Tuesday, January 13, 2009

Google loves newspapers, won't buy them

We apologize if you've already seen this, but Fortune magazine's Adam Lashinsky (formerly of the Merc) interviewed Google CEO Eric Schmidt about the future of newspapers. The interview came out Jan. 7 and it's an eye-opener because, while the Mountain View company makes money by aggregating the content of newspapers, it has no interest in buying newspapers or supporting news-gathering. Here's the link and a few quotes:
    Lashinsky: Is there some grand gesture Google can make to solve the newspaper industry's problems?

    Schmidt: It's not obvious what the grand gesture would be. Google can't make the cost of newsprint go down. We also can't materially change the way consumers behave, and consumers are in fact moving their lives online. We have been able to send clicks to their Web sites, which they can monetize. So that provides some revenue. The problem is that doesn't provide enough revenue to offset the loss of the other revenue.

    Lashinsky: Maybe their time has just come and gone?

    Schmidt: No. They don't have a problem of demand for their product, the news. People love the news. They love reading, discussing it, adding to it, annotating it. The Internet has made the news more accessible. There's a problem with advertising, classifieds and the cost itself of a newspaper: physical printing, delivery and so on. And so the business model gets squeezed.

    Lashinsky: So what else can Google do?

    Schmidt: We have a mechanism that enhances online subscriptions, but part of the reason it doesn't take off is that the culture of the Internet is that information wants to be free. We've tried to get newspapers to have more tightly integrated products with ours. We'd like to help them better monetize their customer base. We have tools that make that easier. I wish I had a brilliant idea, but I don't. These little things help, but they don't fundamentally solve the problem.

    Lashinsky: How about just buying them?

    Schmidt: The good news is we could purchase them. We have the cash. But I don't think our purchasing a newspaper would solve the business problems. It would help solidify the ownership structure, but it doesn't solve the underlying problem in the business. Until we can answer that question we're in this uncomfortable conversation.

    ...

    Lashinsky: What about Google.org, Google's for-profit philanthropic arm, which is investing in alternative-energy startups?

    Schmidt: We didn't want to co-mingle philanthropy with business. We are in the advertising business.

    Lashinsky: But you do believe it's important that newspapers survive?

    Schmidt: Not only do we believe that, but I've been outspoken about it because I want everyone to get that. The fundamental question you're asking is why does Google not write large checks to newspapers? We're careful at Google with our money. We write large checks when we have a great strategy. And we don't yet have that strategy.

    I think the solution is tighter integration. In other words, we can do this without making an acquisition. The term I've been using is "merge without merging." The Web allows you to do that, where you can get the Web systems of both organizations fairly well integrated, and you don't have to do it on exclusive basis.

5 comments:

Anonymous said...

Here's a novel thought, make Google and everyone else pay for downloading the news from various news sites. It's ridiculous that we give news away on the Web while others subscribe.
Wasn't there a study by Reuters that concluded that less than 25 percent of the reading public get their news from the Web and that advertising does not generate enough revenue?
What's amazing is that newspapers still have to pay everyone a salary for the physical location, which includes news-gathering, editing, photography, designing and the added cost of the webmaster. Yet it's all free on the Web.
Why not just give the newspaper away for free? It's what we're doing on the Web.

Anonymous said...

I read four free newspapers every day. They're also on the web. Is this the future? I hope not. I don't want to see unpaid "interns" elbowing out vets.
The important part of newspaper is NEWS, not paper. Poor management has ruined more papers than poor reporting. Cutting the staff is not the answer. Move them to the web. If not we will see the day when news is brought to you by ranting bloggers. Call it validation journalism.

Anonymous said...

Google has taken advantage of newspapers for years by redistributing their stories for free. At the very least, newspapers should be demanding compensation from ANY website that re-uses their content. And cut off anybody who redistributes their content without paying. It's time for newspapers to realize that their is value in their news stories and to act accordingly for people who steal their stuff.

Anonymous said...

Newspapers haven't a clue what to do about Google. They think that allowing Google to link to their stories increases their traffic, but those people brought to their site just return to Google News on the next click. And during the brief visit to a local paper's site, the reader doesn't pay any attention to the various ads like they would if they were reading a newspaper. So the paper gets little out of the visit and Google rolls on. Yet papers are afraid of cutting off Google because they want anything that increases their pageviews.

Anonymous said...

I use Google news. I do not see ads on the Google news site, just headlines along with snippets of text. I click on the headline and go to that newspaper's website where I see their ads. Where is Google making money from this? BTW, I do not look at the online ads nor do I look at the ads in a physical newspaper.