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May 14, 2009, 1:11 p.m.

Maybe Google needs newspapers

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Google has steadily and politely resisted suggestions from various quarters that since it has so much cash and clout, it should just rescue the newspaper business.  Wisely, they have stuck with the mantra that they are out to organize information, not to publish content.

But this week we hear that Google is in negotiations with the New York Times and the Washington Post (and, one assumes, possibly others) “about improved ways of creating and presenting news online.” And Richard Siklos at Fortune reports that an intermediary tried to interest Google in “buying the Times.”

Nicholas Carlson at Silicon Valley Insider mentions a couple of possible ingredients in the Times/Google talks:

  • A potential agreement in which any time Google’s search crawlers find a Web site carrying New York Times content and Google ads, Google would split the revenue it gets from those ads with the Times.
  • Google would somehow help the New York Times actually embed ads within its text so that when blogs or other Web sites use that text, the ads go with it. We have no idea how Google and the Times would do this. Neither does our source.

The latter is certainly something that a news organization allowing fairly free use of its content via an API would want to be exploring.

Two recent blog posts offer other possible explanations for the schmoozing between Google, Times and WaPo execs:

One is Sharon Waxman’s gossipy report a few weeks ago reporting what Google CEO Eric Schmidt told her at a cocktail party:

In about six months, [Google] will roll out a system that will bring high-quality news content to users without them actively looking for it.

Under this latest iteration of advanced search, users will be automatically served the kind of news that interests them just by calling up Google’s page. The latest algorithms apply ever more sophisticated filtering – based on search words, user choices, purchases, a whole host of cues – to determine what the reader is looking for without knowing they’re looking for it.

And on this basis, Google believes it will be able to sell premium ads against premium content.

The first two news organizations to get this treatment, Schmidt said, will be the New York Times and the Washington Post.

That’s not too specific, either, but I would guess that when Google drops a hint that your organization will be “getting the treatment,” you’d better find out what that’s all about. Google is not in the habit of telegraphing what it’s going to do six months from now, so it’s entirely possible that this was an intentional leak designed to get the attention of publishers.

Another possibly relevant factoid came from Tom Foremski at SiliconValleyWatcher, who points out that newspapers are actually better at monetizing content than Google:

GOOG’s profit margin on search advertising is 39%

GOOG’s profit margin on content advertising is about 4.5%

Google is great at monetizing search but really bad at monetizing content.

Media companies are better at monetizing content. The New York Times Co. in 2008 had an operating profit of 5% (not including impairment of assets costs.)

And of course, that’s 5 percent profit at the Times in a really bad year, versus more typical newspaper operating profits in the double digits. This being the case, Google might well be interested in picking brains at the Times and Post, and possibly collaborating on mutually improving content advertising performance.

Note:  the first paragraph of this post disappeared when first posted, but has been restored 5/14 5:42 p.m.

Photo credit: Adriaan Bloem, used under Creative Commons license.

POSTED     May 14, 2009, 1:11 p.m.
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