News Corp. COO: 'Scarcity' key to online advertising

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.