthe agency business in the next ten years. i think we have lived in a world where itbecame very clear how you use television; how you use print; we were able to split thefunctions and have creative businesses and media buying businesses.i think going forward, it is going to be impossible to maintain that distinction,because you have to think about what is the best campaign on you tube?what is the best campaign on facebook? what is the best campaign on google?these are not standard media. google is not equal to you tube, is not equalto my space, is not equal to facebook. we are not the same property, like the televisionbroadcasting channel.
so you actually have to think about the mediayou are buying, and design the campaign around the media, as opposedto, "hey, you buy the media. i'll design the campaign."and the risk we run is, if you do not bring these two parts together,especially in the phase where we are rebuilding the world of advertising,we run the risk that you will have disconnections between the two.i think in the future, going forward, digital businesses have to havebought the media and the creative side together. also, it is very important not to have a separateinternet team, compared to the rest of your creative team,because you have to create
the link between all the different cross-medias that you are actually working with. the same thing applies to newspaper ownersand television owners. the bbc, i think, is one of the better examplesof the cross-media platform. you can actually go to their web site; findprint; you can watch them on television; you can have bbc radio; and they're actuallylearning how to bring all the different content together in differentforms. it's very hard for traditional businesses,which have only been newspapers, or only been television channels.what i'm noticing is that tv companies are hiring print journaliststo write on their web site.
i'm noticing newspapers are hiring one ortwo people with video cameras to put videos on their web site.so it's interesting, that we're beginning to see very, very traditional,solid media people trying to go into the other parts.i think this is an interesting time. the question is, "how do you get all kindsof content into your business?" so, again, you will see this happen more,and you will see more and more of a cross-media strategy as content creationis concerned. and, last but not the least, there alwaysis the question, "how are you going to make money?"we have this big spectrum.
in life, content has either been paid forby subscription or by advertising or a mix of the two.whether it's the magazine you buy, you pay for a subscription.whether it's the television, movie, you buy in your hotel room, that's subscription.or, you watch a free movie, and there's lots of ads in the middle of it.that's how we've always monetized content around the world.on the internet, you see a choice. you can have 100,000 users, and ask them fora subscription. or you can 10,000,000 users, and ask themto be supported by advertising. the problem, i think, in most internet businessesis, people still think geographically.
people still think, "this is a polish website." or, "this is a u.k. web site.""this is a german web site." the problem is, you go to 1.4 billion people,if you will automatically create these constraints, saying these arejust for my country, you run the risk that you have limited thesize of your audience, and therefore you cannot monetize the advertisingor spread the cost across the entire internet base.again, my recommendation is, don't think about just monetizing on a national basis.don't think about monetizing on a subscription basis.think about this as a platform of 1.4 billion
people.that is going to give us tremendous opportunity. i will end by saying, relating back to theprevious speaker, who talked about the crisis. crises are wonderful times, in a way, becausethey create scarcity. and scarcity is phenomenal because it breedsclarity. when you have scarcity and you start worryingabout how to best optimize your resources, then youdon't do wasteful things. interestingly, if you go back, and the otherpoint he made was on innovation. if you go back and think, many successfulcompanies were created in the moments of economic crisis.google was started in 1999, which was the
last crisis in the united states.apple was started in a crisis; hewlett-packard was started in a crisis;microsoft was started in a crisis. so, perhaps, this crisis will give birth tomany more googles and create tremendous amounts of clarity becauseof the scarcity. with that, thank you very much for listening. >>unidentified speaker: thank you very much. >>arora: are we taking questions? >>unidentified speaker: we can ask if there'sany questions from theã¢â‚¬â¦