Why Google May Be Industrys Best Friend

By Paul Gillin | May 17, 2010

News executives who insist upon seeing Google as the Great Satan would do well to read
James Fallows 9,000-word analysis in this months Atlantic. Fallows is well-equipped
to write the story of Googles tortured romance with the news industry. He is a veteran
traditional journalist with a technology bent who is as comfortable writing for PC
Magazine as for Atlantic.
Theres a lot to digest in this article but a few insights struck us as particularly important.
One is that Google sees itself as having what one executive calls a deeply symbiotic
relationship with news organizations. Second is that Google is devoting a lot of bright
people and significant amounts of money to help news organizations reinvent themselves.
The third is that Google believes advertising will become a lucrative and sustainable
source of income for news organizations in the future, but only if they change their
tactics.
Thief or Robin Hood?
Google is often pilloried by publishers for stealing content. This is despite the fact that
Google lifts no more than a few characters from each story, doesnt sell ads on its Google
News service and is the number one source of traffic for most newspaper websites. The
real reason Google is so despised is because it has accelerated the unbundling of news.
This is at the root of the industrys disruption. Newspapers traditionally have delivered
their entire product in one package with advertising in lucrative sections like automotive
and food subsidizing the stuff no one wants to pay for, like correspondents in
Afghanistan. Search engines have blown apart this model by making it possible for online
readers to navigate directly to the content they want. When each form of content is forced
to justify its own existence, the world/national news, statehouse coverage and other
staples lose out.
Fallows points out that Google and newspapers have a lot in common. Googles well-
being is tied to the availability of high-quality information online. One of the reasons its
executives feel such urgency about helping the newspaper industry is that they fear that
the loss of this content will diminish Googles core value. Fallows also astutely points out
that Googles business model is itself a bundle: the company makes the vast majority of
its profits from search, which enables it to fund loss leaders like News and Books.
Genuine Concern

Fallows spent a year interviewing Google executives and he portrays their concern about
the news industrys crisis as heartfelt and earnest. Certainly, no Internet company has
been more visible in trying to engage with publishing executives. CEO Eric Schmidt
addressed the American Society of News Editors last month and has been quoted many
times despairing about the industrys troubles. Of the other online companies that have
taken their share of news industry flesh, only Craigslists Craig Newmark has shown any
concern about the consequences.
Fallows piece is basically upbeat. Google executives express unequivocal confidence in
the future of display advertising, a vehicle that has been widely written off as a dying
intrusion on users reading experience. Advertising on the Internet is still in its infancy,
executives assert, and advances in targeting will enable display ads to do for readers what
Googles AdWords technology has done: deliver relevant contextual offerings to readers
based not only on the article in front of them but also on their self-described interests and
recommendations of their friends. As advertising increasingly reflects a two-way
dialogue between reader and publisher, news operations will wonder why they worried
so much about print display ads, since online display will be so much more attractive,
Fallows writes.
The company is applying technology to increase the yield of advertising in the same way
that airlines adjust their pricing, planes and schedules to maximize revenues per mile.
One innovation is an arbitrage system that enables publishers to adjust the allocation of
premium priced advertising on a second-by-second basis. Another is Fast Flip, a Google
experiment that seeks to mimic the print reading experience on a computer screen.
Google has even adjusted its treasured search algorithm to accommodate complaints from
individual publishers. There is little or no revenue in these efforts for Google; the
companys motivation appears to be giving publishers more options.
Rethinking News
However, Fallows also emphasizes that Google executives believe news organizations
must take responsibility for their own health by rethinking their approach to the business.
Krishna Bharat, a distinguished research scientist at Google and the driving force behind
Google News, probably reads more newspaper content than most humans. He notes that
duplication of effort saps the productive potential of the industry as a whole.
You see essentially the same approach taken by a thousand publications at the same
time, Bharat says, referring to pack journalism. Once something has been observed,
nearly everyone says approximately the same thing. This repetition is a relic of the days
when readers had limited sources of information and hundreds of reporters might cover
the same event. Now this approach has become antiquated. Publishers would get more
bang for the buck by pooling their efforts to provide the five Ws and devote more
resources to something else, equally important, that is currently being neglected.
Executives also emphasize that while they believe the ad picture is bright, a continued
overreliance on display advertising will be the news industrys undoing. Instead, they
advise a lots of small steps approach based upon continuous experimentation and
diversification of revenue streams. The three most important things any newspaper can
do now are experiment, experiment, and experiment, says Hal Varian, Googles chief
economist.
Which, when you think of it, is how Google works.
Link: http://newspaperdeathwatch.com/why-google-may-be-industrys-best-friend/