Hey Newspaper Guys: Google's Not Making Money From News

from the so-wrong,-so-sad dept

It's become popular for old school newspaper folks to hate on Google and other aggregators for somehow "profiting" off of their content. This is wrong on many, many levels. First, the aggregators send traffic to newspaper sites. They're promoting the newspapers' content. That's a good thing. But much more important is that they're barely profiting from it, if they're profiting at all. That's why it's odd to see some newspaper folks like Howard Weaver think that the answer to the newspaper industry's woes is to create their own aggregator and start making all that cash.

Except, uh, someone forgot the part where Google and the others don't actually make much, if any, money in aggregating all of that content. At best, it's a loss leader for most such sites. Chris Tolles, who runs Topix -- which is an aggregator that tried to play that game and realized how little money there was in it, before changing business models, has a fantastic response to Weaver that should be read in its entirety, but here's a brief snippet. It starts off in response to Weaver's claim that Google, Yahoo, Microsoft and AOL make ("conservatively") $15 billion from "news and news-related content":

Uh. No. That's just wrong.

AOL annual revenue is $4.2B, Google $21.8B, MSN ~$2B, and Yahoo $7.2B

So, since the grand total is around $36B, Google news is pretty much a non revenue products, and Google was doing just fine with little or no news results in their main index until the last couple of years. Yahoo does put news ina lot of their products, but certainly, nowhere near 50% of their advertising is sold against news, as is the same for AOL and MSN.

(Oh and last time I checked the newspaper industry advertising revenue was $37.85B)

News is a crap search product, and a loss leader, which is a big reason why Google news was in beta for years, and unmonetized, and why many news-centric searches get no ads next to them.

News is an unprofitable search. Since we at Topix are an adsense partner, and I am a downstream beneficiary to what revenues there are here, I know what kind of eCPM news brings and how hard it is to make money on aggregated "news" content.

....

So if you built a news aggregator, powered by journalists, this would somehow unlock the value and get to $1.5B in annual revenues?

NO. YOU WOULDN"T.

If that was true, Daylife, Inform, newsvine and the myriad of other startups would be actually making a ton of money and chewing up the pop charts. Or Digg for that matter, or the Huffington Post.

BUT THEY AREN'T, ARE THEY?

Closer to home, I have some experience in running a news site here at Topix, and having talked to Howard while he was at McClatchy (and one of our investors), I am somewhat puzzled since I actually talked him personally about the economics of news search a few years ago.

We've built a site which is,according to comScore, the #2 "newspaper" site online. We actually had a program for a while where' we'd give 50% of all ad revenues back to publishers who wanted to syndicate content to us. Didn't work worth a damn.

Once again, as these newspaper guys struggle to recognize what business they're in, they seem to reach out and attack Google, without even recognizing what it is they're attacking. They don't want to take the time to understand their own business (hint: it's never been "selling content"), so perhaps it's not surprising that they don't bother to understand the business of those they compete against either. And, if anything is causing the industry to falter it's that simple fact. If they can't understand the business they're in (or how others are beating them) then they're not going to do a very good job fixing themselves, will they?

Filed Under: aggregators, business models, chris tolles, economics, howard owens, journalism, news
Companies: google

Want To Know Why Newspapers Are Going Out Of Business? Because Adding Value Never Seems To Be An Option

from the massive-failure-in-action dept

Lots of folks in the newspaper business say that Howard Owens is a guy who really gets the online news business -- and recognizes the challenges and opportunities. I don't know much about him, but I hear such good things from people who I trust, that I have to admit that I'm perplexed by Owens' recent post where he defends GateHouse Media's lawsuit against the NY Times. As you may recall, GateHouse sued the NY Times for effectively aggregating local stories from GateHouse sites and putting them on its own page. These stories all included links back to the original, and didn't include the entire content, but did include the headline and the lede -- which most people (outside of newspaper people) consider to be perfectly reasonable fair use. The NY Times eventually settled in a way that seemed bad for everyone. Owens worked at GateHouse (and was quiet about the lawsuit at the time). He left soon after, and there was some talk that it may have been because he disagreed with the lawsuit -- but that appears to not be the case.

Instead, he has written this lengthy defense of the lawsuit. But rather than vindicate GateHouse, it seems to represent a lot of what's wrong in the online newspaper business these days. When someone who "gets it" like Howard Owens does, and then declares that "I don't know what more we could have done" after describing the various legal threats Gatehouse tossed up against the NY Times, it makes me shake my head.

What more could you have done? You could have competed more effectively. Owens complains about "substitute home pages," where the Boston.com was trying to take away GateHouse's readers. There's a pretty straightforward response to that: if that's all it takes to take away your community, you've failed your community. If the entire value of your site was in providing the headlines and ledes, and someone else copying those headlines and leads causes you to lose the community, you haven't been providing enough value to that community, and you deserve to lose it. Newspapers have neglected their biggest asset, their own communities, for way too long, and this is another example of that. If GateHouse provided a better service where the value went beyond the headline and the lede, there wouldn't be concerns about how such "copying" would take away from GateHouse.

As we've pointed out repeatedly, there are a bunch of sites out there that copy all our content. Not just the headlines and the ledes, but all of the content. Some are pure spam sites. Some are aggregation sites. Some are trying (and failing) to prove the point that we'd get upset if someone copied our stuff. But, that's not what happens -- because this site has much more than just the content. It has the community. It has the Insight Community, where we actually help the community make money. Some of our community members made five figures in 2008. What newspaper has done that for their community? Our community has great ongoing discussions all the time. These other sites can't replicate that. All they can do is end up sending us more traffic.

So, I'm sorry, but the idea that GateHouse Media couldn't do anything else is ridiculous. It's a sign of all that's wrong with online newspapers today. They don't look at all of the amazing things they can do. They just throw up their hands and wonder what they can do, beyond charging people or suing.

Filed Under: adding value, howard owens, newspapers
Companies: gatehouse media, ny times