Some quick thoughts about Google versus the newspapers

Image representing Rupert Murdoch as depicted ...
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Rupert Murdoch has really put the cat amongst the pigeons with his comments about Google:

Rupert Murdoch threw down the gauntlet to Google Thursday, accusing the search giant of poaching content it doesn’t own and urging media outlets to fight back. “Should we be allowing Google to steal all our copyrights?” asked the News Corp. chief at a cable industry confab in Washington, D.C., Thursday. The answer, said Murdoch, should be, ‘Thanks, but no thanks.’ “

Some people will paint this as an old-media dinosaur not understanding new media, but I’m not so sure. If you’ve read Michael Wolff’s biography of Murdoch, you’d realise that he rarely says something like this without thinking it through, and without having an agenda.

There’s a few points of context which should be considered:

Google is a competitor to newspapers

The pool of advertising money online is finite. At the moment, Google takes a very large chunk of that money. If content isn’t paid for, then that makes Google a competitor to newspapers as well as something which delivers traffic.

Traffic is a double-edged sword

You need readers to make money from content, but even online every reader has an incremental cost. If companies aren’t making enough money from the additional readers they get from Google, then Google represents a cost to newspapers, rather than additional revenue. In other words, if the ad revenue isn’t there, every page view costs money. So why should newspapers care about the loss of page views from blocking Google?

Search feeds off content, just as content feeds off search

If a user can’t find the content that’s most relevant to them from a search engine, that search engine is useless. Relevance is everything – and that works both ways. Taking their content out of Google would hurt a newspaper (unless they’re making nothing from the page view), but it would hurt Google too.

What I think is clear is publishers are starting to think that the present position is unsustainable, as it offers the worst of all possible worlds for them. They don’t get paid by readers. A large chunk of the advertising revenue goes to Google, rather than them, in a world where ad revenue is hurting overall.

Interesting times, and lots of open questions. If someone says that the status quo can be maintained, I’d take that with a pinch of salt.

UPDATE: Just to add fuel to the fire, Alan Patrick has done some back-of-the-envelope calculations to work out how much Google makes from a typical site, in this case, TechCrunch.

“In other words, if all hits to TC are via Google, then Google is making 10x more money than TC is. Or, put it another way, if Google has only 10% of the traffic going to TC via its site, it makes the same amount of money.”

While Google obviously adds a lot of value to the customer, does it really add as much value as the content that the customer is actually interested in – let alone more value?

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  • http://www.floodle.net Phil

    If the papers remove their content from Google then the bloggers who rewrite it will get all the traffic instead. If their advertising is CPM based (cost per impression) then every user brings revenue to the site whether they read the ads or not.
    Now here's something to really think about – what if the next versions of internet explorer and Firefox had built in ad blocking? – maybe this is why google has released their own browser called chrome.

  • http://thesingh.blogger.com Brendan

    Question, if Google stops indexing newspapers online content how is that going to create revenue for those newspapers? Murdoch is a dinosaur, because he doesn't underrstand that the newspaper days are over. No one wants to pay for stuff they can get free over the net. What's he gonna do next? Sue twitter for bringing news while cutting out the middleman? Please.

  • Greg

    “even online every reader has an incremental cost.”

    There are not too many sites that worry about getting too much traffic due to incremental costs

  • http://www.technovia.co.uk ianbetteridge

    No – but when page impressions run into millions, it can be an issue. Even if the cost is in the hundreths of a penny per user per day, that can still add up to a heap of money.

  • http://www.technovia.co.uk ianbetteridge

    As I said, users who bring in no revenue are not only of no value to a site, they are an active drain on resources. So, if users who come from search cost you more than you make off them, you have two choices: ask Google to pay you for them, or just cut out them.

    Customers who cost you money aren't customers – they're liabilities.

  • doug

    There's a problem that nobody seems to recognize — not that many people want to advertise using keywords that are relevant to newspaper stories. Some large majority of Google advertisements are product-related and show up when people are doing product searches.

    It's also the case that Google takes headlines and snippets and not stories. To get the story you have to click through and go… to the newspaper. I'm assuming Murdoch isn't claiming that his headlines are the only value he provides?

    I wouldn't say that Google doesn't care about news, exactly, but all this hue and cry coming from the newspaper industry is solipsistic and misdirected. They're just like the ISP industry, being driven to the bottom by lowering margins and looking for someone that has a deep pocket to pick.

  • doug

    p.s. There are two sources of revenue: display ads that go in the newspaper margins, and classifieds. Why are newspapers cranking so hard on Google instead of Craigslist (which I suspect is responsible for much more direct revenue loss)?

    One thing is that they have some argument they can make around fair use, etc. Attacking Craigslist makes them look like they're crying because they're losing to a new technology.

    The other is that Google has more money.

  • vish

    the calculation of cost needs to also include the opportunity cost of some portion of the readers that would have only read the channel (print) that would have resulted in revenue for the paper.

  • http://www.technovia.co.uk ianbetteridge

    That's a good point, Doug.

  • stannyc

    None of this means anything so long as “fair use” remains in effect. I'd like to see any of the media “opting out” of Google search. Do you think that would HELP them, or HURT them? The answer is obvious to me.

  • http://onmilwaukee.com Jeff Sherman

    Collaborate or die.

    Consider this, we're only 10 years into the Relationship Media era and look at how much everyone's media consumption habits have changed. Leap forward 20 years and it's almost scary what the future holds.

    Every thing today is about making information easier to share. When media companies do this, revenue and readership expand. Newspaper companies are finally figuring this out as they build out, invest and expand their online products and properties. Many use google for search and traffic.

    Seth Godin hit the nail on the head with a recent post titled, “When newspapers are gone, what will you miss?” His conclusion? Nothing. I agree.

  • http://blog-o-blog.com Zac Echola

    If it costs in the hundredths of a penny per user per day, how is it that sites can't run up huge margins selling every page view for a penny? That may lead to smaller streams of actual revenue, or it may lead to more, depending on how large the site's traffic. Either way, you're talking massive margins.

    I think this is a sales issue within traditional media organizations.

    Newspapers try to bring a limited display advertising model to the Web when they should be reaching out to thousands or hundreds of thousands of businesses to offer incredibly cheap advertising options.

    They should be selling highly targeted segments of users, not mass, as they would sell the paper. I guess I just described Google, but newspapers, especially in America, have a geographic advantage Google can't easily approach.

  • http://www.technovia.co.uk ianbetteridge

    Just an aside, but an interesting talking point…

    The problem with trying to predict the future from a point when things are changing fast is that you can't extrapolate from that point very well.

    For example, suppose you were a medieval futurologist, looking at the revolution in the printed book 20 years after Gutenburg or Caxton. From the sudden, huge change you might have predicted that within 20 years everyone would have their own personal printing press.

    That didn't happen, because change can be sudden, radical, change the world – and not maintain that pace.

    To pick out another point…

    “Every thing today is about making information easier to share. When media companies do this, revenue and readership expand.”

    I hear this a lot. Can you give me a solid, ROI-based case where it's true, and the increase in revenue (readership is irrelevant) can't be attributed to any other factor?

  • http://www.technovia.co.uk ianbetteridge

    Because, in advertising terms, page view isn't worth a penny a view.

    Unlike PPC, page view costs you additional money to measure its results. You have to establish silent cells which aren't exposed to the ads. You can't measure quickly, as you have to wait for the long-term effects of brand exposure to shake out. And so on.

    So why is that a problem? Surely newspapers can sell PPC just as well as anyone else?

    Well, the problem lies not in PPC as such, but in the way that search traffic differs from organic traffic. When someone arrives at your newspaper page from search, they have already been exposed to a set of highly-contextual, targetted PPC ads. If they wanted to click on an ad, they would already have done so – on Google's page, delivering all the revenue to Google.

    In effect, with PPC, Google creams off the best advertising targets from search traffic before it even hits your site. That's why, for traffic to your site from search, you will never achieve higher PPC rates than Google itself.

    That's why I talk about Google being a competitor to newspapers – and one that's in the position to get all the best traffic before it even hits their content.

    Effectively, Google uses the content as a carrot to get the best prospects (as they'd put it in ad-speak), without paying a penny for the content.

  • http://theinternetandbusiness.wikidot.com DavidS

    Re “…even online every reader has an incremental cost.” Sorry, your microeconomics are wrong. Creating content is a fixed cost. Additional readers are an incremental cost only if it costs money to acquire them. Since the content producer is not paying the reader acquisition cost there is no incremental cost. However, there is an opportunity cost of lost advertising revenue if – in the absence of Google or other search engines – the content creator would have appropriated more advertising revenue from that incremental reader.

  • Jacquie

    It is a shame we are putting all of our eggs into the Cyber world basket!
    If we lose newspapers and magazines as a viable source of news, information, education, and entertainment, what will become of it all when those sattlelites falter, fail, or get lost to a Space war?
    In the meantime, MILLIONS of Americans are being kicked to the curb if they can not afford A- a computer, or B- internet service. AND believe it or not, outside of major metro cities, there really are Millions of people in the US that DO NOT OWN A COMPUTER!
    SO when the news says “for the rest of this story to go our website”, that kills it for those who can not go the computer.

    And despite fair use, first sale, etc, copyright does exist and is legally binding even for Google!

  • http://www.technovia.co.uk ianbetteridge

    That would only be true if no one paid for servers, bandwidth, support, maintenance, redundant capacity, and so on. Those costs are always incremental – the more people who view your site, the more it will cost you. And with increasing use of video as well as text, those incremental costs will mount up. On a per-user basis, they will always be small – but with millions of page impresssions per day, they can add up fast.

  • http://jearle.eu Jared Earle

    I would go so far as to say those not on the internet are not relying on newspapers for their news. TV is the first news outlet of the poor.

    Besides, the battle for news Murdoch is describing isn't Google versus print media; it's Google versus newspaper's websites. It has nothing to do with printed newspapers; that's another debate altogether, and one we're too late to as it's already been decided.

    If Murdoch is defending his corner of online newspapers, it's because he realises it's where the real battle will take place.

  • http://www.technovia.co.uk ianbetteridge

    He's realised that for a very long time. Murdoch's first significant investment in online dates back to 1993, when News Corp bought the then-quite-popular online service Delphi. And he's had some pretty smart people working for him along the way (Clay Shirky did a stint consulting for News Int in the late 90's or early 2000's)

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