by Irina Slutsky http://adage.com/digital/article?arti... SAN FRANCISCO (AdAge.com) -- Regular readers of Ad Age know that the companies that control th...moreby Irina Slutsky http://adage.com/digital/article?arti... SAN FRANCISCO (AdAge.com) -- Regular readers of Ad Age know that the companies that control the internet are, if not obsessed, then very concerned with the topic of network neutrality. Most recently Google and Verizon were the two giants rumored to have a plan to let users pay for faster access. "We already had the payola battle in radio, now this is the payola battle of the internet," said Tim Wu, the man who coined the term "network neutrality."
A Columbia Law school professor, Mr. Wu advised the Obama campaign in 2008 and today published his latest book, "The Master Switch: The Rise and Fall of Information Empires," which traces the histories of the mighty (and once-mighty) AT&T, NBC and Google.
Tim Wu Currently, the Federal Communications Commission -- in front of which Mr. Wu has testified on numerous occasions -- has put the question of network neutrality on hold until after the midterm elections. Ad Age spoke to Mr. Wu a few days before his official book tour and asked him to frame the history of those empires in terms of advertising and, of course, Facebook. Ad Age: What is the role of advertising in an information monopoly like AT&T -- or potentially, Verizon and Google?
Mr. Wu: Historically, the major resistance to monopoly comes from high prices. But if you have a monopoly supported by advertising, the price isn't noticed by consumers because the price is distributed. Consumers pay for Google through everything being a bit more expensive. If I type "dentist" in Google, and click through to a Google link, the price comes back to me when I pay the dentist. Consumers always pay for everything, but with advertising, it's in an extremely indirect fashion.
Ad Age: What about Facebook?
Mr. Wu: If they charged you money to see all your friends, then they started raising those prices, you would be really mad.
The fact that we think Google and Facebook are free deadens resistance to what would be very objectionable. People pay their phone bills and their cable bills and those prices are under scrutiny because those are consumer-facing bills. But Google and Facebook activity isn't under that much scrutiny.
Ad Age: Is social-media marketing -- typified by buzzwords like "engaging the consumer" -- changing the equation in terms of traditional advertising?
Mr. Wu: Every age thinks it is revolutionary -- in this case we are talking about marketer or advertiser having access to consumers in a new way. But the first television or the first sponsored radio programs, those marketers had the idea that the revolutionary thing was to be inside the American home, that was such a big change! We think Facebook is a big deal but a much bigger deal was an advertiser speaking directly in the living room of a customer when that had never happened before! Prior to that, the home was a sacred place. We think right now everything is changing like never before, but imagine 1920 and how completely shocking that was and what an effect it had on American culture. So I think the changes today are relatively mild. That gives some perspective.
Ad Age: Why do you suppose so many of the information monopolies started in the U.S.?
Mr. Wu: It started with radio in the 1920s and 1930s. England felt it was inappropriate to have advertisements on radio since they wanted to make their citizens into better people through the programming. Germany called radio the spiritual weapon for the totalitarian state. And in the U.S., we decided to collectively let large companies take over the radio -- and their main interest was to turn Americans into consumers.
'The Master Switch' Ad Age: Now Apple is entering the advertising business with its iAd format. How do you see that changing the milieu? Mr. Wu: Steve Jobs believes viewing an ad can be an enjoyable and titillating experience. His theory is to treat advertising as another form of content. I'm not sure it will work -- iAds haven't taken off yet, but I understand Jobs' theory. Apple delivers the best content, so they will deliver the best ads, the ones that you want to see because you find them entertaining. But advertising isn't content. Google's theory is all about YOU. Apple's approach is all about "we are the experts."
Ad Age: Where do you see Facebook going? Its consumer dominance hasn't yet been matched by economic dominance.
Mr. Wu: Facebook is trying to figure out who they are right now. They are looking for a role model. Google is the most obvious example as success in advertising. Apple hasn't been successful in advertising. Ideologically, Facebook has to decide if they are going to be an open system like Google or a closed system like Apple.
Ad Age: Who is going to win the battle for control of the TV and, by extension, the TV ad?
Mr. Wu: The big big dog in advertising is television. The ongoing battle is between the phone, the television and the computer -- and the internet brings them all together. Google TV is Google's effort to colonize television. It's incredibly threatening to the established world of advertising. Traditionally monopolists have a lot of money and they are interested in taking over another market. And you can see this in Google -- they are interested in phones and TV. They are challenging powerful established powers in phones and TV. More than anything its an ideological campaign; they have a Google way of Google doing things. Google succeeding in phone and TV depends on what consumers are actually like. Do they prefer to have things chosen for them or do they like to make choices. Americans like choice and Americans like convenience. Historically Americans lean a little toward convenience. Google stuff has been extremely successful but I don't know the answer to this question.(less)