Journalism June 2010

How to Save the News

Plummeting newspaper circulation, disappearing classified ads, “unbundling” of content—the list of what’s killing journalism is long. But high on that list, many would say, is Google, the biggest unbundler of them all. Now, having helped break the news business, the company wants to fix it—for commercial as well as civic reasons: if news organizations stop producing great journalism, says one Google executive, the search engine will no longer have interesting content to link to. So some of the smartest minds at the company are thinking about this, and working with publishers, and peering ahead to see what the future of journalism looks like. Guess what? It’s bright.

Display ads. The idea for improving display-ad prospects begins with insignificant-sounding adjustments that have great potential payoff. For instance: Neal Mohan of Google pointed out that news organizations now typically sell their online ad space in two very different ways. Premium space—on the home page, facing certain featured articles or authors—is handled by “direct sales,” through the publication’s own sales staff. “Remnant” space, anything left over, is generally franchised out to a national sales network or “exchange” that digs up whatever advertisers it can. Publications decide on the division of space ahead of time, and hope the real-world results more or less fit.

One of Google’s new systems does for online ad space what the airlines’ dreaded “yield management” systems do for seats on a plane. Airlines constantly adjust the fares on a route, and the size of the planes that will fly it, toward the goal of making each plane as full as it can be before it takes off. The Google system does the same thing, allowing publishers to adjust the allocation of high- and low-priced space, second by second. “Your top salesperson might just have had dinner with the biggest client, who decides to run a big campaign,” Mohan told me. The dynamic allocation system ensures that the publisher doesn’t lose a penny of potential ad revenue to avoidable supply/demand glitches. If an advertiser wants to spend more on “premium” ads, the necessary space will be automatically redeployed from lower-value sections. “We think publishers should always monetize for the highest value,” Mohan said. He could tell that my reaction was “Duh!” so he went on to say, “Day by day, across billions of ad impressions, this makes a tremendous difference.” Yield management has allowed airlines to survive; according to Mohan, the advertising equivalent in Google’s new system “has generated a lift for publishers of 130 percent, versus what they did when dividing the space themselves.”

Mohan suggested a variety of other small but significant operational improvements, which together led to a proposal so revolutionary that it challenges all despairing conclusions about the economic future of the press. Newspaper and magazine publishers have felt trapped by the death of print, he says, because display ads in print have been such a crucial cash cow. The switch to online display ads has not offset the losses in print, since the “per eyeball” revenue from online display ads has been so much lower. (“Is that because they’re so much less attractive?” I interrupted to ask, adding, “A good print ad can look better than the article next to it, while an online display ad can just be a nuisance.” “No offense taken!” he said wryly: his life’s work is these ads.) Online display ads may not be so valuable now, he said, but that is because we’re still in the drawn-out “transition” period. Sooner or later—maybe in two years, certainly in 10—display ads will, per eyeball, be worth more online than they were in print.

How could this be? In part, he said, today’s discouraging ad results simply reflect a lag time. The audience has shifted dramatically from print to online. So has the accumulation of minutes people choose to spend each day reading the news. Wherever people choose to spend their time, Mohan said, they can eventually be “monetized”—the principle on which every newspaper and magazine (and television network) has survived until today. “This [online-display] market has the opportunity to be much larger,” he said. It was about $8 billion in the U.S. last year. “If you just do the math—audience coming online, the time they spend—it could be an order of magnitude larger.” In case you missed that, he means tenfold growth.

The best monetizing schemes are of course ones that people like—ads they enjoy seeing, products for which they willingly pay. Online display ads should be better on these counts too, Mohan said. “There are things we can do online that we simply can’t do in print,” he said. An ad is “intrusive” mainly if it is not related to what you care about at that time. (I pore over unadorned tiny-print ads in hobbyist publications I care about; I skip past beautiful pictures for, say, women’s fashion, which I don’t know about.) “The online world will be a lot more attuned to who you are and what you care about, and it will be interactive in a way it never has been before.” Advertising has been around forever, Mohan said, “but until now it has always been a one-way conversation. Now your users can communicate back to you.” His full argument is complex, but his conclusion is: eventually news operations will wonder why they worried so much about print display ads, since online display will be so much more attractive.

Hal Varian pointed out that people who read printed newspapers report spending an average of about 30 minutes a day with them, whereas online users flit in and out of news sites in an average of 70 seconds. Eventually they’ll spend more, if never quite as much as with a newspaper. At that point, he said, “you’ll be as valuable to advertisers as you ever were—if anything, more so, since advertisers can probably have a better-focused ad.” They won’t be telling me about strollers and toddlers’ clothes when my children are in college; they won’t be telling families with young children about leisure cruises.

“I am a growing-pie guy,” Mohan said, referring to the total ad money that flows toward news sites. (As a physical specimen, he is reasonably trim.) “The audience is there, and the dollars will follow. I would argue that publishers will ultimately do better in the digital world. That bodes well for everybody who is going through this shift.”

When I later spoke with Eric Schmidt, I asked whether this growing-pie proposition was a widely shared view. “It is my view,” he said. Maybe such statements will prove inaccurate, but considering the source, they can’t be ruled out as naive.

Designing the paywall. The other hugely consequential effort Google is exploring involves reviving the idea of “subscriptions”—the quaint old custom of an audience paying for what it receives. Most Google people I spoke with had zero interest in the paywall question as an abstraction, because it seemed so obvious that different publications in different circumstances with different business models will make different decisions about how customers should pay.

“If you go back through history, content has always been monetized across a broad spectrum,” Nikesh Arora said. “You could buy a journal for a $1,000 subscription price and an audience of 1,000. Or you could pick up a newspaper that is given out free on the Metro. People have adjusted their cost curves to their own form of monetization. The Harvard Business Review is not fretting about a loss of advertising [most of its revenue comes from subscribers]. The free Metro paper is not fretting about low subscription income. They have different business models, and the same principle will apply on the Internet.” Before, “publishing” meant printing information on sheets of paper; eventually, it will mean distributing information on a Web site or mobile device. That shift, according to Arora and others, will not force news companies into a limited range of business choices. If anything, it should allow for even more variety.

“We don’t want to encourage anyone to start charging for content, or not to charge for content,” Chris Gaither said. “That is entirely up to them.” But Google teams based in Mountain View and New York have been working with newspapers and magazines on the surprisingly complex details of making any kind of payment system work. Paywalls themselves come in a wide variety: absolute barriers to anyone who is not a subscriber, metered approaches that allow nonsubscribers a certain number of free views per day or month, “first click free” schemes to let anyone see the start of an article but reserve the full text for subscribers, and many more. Each involves twists in how the publication’s results show up in Google searches and on Google News. For instance: if you are a paid subscriber to the Financial Times, any Web search you run should include FT results—and indeed rank them all the higher, since your status as a subscriber means you place extra value on the paper’s reports. If you don’t subscribe, those FT links should come lower in the search results, since you won’t be able to read them—but the results should still appear, in case you decide you want them enough to subscribe. But when you run the search, how can Google tell whether or not you subscribe? How can it know that you are you, whether you’re using your computer, or a friend’s, or one at an Internet café, or an iPhone? And how can its Web crawlers index the FT’s stories in the first place, if they’re behind the paywall? All these questions have answers, but they’re not always obvious.

“We often hear from publishers saying, ‘We’re thinking of this approach, and we want to understand it fully,’” Josh Cohen told me. “‘We want to be sure this works the way we intend it to work. Can you give it a look?’We will tell them how their ideas would turn out with our system.” Then, without giving the newspaper’s name or the proprietary details of its specific plan, the Google team will also post its findings and advice on its public Web site. And for publications thinking of the “E-ZPass” approach—some automatic way to collect small per-article charges without slowing the user down or involving cumbersome forms—another Google team is working on the practicalities.

As for the very idea of paid subscriptions: How can they have a future in the Google-driven world of atomized spot information? “It is probable that unbundling has a limit,” Eric Schmidt said. Something basic in human nature craves surprise and new sources of stimulation. Few people are “so monomaniacal,” as he put it, that they will be interested only in a strict, predefined list of subjects. Therefore people will still want to buy subscriptions to sources of information and entertainment—“bundles,” the head of the world’s most powerful unbundler said—and advertisers will still want to reach them. His example:

“It’s obvious that in five or 10 years, most news will be consumed on an electronic device of some sort. Something that is mobile and personal, with a nice color screen. Imagine an iPod or Kindle smart enough to show you stories that are incremental to a story it showed you yesterday, rather than just repetitive. And it knows who your friends are and what they’re reading and think is hot. And it has display advertising with lots of nice color, and more personal and targeted, within the limits of creepiness. And it has a GPS and a radio network and knows what is going on around you. If you think about that, you get to an interesting answer very quickly, involving both subscriptions and ads.”

This vision, which Schmidt presented as utopian, helps illustrate the solution Google believes it will find; the problem it knows it can’t solve; and another problem that goes well beyond its ambitions.

The solution is simply the idea that there can be a solution. The organization that dominates the online-advertising world says that much more online-ad money can be flowing to news organizations. The company whose standard price to consumers is zero says that subscribers can and will pay for news. The name that has symbolized disruption of established media says it sees direct self-interest in helping the struggling journalism business. In today’s devastated news business, these are major and encouraging developments, all the more so for their contrast with what other tech firms are attempting.

The problem Google is aware of involves the disruption still ahead. Ten years from now, a robust and better-funded news business will be thriving. What next year means is harder to say. I asked everyone I interviewed to predict which organizations would be providing news a decade from now. Most people replied that many of tomorrow’s influential news brands will be today’s: The New York Times, The Wall Street Journal, the public and private TV and radio networks, the Associated Press. Others would be names we don’t yet know. But this is consistent with the way the news has always worked, rather than a threatening change. Fifteen years ago, Fox News did not exist. A decade ago, Jon Stewart was not known for political commentary. The news business has continually been reinvented by people in their 20s and early 30s—Henry Luce when he and Briton Hadden founded Time magazine soon after they left college, John Hersey when he wrote Hiroshima at age 32. Bloggers and videographers are their counterparts now. If the prospect is continued transition rather than mass extinction of news organizations, that is better than many had assumed. It requires an openness to the constant experimentation that Google preaches and that is journalism’s real heritage.

The challenge Google knows it has not fully coped with is a vast one, which involves the public function of the news in the broadest sense. The company views the survival of “premium content” as important to its own welfare. But Schmidt and his colleagues realize that a modernized news business might conceivably produce “enough” good content for Google’s purposes even if no one has fully figured out how to pay for the bureau in Baghdad, or even at the statehouse. This is the next challenge, and a profound one, for a reinvented journalistic culture. The fluid history of the news business, along with today’s technological pattern of Google-style continuous experimentation, suggests that there will be no one big solution but a range of partial remedies. Google’s efforts may have bought time for a panicked, transitional news business to see a future for itself and begin discovering those new remedies and roles.

Presented by

James Fallows is an Atlantic national correspondent; his blog is at More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.


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