Monday, April 13, 2009

In Defence of Google - On its role in Newspapers Problems

With the falling circulation and ad revenues, the newspaper industry is unable to make its ends meet. This problem is more pronounced in the developed countries where internet penetration is high. Newspapers satisfied a need of knowing whats happening around us in the world. Though this is a need, it is not so important that people pay any amount of money for obtaining it. More so if the news is general political or daily news which does not have great value as it changes daily and yesterday’s news is not generally uselful. The case is different with niche media which has specific audience and a little more shelf life than a daily. Thus people will not pay more than few dollars (in the US) or few rupees (in India) for reading that news. Previously, newspapers were able to subsidize the costs of newsprint with the ads they put in the paper and ofcourse the small subscription amount which amounted to something. The advent of internet affected the news papers in many ways than one.

1. With the ability to publish information virtually free, more stories are published about any incident without any cost.

2. With the ability to update the information realtime, the need to wait till the next day or next edition of newspaper is gone.

3. With the information already available online before the newspapers and read, people found reading newspaper the next day redundant resulting in reduction in subscription numbers of newspapers resulting in loss of revenue for newspapers

4. With more people reading the news online and ability to target the ads more effectively, the ad dollars moved online thus resulting in less ads on the newspapers resulting in further loss of revenue.

All these conditions sort of reinforced each other resulting in daily newspaper business becoming unsustainable.

The newspapers have to recognize that their business model is no longer effective. It is not that they did not provide any value to the customer, but whatever value they have provided is being provided at a lesser cost and in a better way to the customer. Thats why the readers are willing to leave the printed newspaper in favour of online editions of the news. People in the newspaper industry, rather than understanding the fact and trying to adapt are trying to blame google or trying to protect their content.

But is blame game on google right? Google provides value to the people. It allows us to know which is the best story a particular topic to read. As there are lot of publishers on the net, google does a very valuable job of filtering the news and provide the best of them. Nick Carr says

Wow. “A billion clicks.” “Millions of dollars.” Such big numbers. What Google doesn’t mention is that the billions of clicks and the millions of ad dollars are so fragmented among so many thousands of sites that no one site earns enough to have a decent online business. Where the real money ends up is at the one point in the system where traffic is concentrated: the Google search engine. Google’s overriding interest is to (a) maximize the amount and velocity of the traffic flowing through the web and (b) ensure that as large a percentage of that traffic as possible goes through its search engine and is exposed to its ads. One of the most important ways it accomplishes that goal is to promote the distribution of as much free content as possible through as many sites as possible on the web.

Yes google does that, it organizes the information in a best first manner and it is an enormous service to the people, it does it for free and it is best for the end user. Hence customers and I love it.

The problem is not Google, but their failing business model - The internet has disrupted their business model and now they have to figure out a new business model. Ofcourse, changing their robots.txt file and not getting indexed in google is not at all a solution, but blaming google or trying to extract money from it is also not. So what is the solution? Unwittingly this google-bash post has a solution.

The key to Google’s monopoly control over content distribution on the web is its ability to judge what’s most relevant in an increasingly large sea of content. If media companies want to compete with Google, they need to look at the source of its power — judging good content, which enables Google to be the most efficient and effective distributor of content. They also need to look at Google’s fundamental limitation — its judgment is dependent on OTHER people expressing their judgment of content in the form of links. Above all, they need to look at sources of content judgment that Google currently can’t access, because they are not yet expressed as links on the web.

So they understand that the ability of google to judge whats relevant is their problem - and the simple solution is that if their content is the best they will be rewarded always isn’t it? If the newspapers can give the speed, flexibility and ease of usage and unique content then newspapers can get money. But newspapers compete on ubiquitous content not unique content and I am not sure how much value they will add in reporting facts.!!! This is the whole problem, you have to differentiate yourself to charge more or otherwise why will users pay to you when there are people who are willing to report for free in their blogs?

Current news is always interesting and internet makes it easy to publish and discover. Newspapers which used to do this are not relevant in that segment. Niche papers will continue to to make money. I think the subscription model will not work for normal newspapers as who will be willing to pay for a thing that can be obtained for free? Does it mean that newspapers have to die? They have to adapt to a lean and mean way of doing things. If they differentiate themselves, engage with people and develop a brand, people will come to their site directly without going to google by subscribing to rss feeds or email alerts.

I wondered what we are going to miss by the going away of newspapers? What about the investigative journalism that newspapers do? And seths post on this topic clears all my doubt on that he says -

Punchline: if we really care about the investigation and the analysis, we’ll pay for it one way or another. Maybe it’s a public good, a non profit function. Maybe a philanthropist puts up money for prizes. Maybe the Woodward and Bernstein of 2017 make so much money from breaking a story that it leads to a whole new generation of journalists.

So whats the conclusion ? Newspapers will not remain the current form. Newspapers which embrace the way of doing things on the internet will thrive and grow, others will fail but we will never miss them.

Update: Another post here in support of google

Update: A post here on how the newspapers can earn money. I think this is spot on. And I am sure they will surely be making more money on internet