• by Diane Mermigas , May 1, 2008

Exploding consumer demand outside the U.S. is key to sustainable media and Internet company growth--regardless of how deep and protracted the domestic economic woes become. Recent quarterly reports provide the most convincing evidence yet that players are embracing global opportunity. Follow the money and go where the growth is, according to Google Chief Executive Officer Eric Schmidt.

Google's $2.65 billion in international growth in the first quarter, representing 51% of the company's total sales, is more than offsetting the U.S. slowdown that is inevitable for the Internet giant--not only in a recessionary economy, but in the eventual leveling off of initial meteoric growth. The bulk of more than 100 search quality improvements made last quarter (creating the controversy over comScore metrics) customized Google home pages for the Asian market.

Google mobile search is available in more than 40 languages, which are particularly important in emerging markets where Internet use is more prevalent on cell phones than on laptops or desktops. It recently earned the exclusive rights to process search queries from China Mobile customers, which will support Google's efforts to supplant Baidu in the world's largest Internet market. Google has claimed more than one-quarter of China's search market by learning how to cautiously and wisely "operate in that environment," Schmidt says. "Although the advertising business is nascent in China, the Chinese Internet is so large that even on a small basis, the numbers add up to quite a significant with a good growth rate," Schmidt said.

International content and services top Google's list of priorities because they are growing 63% outside the U.S., compared with slowing 30% domestic growth.

Social networks MySpace and Facebook also are waging a battle for global users. Although its international growth has only just begun, Facebook recently surpassed MySpace in international average unique daily visitors, although both services face formidable monetization challenges here and abroad. Global growth is what will encourage Facebook--valued at about $9 billion--and other private startups to go public as markets strengthen.

One trend gaining traction involves the mushrooming interest by foreign users in made-for-Web programs and TV shows syndicated by U.S. content companies. Hulu.com, which distributes the product of co-owners NBC Universal and News Corp.'s Fox, is sorting out sticky rights and license issues to extend the ad-based Web service internationally. Even Rupert Murdoch's News Corp., which also looks outside the U.S. for a growing portion of its revenues, is seeking to pit its newly acquired The Wall Street Journal against The Financial Times for global business supremacy.

Cable content from Viacom and Time Warner especially is the runaway performer domestically and abroad in its widespread appeal and transfer to all devices. CBS' new international syndication self-distribution pact for the "CSI" franchise bolstered its first-quarter returns, contributing to an incremental $280 million from licensing. DreamWorks Animation SKG's first-quarter profits rose 69% on the international DVD sales of "Shrek the Third" and "Bee Movie."

Such international afterlife is completely dependent on replenishing the pipeline of hit TV programs and theatrical films. The international demand for content was never stronger. The shift to more economic produced-for-Web global product is even more promising, with production costs one-tenth or less of what they are for traditional broadcast networks.

It's not surprising that online video advertising is projected to more than triple to $2.1 billion in the U.S. by 2011. But it will grow even faster in markets outside the U.S.--increasing from about $200 million each to $2.5 billion in Europe and to $3.3 billion in Asia by 2011, according to eMarketer. Many other media sectors, including IPTC, mobile, mobile TV, general online advertising and e-commerce, also are aggressively outpacing the U.S. over the next five years.

Madison Avenue already is onboard: Leading global ad agencies--such as IPG, which reported on Wednesday that its international revenues were growing 15%, or about three times that of U.S. revenues--are en route to seeing more than one-quarter of all worldwide revenues come from digital. Indeed, brisk growth abroad, supported by a weak dollar and lower tax rates, is bolstering many U.S.-based companies.

Global growth prospects have been driving drastically curtailed merger and acquisition activity this year. CBS recently acquired International Outdoor Advertising, the largest outdoor advertiser in South America, for $110 million. CBS Outdoor was its fastest-growing segment last quarter--up 7%, with most of that fueled by 18% outdoor growth in Europe and Asia.

Fractional growth in the gross domestic product reported by the Commerce Department Wednesday was attributed to an increase in inventories and foreign trade. Technology and global conglomerates, including General Electric, Intel, IBM, Coca-Cola, eBay and Google, have reported increased international sales even in the context of slowed or declining revenue and earnings growth last quarter. Even as it was reporting earnings that missed its own and Wall Street expectations, GE (corporate parent of NBC Universal) said it will invest an additional $2 billion in China to grow revenues there from an existing $4.4 billion to $10 billion by 2010.

Indeed, half of all S&P earnings now come from internationally generated sales. Global momentum from emerging and thriving markets--rom Latin America to Asia--facilitated Visa's wildly successful but virtually lone IPO earlier this year, citing the worldwide demand for electronic credit and sales. In short, "international exposure remains a lifesaver," observes Goldman Sachs equity strategist David Kostin.