I had a good conversation with Marissa Mayer this morning, who had the unfortunate task of clarifying the terms of Google’s recent deal with AOL. I say unfortunate for two reasons: one, I did sort of call her out after her post went up, and two, she’s on vacation right now, and who wants to deal with cranky reporters while on vacation?
In any case, she was good enough to speak with me, and what she had to say was worth repeating, so I’ve transcribed a slightly edited version of our conversation below (it was raining, I was in my car…).
The highlights: Mayer reiterated that Google is not going to fiddle with its organic results in any way, and that banner or animated ads will not appear on Google.com or on search results pages. However, she did say that such ads may well appear on other Google sites, noting that the deal terms specifically mention Google Video and Google Image search as obvious candidates.
We then got into the OneBox, which has always been something of a mystery to most. I’ll let the conversation stand on its own on this point, but I had done some recent reporting which indicated that deals are indeed done inside the OneBox, which was not a surprise to me, per se, but it was news. I asked Marissa about this and the AOL deal, and she clarified how OneBox inclusion works below.
This may well be the heart of the deal, beyond the amount of revenue guaranteed (yes I asked, and no I did not get the answer). As Mayer pointed out, while the deal terms have been agreed to and announced, the final contract has not been written. I am sure when it is, the devil will quite literally be in the details. I’ve been in on these kind of deals. When the lawyers swoop in, things can go, well, astray. But I sensed from my talk with Marissa that in the end, this deal is between two parties who in fact believe they belong together. We’ll all be watching, of course, as those devilish details begin to emerge over the coming months.
Thanks for taking time away from your vacation. First of all, just to get it for the record, you clarified in the blog post that there is not shift to the organic results due to this deal.
Also you made a clarification about banner ads, but it was not clear to me if that applied to just Google.com or other Google properties.
So, with banner ads we are comfortable saying that they will not appear on the home page and that they will not appear on the result pages.
They might appear on Gmail or Google News, or somewhere else but not …
Gmail and Google News weren’t thrown out (as examples). What we actually agreed to and committed to in the contract is that we would experiment with showing banner ads on properties where we think they are more suitable. And the two properties that are specifically mentioned as an “e.g.” are Google Image search and Google Video. Which kind of makes sense – if you are looking at pictures or videos it makes more sense to have a picture ad or an animated ad
Or even a video ad, perhaps.
OK, let’s dive into the OneBox, it’s kind of a box of mystery. People are always wondering, “How are those links chosen?” Say for example, for the travel OneBox, how are those links to Expedia or Travelocity chosen? I’ve had recent conversations with folks there (at Google) and I’ve learned that sometimes deals are actually done for the OneBox. They are not money deals, I am told, but more traffic for data, for weather, for example. So deals are actually done for the OneBox, is that correct?
Not that I know of. I mean we signed a contract with Weather Underground to provide us…to give us a data feed, but I woudn’t think of it a deal per se…
There wasn’t a stipulation of value exchanged?
It’s almost like us licensing their data…instead of taking cash, what Weather Underground wanted was a link to them.
Of course, there are plenty of folks who want that…
I guess if you look at it that way you could call it a deal…but the agreements are not exclusive and it really is about us providing the best user experience. We wanted an actual feed of the data…and so we need to license it from someone.
But I’m not even sure there is a contract in place there…I’d have to check into that.
I’m not looking to nail (the Weather Underground deal) down, it’s all a way of clearing the underbrush to discus AOL’s inclusion in the OneBox. Since the OneBox has been something of a mystery to people, particularly business people who would kill to be included in it.
Right. Well let me tell you how we generally do the OneBox – (the weather deal) is actually novel. We have like 20 OneBoxes and that may be the only one I know of where we specifally license data as opposed to getting it for free or crawling it.
What we normally do on the OneBox, like on our stocks page or travel, where we have links to a few providers, we look at Media Metrix or Pagerank data, and generally they agree and corroborate themselves (as to) who are the top three or five providers. And those are who we generally look to include. We make sure to look at the overall user experience – you know do these people have a good page for us to click through to? So with the travel providers what we were looking for is do you get a results page that shows you flights? … We looked at who was willing to provide us a page that was suitable and accessible…
So in the AOL contract, did you guarantee AOL OneBox inclusion?
What we committed to is that they will be included when they have a materially equivalent service.
Those guys at AOL didn’t pin you down on that one?
Wow. That’s pretty good. That’s part of my skepticism about the deal – these guys were highly courted, (they were) able to say “you can’t really buy us with money, because Microsoft has lots of it.” So it seemed to me what they could extract from Google that they could not extract from Microsoft was the fact that you had such enormous brand power and such enormous traffic and so therefore it seems to me that they would want to nail you down on points like this. And if you are saying they did not….
What I am saying is that for them, you know, we have 20 OneBoxes and they are constantly changing shape and form – are we showing links, how are we showing links – those types of things. From their perspective they are looking at things like Google Book Search, (where the service links) are along the sides, and there are five places where you can go buy the books. Actually I don’t think AOL has a book buying service, but where there is a list of providers, (they can say) “We want to be on that list.” And we said “Hey this is no brainer for us, because usually when AOL does provide a materially equivalent service, it is one of the top five services…”
So the contract is not specific in that it says of “Of these 20 OneBoxes AOL will be included in these 5 or 6…”
Right. Because I think they wanted a broader provision, an agreement to include them. Because we add a new OneBox two or three times a month. We couldn’t specify all the future one boxes they wanted to be in or anticipate how we might change the OneBoxes we do have. In some ways it’s a stronger and safer future statement from them.
But I’ve dealt with lawyers like AOL’s, Marissa, and they always want to put specific language around (terms) – What does it mean when a OneBox comes out, and what defines a “materially equivalent service,” and all that kind of stuff, it can’t possibly just be…
You have to remember John, where we are in the deal. We’ve agreed to terms, but the actual contract is to be specified in the next 90 days.
So there’s some legal wrangling to be done…
I don’t know what is going to happen, but terms are usually short, and contracts can be hundreds of pages, and we haven’t gone through that process.
So I think we know the terms, and the terms are general, and there is a possibility they will become more specific during the process.
Who drove this deal from Google’s side?
Eric will tell you that he was really happy with the way the deal happened, and we had an entire deal team. Eric was certainly out on point, he did a lot of the communication. He was the person who appointed the deal team. Larry and Sergey obviously were in a lot and were very engaged, but if I had to say which of the triumvirate took the lead here I would say it was Eric, and he had a group of people … that worked on this literally 24 hours a day for 2-3 days.
My sources, not that they are perfect or that you won’t clarify me on this, but I was told that MSFT was really ahead of everyone on this deal up until about ten days before you guys announced, and then something changed. Do you have any comment on what changed? Did Eric say “We cannot lose AOL?”
We tried our hardest on this deal all along. It felt Googley to us. So from our perspective it didn’t’ feel like a lot changed ten days before. The only thing I have to speculate on is pretty much what you have to speculate on, which is that some stories came out about AOL’s visit to Microsoft and some of the concerns that came from that. All I can do is read the same newspapers that you do. As far as what might have changed the climate, that’s the best guess that I have. (My note: I’m not sure I’ve read these stories, can someone clue me in? I’ve mailed Marissa and others for more…Update: Here’s a Journal link, thanks Danny) Because we didn’t change our position or the deal terms during those ten days. We tried our hardest for the deal the whole time…We felt that AOL was a great investment. If anything (we) believe that they are undervalued…
In the deal we stuck with them in 2001 or 2002 we made a very big bet, a very big revenue guarantee.
It caused a huge amount of controversy at the time because by some of the models that we had run, the deal was going to bankrupt Google. Like Jonathan Rosenberg actually got up on the table and jumped up and down about how much we shouldn’t do this deal because Google was going to go bankrupt. We had models, one said that we were going to go bankrupt, one which said we might break even… and one year into the deal what we saw was that by signing AOL and broadening the reach of our advertising network we attracted so many more advertisers, and RPMs (revenue per thousand pageviews) went up across the network and we outperformed our expectations by a factor of two, maybe even three times. And so here again we see deepening that relationship and broadening the reach of the network it will again have appeal to advertisers…
I agree with you – and I am sure Steve Ballmer agrees with you, because if there is one thing he needs it’s reach and breadth and new advertisers, because he’s so behind with AdCenter. But it seems he lost for understandable reasons.
One last thing, there are mentions in the filing but no specificity on the revenue guarantees. I am quite sure you will not tell me what they are, but I am curious that once they are disclosed whether you think they will be seen as extraordinary, or normal course of business.
I have to be honest, I was very active on the product side, but not on the revenue guarantee side. I don’t know a lot about the revenue terms. I am sure the team was very prudent on this, so to our eyes this will look like normal course of business, but this is a huge deal…so my guess is that to the general public those numbers will look very big.
Well, it is a very big business now. Thanks very much for your time.
Update 2: Danny’s interview with Marissa (yup, she did the rounds!) is here.