About two years after The New York Times and The Washington Post debuted their own independent Web sites (that wasn’t until 1996!), two Stanford students, Sergey Brin and Larry Page, launched a search engine called Google. Their motto— first uttered by engineer in 2001 and reiterated in the company’s IPO filing in 2004—would eventually become “Don’t Be Evil.”
It would be a few years before Google graduated from being America’s favorite search engine to arguably the single most powerful force in online journalism.
It began with the debut of Google News, launched in September 2002. The threat, that a news site bringing together content from across the web would break loyalties to hometown homepages, was obvious. Google News algorithms crawl the Web, aggregate headlines from more than 4,500 English-language news sources and then display several articles in clusters, based on topic and date. Articles are chosen based on how often and on what sites a story appears online. Google News claims that no human editors are handpicking stories or deciding which ones deserve top placement. “Traditionally, news readers first pick a publication and then look for headlines that interest them,” according to Google News’ “about” page. “We do things a little differently, with the goal of offering our readers more personalized options and a wider variety of perspectives from which to choose.”
But it was a revolution in online advertising a year later, with the advent of AdSense in 2003, that a less public but more serious threat to the revenue models that were widely thought would soon support journalism online began to grow.
Advertisers and Web sites signed up for AdSense because it made advertising easy and cheap. Google’s program matches text, picture and video ads to the particular site’s content and users. Publishers earned money from clicks or “impressions,” or loads of an ad on the site. But Google essentially cut the revenue of newspapers by adding themselves in as middle men.
Robert Thomson, the managing editor of The Wall Street Journal, one of the few newspapers that charges successfully for its news site, recently described how Google eats away at everyone’s profits on The Charlie Rose Show. “I mean, the harsh way of just defining it, Google devalues everything it touches,” he said. “Google is great for Google, but it’s terrible for content providers, because it divides that content quantitatively rather than qualitatively. And if you are going to get people to pay for content, you have to encourage them to make qualitative decisions about that content.”
The serving of these lower-cost remnant ads decelerated a process that journalism had come to depend upon, according to Jean-Philippe Maheu, chief digital officer at Ogilvy, the advertising firm.
“Right now if you look at newspaper and publishing houses, they do make money with digital advertising,” he told The Observer. “The challenge is that revenue decline on the print side is moving faster than the growth of online revenue. That leaves a gap. A sizable gap. That’s what you see for the major newspapers.”
“Until the very end of last year we were growing dramatically in terms of our display advertising online,” Denise Warren, general manager of NYTimes.com and senior vice president and chief advertising officer for the New York Times Media Group, told The Observer. “And our forecast—until the recession and its impact really became clear—was significant online advertising growth. What is difficult right now is to determine what the impact of the recession will be and how long that’ll last versus were there true business prospects for Internet advertising.”
Meanwhile the advertising dollars are going largely into higher-margin businesses that do not have to pay to maintain foreign bureaus, television studios, production departments or journalists’ salaries.
“It’s our judgment that we significantly outperformed the marketplace last year in terms of our revenue performance,” Ms. Warren said. But it’s a small marketplace for newspapers. “There’s a pie of display advertising. Google, Yahoo do take 60 percent, 70 percent—I don’t know what the numbers are—of the revenue off the table in terms of percentage of the pie that goes to search advertising; and there’s a percentage for everyone else.”
“Everybody loves to hate Google and I think that’s quite frankly an excuse,” Ms. Warren said. “You have to figure out how to generate revenue from your readers and/or from your advertisers. And you have to be focused to get that done. To blame Google? Or anyone else? To me, it’s kind of a waste of energy. We don’t do that.”
So perhaps instead of fighting Google for that 60 percent of the pie, news media ought to make themselves first on the next wave of advertising revenue possibilities. That means that The News must make itself a player in the larger online business.
They are already falling behind.