HALF MOON BAY, Calif.--For Internet publishers to make the big money from online advertising, they need to manufacture a little scarcity, much like the television business.
That's the current thinking of News Corp. Chief Operating Officer Peter Chernin, who said at a conference that there's just too much inventory on the Internet for advertising to sell for high rates.
"We have to create category scarcity. That category these days is video," Chernin said here at the Fortune Brainstorm Tech conference, a three-day gathering of tech and media executives. More specifically, he said, premium online video will deliver the high ad rates.
That's why News Corp. has invested heavily over the last year in MySpace TV, one of the top video sites in the United States, as well as Hulu.com, a destination for television programming and feature films, Chernin said. News Corp. is also working on about 10 Web-only shows to premiere online. Also, next up for video will be MySpace Music, he said.
"This is the first pitch in the first inning," he said.
Chernin's comments come as many media giants are falling out of favor on Wall Street, thanks to concerns about advertising. The stock of Time Warner is down 13 percent for the year on concerns about its advertising outlook, for example.
Chernin said that in the digital age, rivals are less relevant. His main foe, he said, is News Corp. itself. "We are up against infinite possibilities."
So where does he see the business headed, apart from online video? Mobile is a big opportunity for growth, he said. People will want more content on their handheld devices, excluding a two-hour movie. He said content creators have the chance to produce a new genre of content, much like what has evolved with the video game industry.
He also said that News Corp. is expanding internationally at a fast clip. MySpace, for example, has introduced versions of its sites in 30 to 40 new territories over the last year, he said. The company also bought an ad network in Latin America in that time. News Corp., in partnership with NBC Universal, also plans to expand Hulu.com internationally, but a slow rate in order to deal with the content licensing issues.
"I think the media business is in a much better position than people believe," he said.
HALF MOON BAY, Calif.--Facebook's business playbook takes a page from those of the early dot-coms: build it and then figure out how to make money.
Sheryl Sandberg, the chief operating officer of Facebook, said here in a panel interview Tuesday that Facebook's primary goal is to grow its social network. Second is monetization.
"Our focus is on growth--we believe this is the moment people are joining social networks," Sandberg said here at the Fortune Brainstorm Tech conference, a three-day gathering on technology and media. "Then it's monetization to support that growth."
Her comments were in answer to a question about Facebook's reported $15 billion valuation after Microsoft invested and struck a strategic partnership with the company last year. David Kirkpatrick, a Fortune writer who's working on a book about Facebook, asked about whether the company is feeling pressure from investors to produce revenue and take the company public. Her answer was no.
"We're not public (and we're not feeling that pressure)."
Sandberg joined Facebook in March after six years with Google, where she was vice president of global online sales and operations. At the time, it was a big loss for Google because she oversaw the search giant's advertising engine AdWords. At Facebook, she's founder Mark Zuckerberg's right arm in charge of business operations and developing an economic engine for the company.
She said that after six years in advertising at Google, she believes that there's an "unusual and extraordinary opportunity" for advertising at Facebook. That opportunity is somewhere between major brand advertising like Super Bowl commercials and the direct-response search ads that Google sells.
"This isn't search and it's not monetization of search--that's direct response. We're not trying to compete with direct response," she said. "We do see a huge opportunity in performance and brand marketing. More than 90 percent (of marketing dollars) spent in the world are not in direct, but in brand, and that's (about) generating awareness."
The unusual situation Sandberg spoke of is that Facebook members create and share content with each other. The opportunity is for marketers to insert themselves into that swap of information. For example, she said Facebook helped Mazda run a design contest on the site recently that let members rate new designs from the car company, or create their own. Three hundred people submitted designs to Mazda, and Facebook members voted on the best one.
Fitzpatrick asked if that kind of relationship with marketers can scale enough to justify the company's valuation.
"All of the tools are publicly available--Mazda used groups and pages, and we worked with them to put that together," she said. "We need to do a better job to work with advertisers so that they can use the tools."
Sandberg said her biggest challenge at Facebook is growth, rather than figuring out how to make money. More than half of the site's users are based overseas, and as a result, the company recently launched versions of the site in 18 different foreign languages. She said that overseas usage is accelerating because of it.
Facebook's already in the cat bird's seat when it comes to social network traffic in the United States. According to ComScore, Facebook pulled in 123.9 million unique visitors in May, beating MySpace's 114.6 million visitors that month.
The company is also working on projects to develop Facebook for the enterprise, data portability technology, and settings to help people differentiate types of friends on the site.
And the company is enjoying a fast rate of growth on mobile applications, including the iPhone, she said. She would not say how many people are using Facebook on the iPhone, but she said the company is not yet focused on monetizing mobile traffic. "We're not very far in this. We're focused on that for the site."
Sandberg sloughed off the bubbly notion that Facebook is focusing on "if you build it, they will come."
"We're growing users and we're growing revenue along with it," she said.
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