Friday, July 17, 2009

Time for news to play offense: how David can attack Goliath (and win)

If you don’t think paid content can ever pay the freight for professional journalism – and I don’t – then what hope is there for news companies?

Well, the good news is that there’s plenty of money being made on content online. On the other hand, the news companies have to be willing to fight for it.

Google, Yahoo, MSN and AOL are making more money from online content than the newspaper industry makes from everything. Many billions of those dollars are tied directly to the distribution of news and news searches, and that’s the money news companies must find a way to get.

Let’s say those online giants – call them GYMA – make $15 billion a year from news and news-related content (searches, archives, etc). I think that’s a conservative guess.

If we could find a way to get just 10 percent of that – $1.5 billion – pumped into American newsrooms, the impact would be direct, immediate and dramatic. The layoffs could stop, and owners would have breathing room to address strategic questions instead of constantly bailing water to keep the boats afloat. Newsrooms could start hiring the kind of people they need to create the journalism of the future.

Too often, executives and editors I talk with at news companies act like that’s impossible. You can’t compete with Google, they say, grasping instead for legislation or regulation to let them keep their content behind pay walls, away from GYMA altogether. They somehow think their content is valuable enough to charge readers for, but not valuable enough to compete in a marketplace that’s already proven extremely lucrative and attractive to consumers.

Say that again: valuable enough to sell to people who haven’t been willing to buy it so far, but not valuable enough to compete with GYMA? Not good enough to capture 10% of their ad revenue?

That’s a losing strategy. And it’s wrong.

I’m a real dinosaur in the news business in one respect, at least: I spent the first 20 years of my career in life-or-death competition for readers and revenues. The good guys won (that was us) and I’ve never flinched from a competitive fight since.

Not many news executives and editors nowadays were lucky enough to have that seasoning. The newspaper industry as a whole was monopolistic in many important ways over the last 40 or 50 years. Truth is, it was easy to make money for most of them.

I’ve often heard McClatchy’s Gary Pruitt say the news business in that era proved the wisdom of Warren Buffet’s admonition to “always invest in a company that can be run by a complete idiot – because sooner or later, it will be.” When the Anniston Star’s owner (Brandy Ayers) announced in 2003 that he was creating a foundation to keep the paper he inherited independent and reinvest profits in community and academic affairs, he told ASNE he had been raised in a great newspaper tradition with “the twin blessings of monopoly and nepotism.”

News companies no longer have either: few are nepotistic these days, and the notion of monopoly is a distant, dimming memory.

To win and survive in the future, they need to look back instead to a tradition that used to define the industry: competitive fire.

An old politician in Juneau once reminded me that “you can’t beat something with nothing.” Newspapers won’t beat Google or other aggregators by building pay walls and leaving the field of battle. To win, they need to provide something better than GYMA. That’s where the money is – that $15 billion isn’t theoretical – and besides, open competition is the only way to keep serving a mass audience, which is their mission.

The good news is that they already have a product that can beat even Google in the news business: curated, edited, verified, sorted news – not just an exhaustive list of stories, but the news that matters most. What they don’t have is any way to play on the same field as Google. They lack the scale and internet savvy to put that product in front of consumers who want it and for whom advertisers will pay. Google has proven that works; what news companies have to do is take some of that money away.

Google’s algorithims are a wonder of the world, by far the best at sorting and retrieving static information of all kinds. What they don’t do very well is sort through information on the basis of trustworthiness: which is best, most reliable, most accurate? “We have not come up with a way to algorithmically handle that in a coherent way,” Google CEO Eric Schmidt told the NAA last April.

Well, journalists can and do handle that in a coherent way, every minute of every day.

The problem for news companies is that Google spans the globe, and they individually can’t. Only by banding together to offer the collective judgment of thousands of journalists about hundreds of relevant stories and presenting that in web-savvy ways can they reach the scale necessary to win a share of the billions already flowing to Google, Yahoo, AOL and MSN.

Disclosure: I am on the board of a company (Publish2) that is finalizing plans we think could do just that – and something Google never will: share 50% of the revenue with those who create the stories. Others are also looking at or thinking about ways to address the need for joint, competitive action. For any to succeed, the news companies will have to stop building walls and find the nerve to play offense again. They will have to work together and win by offering a better product. They will have to do it soon.

The Anchorage Daily News was just beginning to win its 40-year battle with the Anchorage Times when that once-dominant paper was sold to a rough-and-tumble oil millionaire with deep pockets and a reputation for ruthless competition. It seemed like everybody I talked to after that said something like, “You must be scared now that you have to compete with Bill Allen.”

Honestly, I wasn’t. “If I wanted to compete in the oilfield services business, I’d be terrified,” I told them. “But in the news business, Bill Allen ought to be terrified of us.”

After spending two years and a reported $40 million learning that, he folded the Anchorage Times.

I’d be terrified to think about competing with Google on anything involving algorithms. But when it comes to news judgment, they ought to be terrified of us.


  1. This sounds intriguing. I look at the problem in another way - link below. You might think I'm out of my mind. If so, please help me see why.

  2. I never read a newspaper; only started reading the news when it came online for free. If they put it behind a paid wall; I'm going to split the cost 1,000,000 ways & coordinate a cut & paste of every issue every day in a shared, internal Google doc; and newspaper profits be damned.

  3. "If we could find a way to get just 10 percent of that – $1.5 billion – pumped into American newsrooms, the impact would be direct, immediate and dramatic. The layoffs could stop, and owners would have breathing room to address strategic questions instead of constantly bailing water to keep the boats afloat. Newsrooms could start hiring the kind of people they need to create the journalism of the future."

    Except you need that breathing room to address strategic questions so that you can in fact get that 10 percent. You also need those people you already laid off in addition to those kind of people needed to create the journalism of the future.

    In short, newspapers are screwed. They squandered their resources when the had them ("the internet is a fad") but now that it has become frightening clear that the world has changed in spite of them, there's not a whole lot left in the way of resources for most newspapers (and newspaper companies) to fight this fight.


    Unless newspapers (or newspaper companies) take the stance that this is in fact a life or death struggle and fought not for some level of mediocracy and "goodenoughism" but to either come out on top... or die.

    So on that line, what if Gary Pruitt stood up and said, "In 5 years MNI will either be on top of it's game, on top of the markets, stronger than it ever was historically... or completely out of business!" And then threw down the gauntlet. Under his inspired guidance his papers would hire back the legions they laid off, and then hire even more only with the web savvy that MNI still lacks.

    Money would be lost up front, of course, but over the long term?

    You know, a lot of people have said that newspapers can't compete with Google in technology. Why not? Heck, it took 6 people with a Knight Foundation grant to build Everyblock. Is MNI incapable of hiring 6 more smart and dedicated people? Even Craigslist still employs under 30 people. How many are at Publish2 or Daylife? Hire them too.

    Or is it too late?

  4. Anonymous5:25 PM

    >that $15 billion isn't theoretical

    Howard, can you sketch out why you think that's the right ballpark? Google owns 81 percent of search activity (according to and just reported quarterly revenue of $4 billion. That suggests all revenue from search is less than $20 billion per year (probably well below, because Yahoo, Microsoft and AOL aren't as good as Google at turning clicks into dollars).

    Do you really think 75 percent of all searches are for news? And do you have any data to back that up?

  5. Anon 525: Google revenue was $22 billion in 2008 and is expected to be bigger in 2009. 99& of Google revenue is search advertising. It's harder to peg Yahoo or AOL and, even more, MSN since search is mixed into a more varied revenue streams there, but the total of the GYMA I mentioned is surely closer to $40 billion than $20 billion.

    I believe the percentage of news searches (broadly defined) is more than 25% but of course we can't know for sure, since that's proprietary info at those companies.

    But I am drawing a broad picture here: maybe I am too generous. Suppose it's only $10 billion, or $7.5. But I also believe a well-payed news aggregation by journalists could capture way more than the 10 percent I cited in the post.

    The point remains: there is a lot of money floating around that news companies get NONE of. Journalist judgment can beat algorithms if we give them a solid platform from which to fight.

  6. The news searches don't bring in the dough, Howard. Google serves up a lot of news search results but those pages aren't where it makes the money. If anything they are loss leaders for Google; its users want news, so Google gives it to them. But search advertising is lucrative because search engines can sell narrow searches in certain product areas as leads to companies that are willing to pay a lot. News content, sadly, doesn't lend itself well to such advertising. That's not where the big margins are. That's why the news providers have zero leverage with Google.

    There's no pot of gold here for news providers, I'm sorry to tell you, and the $15 billion figure is astronomically off.

  7. Scott -- Thanks for taking time to look at this, and for your comment.

    I can't imagine how you'd know which search categories Google makes what kind of money from. Yahoo doesn't know that. Microsoft doesn't.

    For starters, you suggest there's "one kind" of advertising that matters. That's wrong. I don't pretend to know precise inside numbers, but I doubt that you do either. I am not, however, uninformed or unconnected. This isn't a WAG on my part.

    Your focus on precise analysis seems like a classic case of missing the forest by looking at trees. It doesn't matter what the precise numbers are. I'm confident that it's billions and it's money that news orgs aren't getting. You don't need a formal study to see the market opportunity - that's just another excuse to hide from the challenge. How can news orgs afford not to compete for every penny? Never before have they conceded a huge bucket of money to competitors.

    Salon has been in the game a long time, and I'm sure you know a lot about this landscape. I think it's a mistake to extrapolate that experience so categorically here.

    What's your suggestion for news?


  8. The competitive opportunity today isn't relative to Google. That battle is decided, and even Microsoft, a huge rich company deeply rooted in competing in tech, can't make a dent.

    However, the field is fairly open in TwitterLand, and the news people are pretty far along in understanding and loving that medium. That's where I'd launch the campaign Howard, create a Twitter that's perfect for news and you'll really have something. The Twitter guys don't understand news. By definition, news people do. You do, that's for sure.

  9. We actually have a lot of data on where Google makes its money, without being insiders. Just look at where the ads are. Google News is a tiny part of Google's traffic, and it has no ads, so Google loses money on it, if anything. With Google search, just poke around on most news topics --try today's stories "Walter Cronkite" or "health care reform" -- and you'll see few or no ads on those pages. Or ask any news publisher who has experimented with putting google's text ads on their news pages. It's not a good fit. The revenue has consistently been disappointing. Even if publishers cut a better deal with Google and got 100 percent of the revenue it would be disappointing. It won't support a newsroom.

    The real money in search comes from directed product searches, searches in areas where people are making choices among vendors, and so on. See any major study of Google, from john Battelle's on.

    I don't consider this "precise analysis" but rather common sense based on my own experience as an online publisher and a longtime user of Google.

    If you want news orgs to "compete for every penny," that's great. But I don't see how looking enviously at Google's profits and thinking that one's own business deserves a share of them is "competing." If news organizations really had leverage with Google -- if they really could hurt Google's bottom line by seceding from it -- that would have happened long ago. They don't. Google provides them with a service (traffic) pretty much gratis.

    I understand that you're proposing a more sophisticated response -- not "hey Google, share the wealth!" but "How can we grab a slice of that pie away from Google?" A successful venture like you're proposing -- a conglomerate of news providers that does a good job sorting out trustworthy information, etc. -- would be a fine thing. But I don't see how it wins a slice of Google's pie when, as I think any simple analysis will show, that pie isn't news-based to begin with.

    My suggestion for news is for individual journalists to get creative on a small scale. As many of us are doing. We're going to have to rebuild this industry from the ground up. We've begun. I don't see a good business future for large news organizations right now. They've made too many mistakes for too many years, long before the Web. My newspaper was scratching its head trying to figure out why it was losing young readers in the 1980s when I started there. Did they spend much of their parent corporation's vast profits over the next two decades figuring out the future? No. They were happy monopolists and they blew it.

    Google's hegemony will pass, too. New forms of information delivery are beginning to form around Twitter and that's only going to grow. The biggest advances in tech and media happen when you leapfrog an industry leader. No one is going to beat Google at search. But search isn't everything.

    That's why, to me, it seems self-defeating to focus our energy on Google's profits. News orgs missed that boat. People who care about the future of news should be looking, and experimenting, beyond that.

  10. Here you go Alan. Marissa Meyer said Google make $100m from news in 2008:

    Found with a search for "google news" + revenue.

    * sigh

  11. Daniel: I answer you on this in Twitter; I'll do it again here.

    Google News, the branded page, is a tiny piece of this. Pretty much everybody knows the page isn't very valuable. "News search" on the other hand, includes every time somebody searches for a news item in Google's general search (almost nobody goes to Google News before searching generally), and every time the answer Google returns comes from a news organization.

    Yeah, go ahead and search "google news" + revenue. Your wildly inappropriate conclusion demonstrates my point about undifferentiated results from searches.

    I'd recommend you look to Scott Rosenberg (above) or others like him for an example of a nuanced, sophisticated (and thus useful) critique.

    You gave me a "tsk" the first time and now a "sigh." Can't tell, but I don't feel like you're hearing me (or want to).

    Short version: citing Google News means nothing (or only $100 mm, close enough).

  12. Anonymous5:47 PM

    The idea that newspapers could avoid extinction by shaking down Google et. al. is at best naive. This is a course that leads to the enrichment of lawyers, nothing else.

    Newspapers probably won't survive. But if they do it will be because they are *not* run by morons trying to maintaain the status quo while pointing their fingers at Google. Google is an act of God; you might as well blame tornadoes for killing newspapers.

  13. Items from News presented in google general (or "blended") search link directly to third party news does that earn google revenue? How would it even get close to closing the gigantic gap between the figure you used and Google's statment?

    Sure it makes their search engine more valuable, but not at the expense of the traditional news industry which only benefits from this exposure.

    My Tsking and sighing isn't because I don't want to hear you - I would love to hear intelligent and well researched comment on this from traditional newsrooms and the people that make their livings from them. Unfortunatly there's precious little of that to be seen in this debate.

  14. The big search player is certainly Google, but the big news player is Yahoo.

    I agree that online newspapers need to do things differently, but I would go way beyond what you're talking about Howard. I think the problems stem from the hubris of the editorial decisions made every day inside the walls of the newspapers.

    I see you reply to comments, how often do you see that at a news website?

    Why aren't the writers encouraged to build a following? How can their editor not make them snap a couple digital photos at the event they're covering? How about a Flip video camera?

    How about rewarding the writers that get traffic and letting go of the ones that just phone it in?

    It's a cultural change that must happen, and the current guys may not see it, but the kids in college right now will never work in a news organization as insulated as the very ones dying off right now.

    I believe the key is to let them die. Their replacemnt will be a better, faster, smarter. more connected, more networked, more social, and hyper-local version - like the ones 200 years ago.

  15. Anon 547: Please show me any place in my post that suggests "shaking down" Google. It's about providing a service they don't (curated news) to meet audience needs.

    Google is an act of God? Are you sure you're not Jeff Jarvis?

  16. Daniel: when a Google searcher makes a request that turns up a result from a news organization, Google monetizes *that page* before sending the traffic along. If the news org was in partnership with the aggregator, a portion of the initial monetization could go to them; with Google it never will, as why should it?

    What I am really proposing is to offer a service Google does not: curated news results. Maybe people want it, maybe not. I can't understand what you object to about that, or why you're so snotty about it.

    Looking for "intelligent and well researched" material, are you? Maybe something like offering "Google News" + revenue and thinking that defines Google's income from news? Please.

  17. I'm being snotty because the sense of entitlement & grossly overinflated estimates of how much traditional news is worth to search engines are hugely counter productive. I care a great deal about the survival of traditional newsrooms, so it's frustrating to see traditional newspapermen failing to "get it" in such a jarring way.

    As others have pointed out above, news related searches are a loss leader...Google could remove them from their results tomorrow and revenue would fall by a fraction of one percent. 1, 10, or even 100% of this revenue will not save the newspaper industry. Are you really still clinging to the notion that there's a $15 billion pot of news gold out there to be had? If so would you care to say how you arrived at this figure? Obviously I'm not alone in believing the worth of News to Google et al is significantly less than you believe.

    As for curated news, I've got no objections and I'm happy to see any ideas that might help traditional journalism. However, you seem to be way off base on the revenue available from news online, not to mention how Google works (their algorithms might not be perfect but they are heavily focussed on recognizing factors like trust and authority), which gives me little hope for the project. I'm also not sure what would distinguish your curated news from existing offerings (be they from the mainstream press, sites like HuffPo or even the Diggs of this world), but that's another story.