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Wednesday, June 2, 2010

Google's Gambit

Over the last year, there has been a lot of buzz regarding the decline of newspaper. I have contributed a tiny bit to it. But if you are a media junkie, as I am, you have also noticed support for newspaper from an unusual source—Google.

It began to get some traction back in December when Google’s CEO Eric Schmidt wrote an op-ed piece in The Wall Street Journal. This was a bit ironic as the Journal’s new owner, Rupert Murdoch, has often pointed at Google as a reason for newspaper’s troubles. In the editorial Schmidt basically said that Google would stand on its head to divert more money to struggling news entities.

In April, Schmidt addressed a news convention and said that he was “convinced that the survival of high quality journalism is essential to the functioning of modern democracy.

We have also heard rumblings that Google is working on methods to help newspaper monetize their products online. Right now, most people agree that the dollars newspapers have generated to date have turned into internet pennies. It is hard to tell exactly what is going on as much of the work appears to be going on at Google during “20 percent time.” This is the time that all Google employees have to work on projects of their own choice and where much of their innovation has come from recently (g-mail, for example, was developed on 20% time).

Some of the test work appears to be centering on pay-walls. Right now, the seasoned players have barriers to non-subscribers firmly in place. You may see a sentence or two of the beginning of an article but have to be a subscriber to see the entire article. Others experiment with allowing for a free article or two or a free day once a month or so. There may be a magic bullet in pay-walls that the brains at Google will find. Maybe not.

There are a lot of structural issues for why newspaper has eroded. The first has been going on for decades. Circulation has faced a relentless decline as people moved to broadcast and cable and now online as their news sources. On-line also hit them with a body blow that few people talk about. Traditionally, 33-40% of a newspaper’s revenue has been contributed by classified ads. That is drying up big time as online sites have become the preferred way to dispose of unwanted merchandise. If you lose that big a piece of your revenue base, you are toast in almost any business.

The other problem is that for a decade people, especially the young, have been conditioned to get information of all kinds, including newspaper, for free online. How effective can an imaginative pay-wall strategy from Google pay off for newspaper if people do not want to pay much of anything?

Why does Google bother? Well, think about it. They are an aggregator of information and a remarkable one. But, if newspaper goes away in several years (with the exception of the Times, the Journal, the Post, a few others), the quality of Google’s content will decline significantly. I realize that some say we bloggers can pick up most of the slack but already the lack of investigative journalism in mid-sized markets is causing alarm among many worried about municipal corruption in some areas.

Without the cost of newsprint, distribution, and union pressman, newspapers could slash expenses radically if they went 100% online. In a few years, a paper could provide you with a customized news summary each day based on your past reading or if they could tap into Facebook with your permission, perhaps show you what your friends are reading. But, to me, there is a still a huge hurdle to overcome. People who are going to have to pay for this service have been getting something close to it for free for a long time. Those in their twenties have never paid for a traditional newspaper. Face it. Those who agree to pay for an online service now tend to be very affluent, elitist or both. Getting the masses to pay for an online paper seems like a tall order in today’s world.

How can newspapers transition to online and not go under while doing it? That is the problem that has to keep publishers up at night these days. Do they have pockets deep enough to wait out the inevitable losses as they morph in to a new entity?

All of us should wish Google well. If any one organization can help unlock some revenue for online newspapers, if is they and perhaps they alone. Still, it will be a very rough sledding.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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