Photos byRobyn Twomey/Redux (Above: Hal Varian, Google's chief economist)
Slideshow: "A Google-Eye View of the Newspaper Business"
A presentation by the company’s chief economist, Hal Varian
Everyone knows that Google is killing the news business. Few people know how hard Google is trying to bring it back to life, or why the company now considers journalism’s survival crucial to its own prospects.
Of course this overstates Google’s power to destroy, or create. The company’s chief economist, Hal Varian, likes to point out that perhaps the most important measure of the newspaper industry’s viability—the number of subscriptions per household—has headed straight down, not just since Google’s founding in the late 1990s but ever since World War II. In 1947, each 100 U.S. households bought an average of about 140 newspapers daily. Now they buy fewer than 50, and the number has fallen nonstop through those years. If Google had never been invented, changes in commuting patterns, the coming of 24-hour TV news and online information sites that make a newspaper’s information stale before it appears, the general busyness of life, and many other factors would have created major problems for newspapers. Moreover, “Google” is shorthand for an array of other Internet-based pressures on the news business, notably the draining of classified ads to the likes of Craigslist and eBay. On the other side of the balance, Google’s efforts to shore up news organizations are extensive and have recently become intense but are not guaranteed to succeed.
That this campaign is under way is surprising in its own right, as is its strong emphasis inside the company as a significant strategic measure. Most Internet and tech businesses have been either uninterested in or actively condescending toward the struggles of what they view as the pathetic-loser dinosaurs of the traditional media. (What is the Craigslist vision for sustaining the news business? Facebook’s? Microsoft’s?) Google’s projects have hardly been secret, since most of them involve collaboration with major newspapers, magazines, and broadcast-news organizations. This April, the company’s CEO, Eric Schmidt, delivered a keynote address to the major news editors’ convention, telling them “we’re all in this together” and that he was “convinced that the survival of high-quality journalism” was “essential to the functioning of modern democracy.” Last December, he wrote an op-ed in The Wall Street Journal announcing that Google would be going out of its way to devise systems that would direct more money toward struggling news organizations—rather than, as many in the news industry assumed, simply directing more of everyone else’s money toward itself. Publishing this in The Journal was a piquant touch, since the paper’s owner, Rupert Murdoch, has frequently denounced Google’s effect on the news industry.
Still, compared with what it could have been saying about its strategy toward news companies, Google has undersold its efforts and rarely talked about them as an overall program with a central guiding idea. Partly this is because of the highly decentralized nature of most innovative effort at Google, which often takes place in “20 percent time”—a workday per week when developers can concentrate on projects they choose themselves. Partly it is because of the “permanent beta” culture at Google, in which projects are viewed as tentative and experimental long after they have reached what others would consider a mature stage. (The company’s wildly popular e-mail system, Gmail, officially graduated from beta-test status only last summer, after five years of operation by tens of millions of users worldwide.) And the news organizations that are trying out experimental approaches at Google’s suggestion and with its support have themselves chosen to be quiet.
But after talking during the past year with engineers and strategists at Google and recently interviewing some of their counterparts inside the news industry, I am convinced that there is a larger vision for news coming out of Google; that it is not simply a charity effort to buy off critics; and that it has been pushed hard enough by people at the top of the company, especially Schmidt, to become an internalized part of the culture in what is arguably the world’s most important media organization. Google’s initiatives do not constitute a complete or easy plan for the next phase of serious journalism. But they are more promising than what I’m used to seeing elsewhere, notably in the steady stream of “Crisis of the Press”–style reports. The company’s ultimate ambition is in line with what most of today’s reporters, editors, and publishers are hoping for—which is what, in my view, most citizens should also support.
That goal is a reinvented business model to sustain professional news-gathering. This is essential if the “crowd sourcing” and citizen journalism that have already transformed news coverage—for instance, the videos from inside the Iranian protests last summer—are not to be the world’s only source of information. Accounts like those are certainly valuable, but they will be all the more significant if they are buttressed by reports from people who are paid to keep track of government agencies, go into danger zones, investigate and analyze public and private abuse, and generally serve as systematic rather than ad hoc observers. (I am talking about what journalism should do, not what it often does.)
Google’s likely route toward this destination, however, differs in crucial and sometimes uncomfortable ways from the one the existing news business would probably choose on its own. The differences are natural, given the cultural chasm that separates a wildly successful, collectively cocky, engineer-dominated, very internationally staffed West Coast tech start-up from a national news establishment that is its opposite in all ways: East Coast–centric, liberal arts–heavy, less international in staff and leadership (more Brits and Australians than in the tech industry, fewer Indians, Chinese, and Russians), dominated by organizations founded in the distant past, and at the moment strikingly downcast and even panicked.
Here’s an important illustration of the difference: people inside the press still wage bitter, first-principles debates about whether, in theory, customers will ever be willing to pay for online news, and therefore whether “paywalls” for online news can ever succeed. But at Google, I could hardly interest anyone in the question. The reaction was: Of course people will end up paying in some form—why even talk about it? The important questions involved the details of how they would pay, and for what kind of news. “We have no horse in that race or particular model in mind,” Krishna Bharat, one of the executives most deeply involved in Google’s journalistic efforts, told me, in a typical comment. His team was already working with some newspapers planning to put their content behind paywalls, others planning to remain free and hoping to become more popular with readers annoyed when paywalls crop up elsewhere, and still others planning a range of free and paid offerings. For Bharat and his colleagues, free-versus-paid is an empirical rather than theological matter. They’ll see what works.
The deeper differences involve Google’s assumptions about what the news business will have to do to “engage” readers again—that is, make them willing to spend time with its printed, online, or on-air products, however much they cost. One Google employee who asked not to be named mentioned another report on journalism’s future and pointed out a section called “Focus on the User.” “They just mean, ‘Get money out of the user,’” he said. “Nowhere do they talk about how to create something people actually want to read and engage with and use.” On the topic of engaging modern users, Google feels very confident right now, and the news business feels very nervous. Apart from anything else, that certainty gap makes Google important to the future of the news.
Before describing how Google came to this point, what its engineers are trying to do, and where it all might lead, a full-disclosure note. Eric Schmidt of Google is an important figure in this saga. By chance, and because he and his wife were Atlantic readers, Schmidt and his family had become friends of my family long before he joined Google as CEO in 2001, and we have stayed in touch. For this story, I did not talk with him except in one official on-the-record interview in late March, after I had finished my other reporting at Google HQ.
Let’s start with the diagnosis: If you are looking at the troubled ecology of news from Google’s point of view, how do you define the problem to be solved? You would accept from the outset that something “historic,” “epochal,” “devastating,” “unprecedented,” “irresistible,” and so on was happening to the news business—all terms I heard used in interviews to describe the challenges facing newspapers in particular and the journalism business more broadly.
“There really is no single cause,” I was told by Josh Cohen, a former Web-news manager for Reuters who now directs Google’s dealings with publishers and broadcasters, at his office in New York. “Rather, you could pick any single cause, and that on its own would be enough to explain the problems—except it’s not on its own.” The most obvious cause is that classified advertising, traditionally 30 to 40 percent of a newspaper’s total revenue, is disappearing in a rush to online sites. “There are a lot of people in the business who think that in the not-too-distant future, the classified share of a paper’s revenue will go to zero,” Cohen said. “Stop right there. In any business, if you lose a third of your revenue, you’re going to be in serious trouble.”
You can’t stop right there, Cohen said, and he went through the list of the other, related trends weighing on newspapers in particular, each pointing downward and each making the others worse. First, the relentless decline of circulation—“fewer people using your product,” as he put it. Then, the consequent defection of advertisers from the lucrative “display” category—the big ads for cars, banks, airlines—as well as from classifieds. The typical newspaper costs much more to print and deliver than a subscriber pays. Its business rationale is as an advertising-delivery vehicle, with 80 percent of the typical paper’s total revenue coming from ads. That’s what’s going away. In hopes of preserving that advertising model, newspapers have decided to defend their hold on the public’s attention by giving away, online, the very information they were trying to sell in print. However that decision looks in the long run, for now it has created a rising generation of “customers” who are out of the habit of reading on paper and are conditioned to think that information should be free.
“It’s the triple whammy,” Eric Schmidt said when I interviewed him. “Loss of classifieds, loss of circulation, loss of the value of display ads in print, on a per-ad basis. Online advertising is growing but has not caught up.”
So far, this may sound familiar. To me, the interesting aspects of the Google diagnosis, which of course sets the stage for the proposed cure, were these:
First, it was strikingly not moralistic or mocking. This was a change, not simply from what I’d grown used to hearing at tech conferences over the past decade—the phrase “dead-tree edition” captures the tone—but also from the way Americans usually talk about distressed industries. Think of the connotations of “Big Auto” or “Rust Belt.” Whatever the people at Google might privately think, that is not how they talked about the news business. What was happening to the press, they said, was happening because of huge, historic technological forces rather than because of short-sightedness or backward thinking by publishers, editors, and owners. “This is a fundamental disruption of an industry,” Nikesh Arora, who joined Google six years ago and is now president of its global sales operations, told me, before detailing the top-to-bottom pressure on every part of the modern journalistic business model.
Next in the Google assessment is the emphasis on “unbundling” as an insurmountable business problem for journalism. “Bundling” was the idea that all parts of the paper came literally in one wrapper—news, sports, comics, grocery-store coupons—and that people who bought the paper for one part implicitly subsidized all the rest. This was important not just because it boosted overall revenue but because it kept publishers from having to figure out whether enough people were reading stories from the statehouse or Mexico City to pay the costs of reporters there.
“Newspapers never made money on ‘news,’” Hal Varian said. “Serious reporting, say from Afghanistan, has simply never paid its way. What paid for newspapers were the automotive sections, real-estate, home-and-garden, travel, or technology, where advertisers could target their ads.” The Internet has been one giant system for stripping away such cross-subsidies. Why look to the newspaper real-estate listings when you can get more up-to-date, searchable info on Zillow—or better travel deals on Orbitz, or a broader range of movie showtimes on Yahoo? Google has been the most powerful unbundling agent of all. It lets users find the one article they are looking for, rather than making them buy the entire paper that paid the reporter. It lets advertisers reach the one customer who is searching for their product, rather than making them advertise to an entire class of readers.
Next, and significantly for the company’s vision of the future, nearly everyone at Google emphasized that prospects look bleak for the printed versions of newspapers—but could be bright for the news industry as a whole, including newspaper publishers. This could seem an artificial distinction, but it is fundamental to the company’s view of how news organizations will support themselves.
“If you were starting from scratch, you could never possibly justify this business model,” Hal Varian said, in a variation on a familiar tech-world riff about the print-journalism business. “Grow trees—then grind them up, and truck big rolls of paper down from Canada? Then run them through enormously expensive machinery, hand-deliver them overnight to thousands of doorsteps, and leave more on newsstands, where the surplus is out of date immediately and must be thrown away? Who would say that made sense?” The old-tech wastefulness of the process is obvious, but Varian added a less familiar point. Burdened as they are with these “legacy” print costs, newspapers typically spend about 15 percent of their revenue on what, to the Internet world, are their only valuable assets: the people who report, analyze, and edit the news. Varian cited a study by the industry analyst Harold Vogel showing that the figure might reach 35 percent if you included all administrative, promotional, and other “brand”-related expenses. But most of the money a typical newspaper spends is for the old-tech physical work of hauling paper around. Buying raw newsprint and using it costs more than the typical newspaper’s entire editorial staff. (The pattern is different at the two elite national papers, The New York Times and The Wall Street Journal. They each spend more on edit staff than on newsprint, which is part of the reason their brands are among the most likely to survive the current hard times.)
Publishers would be overjoyed to stop buying newsprint—if the new readers they are gaining for their online editions were worth as much to advertisers as the previous ones they are losing in print. Here is a crucial part of the Google analysis: they certainly will be. The news business, in this view, is passing through an agonizing transition—bad enough, but different from dying. The difference lies in the assumption that soon readers will again pay for subscriptions, and online display ads will become valuable.
“Nothing that I see suggests the ‘death of newspapers,’” Eric Schmidt told me. The problem was the high cost and plummeting popularity of their print versions. “Today you have a subscription to a print newspaper,” he said. “In the future model, you’ll have subscriptions to information sources that will have advertisements embedded in them, like a newspaper. You’ll just leave out the print part. I am quite sure that this will happen.” We’ll get to the details in a moment, but the analytical point behind his conviction bears emphasis. “I observe that as print circulation falls, the growth of the online audience is dramatic,” Schmidt said. “Newspapers don’t have a demand problem; they have a business-model problem.” Many of his company’s efforts are attempts to solve this, so that newspaper companies can survive, as printed circulation withers away.
Finally, and to me most surprisingly, the Google analysis reveals something about journalism that people inside the business can’t easily see about themselves. This involves a kind of inefficiency that a hard-pressed journalistic establishment may no longer be able to afford.
At a minor, practical level, today’s news organizations generally seem clumsy, at least from Google’s perspective, as they try to re-create their brand and business on the Internet. “The print world has gotten placing an ad in a newspaper or magazine down to a science,” Neal Mohan of Google, who is in charge of working with publishers to develop online display ads, told me. He said that for TV or radio advertising, the overhead and administrative costs of placing an ad might be 2 or 3 percent of the ad’s total value; but for the online news sites he knew about, simple, correctable inefficiencies might drive the cost to 25 or 30 percent. His team is working with publishers to reduce these “parasite costs.”
It was Krishna Bharat who identified a more profound form of inefficiency. As a student at the Indian Institute of Technology in Madras, Bharat had written for the campus newspaper while taking his computer-science degree. “In a second life, I would be a journalist,” he once told an Indian newspaper. (When the Indian newspaper asks me, I will say: In a second life, I would be a successful Google executive.) He got his Ph.D. at Georgia Tech and was an early Google hire, in 1999. After the 9/11 attacks two years later, he grew worried about the narrowness of news he was receiving through the U.S. media. “I felt that we really had to catch up with the world’s news,” he told me. “To get a broad understanding, you had to visit sites in Europe and Asia and the Middle East. I was wondering if Google could do something to make the world’s news information available.”
This last statement is the kind of thing many people at the company say in utter earnestness. In Bharat’s case, it meant devising a system that would collect news feeds from around the world, automatically and instantly cluster them by subject and theme, and move them up and down in prominence based on how many sources in various parts of the world were discussing the same topic. A few weeks later, such an automatic news-monitoring site was up and running as an internal demo at Google. In September 2002, it went public as Google News, initially covering 4,000 English-language news sources a day. Now it covers as many as 25,000 sources in some 25 languages, all by purely automated assessments of the main trends emerging in news coverage around the world.
Except for an 18-month period when Bharat founded and ran Google’s R&D center in Bangalore, his original hometown, he has been guiding Google News ever since. In this role, he sees more of the world’s news coverage daily than practically anyone else on Earth. I asked him what he had learned about the news business.
He hesitated for a minute, as if wanting to be very careful about making a potentially offensive point. Then he said that what astonished him was the predictable and pack-like response of most of the world’s news outlets to most stories. Or, more positively, how much opportunity he saw for anyone who was willing to try a different approach.
The Google News front page is a kind of air-traffic-control center for the movement of stories across the world’s media, in real time. “Usually, you see essentially the same approach taken by a thousand publications at the same time,” he told me. “Once something has been observed, nearly everyone says approximately the same thing.” He didn’t mean that the publications were linking to one another or syndicating their stories. Rather, their conventions and instincts made them all emphasize the same things. This could be reassuring, in indicating some consensus on what the “important” stories were. But Bharat said it also indicated a faddishness of coverage—when Michael Jackson dies, other things cease to matter—and a redundancy that journalism could no longer afford. “It makes you wonder, is there a better way?” he asked. “Why is it that a thousand people come up with approximately the same reading of matters? Why couldn’t there be five readings? And meanwhile use that energy to observe something else, equally important, that is currently being neglected.” He said this was not a purely theoretical question. “I believe the news industry is finding that it will not be able to sustain producing highly similar articles.”
With the debut of Krishna Bharat’s Google News in 2002, Google began its first serious interactions with news organizations. Two years later, it introduced Google Alerts, which sent e-mail or instant-message notifications to users whenever Google’s relentless real-time indexing of the world’s news sites found a match for a topic the user had flagged. Two years after that, in the fall of 2006, Google began scanning the paper or microfilmed archives of many leading publications so that articles from their pre-digital era could be indexed, searched for, and read online.
Up to this point, the company’s attitude was that it was doing the news business a favor, whatever the publishers themselves thought. “Our anecdotal evidence was that [these and other news efforts] were driving users to better stories,” Eric Schmidt told me. “There was a set of publishers who recognized that with these tools, users were more likely to visit their Web sites”—and in turn increase the publisher’s online audience and make online ads easier to sell. “There was another set who believed we were stealing their content.”
Google’s rebuttal to the claim of stealing is that it doesn’t sell ads on the Google News site, and moreover provides hardly any of the newspapers’ original content. Indeed, in this practice it is the opposite of “aggregators” like the Huffington Post, which often “excerpt” enough of someone else’s story that readers don’t bother to click through to the source. Google News gives only a set of headlines and two-line links meant to steer traffic (and therefore ad potential) to the news organization that first ran the story.
With this approach, Google has in a curious way re-created the “bundled” approach that it has helped destroy for newspapers. Virtually all of Google’s (enormous) revenue comes from a tiny handful of its activities: mainly the searches people conduct when they’re looking for something to buy. That money subsidizes all the other services the company offers—the classic “let me Google that” informational query (as opposed to the shopping query), Google Earth, driving directions, online storage for Gmail and Google Docs, the still-money-losing YouTube video-hosting service. Structurally this is very much like the old newspaper bargain, in which the ad-crammed classified section, the weekly grocery-store pullout, and other commercial features underwrote state-house coverage and the bureau in Kabul. Bundling worked for newspapers, as long as they offered things that readers couldn’t get elsewhere, to a wide swath of the public. Google’s version depends on its loss-leader services, like search and mail, being so central to modern online life that, when people do their less frequent but more valuable commercial searches, they’ll stay inside Google’s world. This in turn depends on the existence of information worth searching for, which brings us back to the predicament of the press.
“About two years ago, we started hearing more and more talk about the decline of the press,” Schmidt told me. “A set of people [inside the company] began looking at what might be the ways we could help newspapers.”
Why should the company bother? Until recently, I would have thought that the answer was a combination of PR concerns and Schmidt’s personal interest. On the PR front, one news official recounted a conversation two years ago in which Schmidt said that whether or not Google was responsible for journalism’s business problems, it did not want to be seen as “the vulture picking off the dead carcass of the news industry.” Unlike the two Google founders, Larry Page and Sergey Brin, Schmidt is well connected in the news business and at ease with the media. His wife, Wendy, has a degree from the Graduate School of Journalism at UC Berkeley. Brin’s family experience with repression in the old Soviet Union is universally assumed to have shaped his uncompromising stance toward repression in today’s China. His parents brought him from Moscow to Maryland when he was a child; by all accounts, it was Brin who drove the recent change in Google’s policy toward China. Schmidt is just as widely assumed to have driven Google’s efforts on the press. But, significantly, he’s no longer the only one.
Before this year, when I asked Google employees about the health of the news business, their answers often seemed dutiful. During my interviews this year, people sounded as if they meant it. Google is valuable, by the logic I repeatedly heard, because the information people find through it is valuable. If the information is uninteresting, inaccurate, or untimely, people will not want to search for it. How valuable would Google Maps be, if the directions or street listings were wrong?
Nearly everyone I spoke with made this point in some way. Nikesh Arora’s version was that Google had a “deeply symbiotic relationship” with serious news organizations. “We help people find content,” he told me. “We don’t generate content ourselves. As long as there is great content, people will come looking for it. When there’s no great content, it’s very hard for people to be interested in finding it. That’s what we do for a living.” As Chris Gaither, a former technology reporter for the Los Angeles Times who joined Google last year as a communications manager for the news team, put it, “We believe in making information accessible. The surest way to make it inaccessible is if it doesn’t get created in the first place. That is why it is in our interest to deal with the problems of the industry.” (Small-world department: Gaither worked at The Atlantic as an intern in the mid-1990s and was a student in a class I taught at Berkeley’s journalism school nine years ago.)
“For the last eight years, we mainly focused on getting the algorithms better,” Krishna Bharat said, referring to the automated systems for finding and ranking items in Google News. “But lately, a lot of my time has gone into thinking about the basis on which the product”—news—“is built. A lot of our thinking now is focused on making the news sustainable.”
So how can news be made sustainable? The conceptual leap in Google’s vision is simply to ignore print. It’s not that everyone at the company assumes “dead tree” newspapers and magazines will disappear. Schmidt and others talk about how much easier and more efficient it is to assess, at a glance, stories on a broadsheet newspaper page than to click through to see the full text on a screen. Steve Ballmer, the CEO of Microsoft, told the Washington Post editorial board two years ago, “There will be no newspapers, no magazines, that are delivered in paper form” by 2020. (Ballmer later made clear that there might be small exceptions.) No one I spoke with at Google went quite that far. But all of their plans for reinventing a business model for journalism involve attracting money to the Web-based news sites now available on computers, and to the portable information streams that will flow to whatever devices evolve from today’s smart phones, iPods and iPads, Nooks and Kindles, and mobile devices of any other sort. This is a natural approach for Google, which is, except for its Nexus One phone, a strictly online company.
The three pillars of the new online business model, as I heard them invariably described, are distribution, engagement, and monetization. That is: getting news to more people, and more people to news-oriented sites; making the presentation of news more interesting, varied, and involving; and converting these larger and more strongly committed audiences into revenue, through both subscription fees and ads. Conveniently, each calls on areas of Google’s expertise. “Not knowing as much about the news business as the newspapers do, it is unlikely that we can solve the problems better than they can,” Nikesh Arora told me. “But we are willing to support any formal and informal effort that newspapers or journalists more generally want to make” to come up with new sources of money.
In practice this involves projects like the ones I’m about to describe, which share two other traits beyond the “distribution, engagement, monetization” strategy that officially unites them. One is the Google concept of “permanent beta” and continuous experimentation—learning what does work by seeing all the things that don’t. “We believe that teams must be nimble and able to fail quickly,” Josh Cohen told me. (I resisted making the obvious joke about the contrast with the journalism world, which believes in slow and statesmanlike failure.) “The three most important things any newspaper can do now are experiment, experiment, and experiment,” Hal Varian said.
In fact, such advice is both natural and inconceivable for most of today’s journalists. Natural, in that every book, every article, every investigative project, every broadcast is its own form of pure start-up enterprise, with nothing guaranteed until it’s done (if then). Inconceivable, in that news businesses themselves are relatively static, and the very name “Newspaper Guild” suggests how tradition-bound many journalists are. We pride ourselves on defending standards of language, standards of judgment, and even a form of public service that can seem antique. Whether or not this makes for better journalism, it complicates the embrace of radical new experiments.
The other implicitly connecting theme is that an accumulation of small steps can together make a surprisingly large difference. The forces weighing down the news industry are titanic. In contrast, some of the proposed solutions may seem disappointingly small-bore. But many people at Google repeated a maxim from Clay Shirky, of New York University, in an essay last year about the future of the news: “Nothing will work, but everything might.”
In all, Google teams are working with hundreds of news organizations, which range in scale from the Associated Press, the Public Broadcasting System, and The New York Times to local TV stations and papers. The last two efforts I’ll mention are obviously different in scale and potential from all the others, but these examples give a sense of what “trying everything” means.
Living Stories. News reporting is usually incremental. Something happens in Kabul today. It’s related to what happened there yesterday, plus 20 years ago, and further back. It has a bearing on what will happen a year from now. High-end news organizations reflect this continuous reality in hiring reporters and editors who (ideally) know the background of today’s news and in the way they present it, usually with modest additions to the sum of established knowledge day by day.
The modest daily updating of the news—another vote in Congress, another debate among political candidates—matches the cycle of papers and broadcasts very well, but matches the Internet very poorly, in terms of both speed and popularity rankings. The Financial Times might have given readers better sustained coverage of European economic troubles than any other paper. But precisely because it has done so many incremental stories, no one of them might rise to the top of a Google Web search, compared with an occasional overview story somewhere else. By the standards that currently generate online revenue, better journalism gets a worse result.
This past winter, the Google News team worked with The New York Times and The Washington Post to run the Living Stories experiment, essentially a way to rig Google’s search results to favor serious, sustained reporting. All articles about a big topic—the war in Afghanistan, health-care reform—were grouped on one page that included links to all aspects of the paper’s coverage (history, videos, reader comments, related articles). “It is a repository of information, rather than ephemeral information,” Krishna Bharat said, explaining that it was a repository designed to prosper in what he called “today’s link economy.” In February, Google called off the Times-Post experiment—and declared it a success, by making the source code available free online, for any organization that would like to create a Living Stories feature for its site.
“If you are asking, ‘Has this moved the needle for us yet in a financial way?’ the answer is no,” Vijay Ravindran, chief digital officer of the Washington Post Company, said when I asked him about the experiment. “But it has brought to the surface many different ideas for changing our technology, changing our user interface. The idea that [Google] would work with us on a product and take feedback was very positive. It’s almost unique, compared with working with technologists who view ‘content creators’ as raw-material suppliers and nothing more.” He said that simply being able to work directly with Google engineers was a plus, for the implicit lessons in how they develop products and what they know about user behavior.
Richard Tofel, the general manager of ProPublica, a new nonprofit news organization that conducts investigative-journalism projects, described a similar collaboration. When an article or documentary by a ProPublica staffer is ready, it is carried by an existing news organization as well as on ProPublica’s site. Tofel met Don Loeb, another Google manager working with news companies, at a journalism conference in Berkeley last year and mentioned that Google News and Google Web searches often featured the paper that ran the story but not ProPublica. “He was receptive to the argument, and said that if the search algorithm was not rewarding creators, they would view it as defective,” Tofel told me. Loeb and his Google colleagues later asked for illustrations of searches that slighted ProPublica’s role. Whether or not there was ever an adjustment (Google never discusses such matters publicly), ProPublica’s results now come higher up.
Fast Flip. The Internet is a great way to get news but often a poor way to read it. Usually the longer the item, the worse the experience; a screenful is fine, clicking through thousands of words is an ordeal. Moreover, the gap between the print and online experiences is greatest for those high-end publications that put a lot of thought and expense into elements other than words themselves: the glossy photos of a fashion magazine, the info charts and pull quotes of a mainly text magazine like this.
The Fast Flip project, which began last summer and has now graduated to “official” status, is an attempt to approximate the inviting aspects of leafing through a magazine. It works by loading magazine pages not as collections of text but as highly detailed photos of pages as a whole, cached in Google’s system so they load almost as quickly as a (human) reader can leaf through them. “It was an experiment in giving you a preview of an article that was more than just a link to the title,” Krishna Bharat said. “It gives you a sense of the graphics, the emphasis, the quality, the feel. Whether you would like to spend time with it.” Spending time with an article, whether in print or online, is of course the definition of “engagement” and the behavior advertisers seek. The online manager for a well-known consumer magazine, who asked not to be identified “because Google is too central to our existence,” said that each day, Fast Flip was sending his magazine tens of thousands of clicks, which in turn had increased his site’s ad revenue. “What we don’t know is how many people are staying just at the Google site, and how the money is divvied up, which makes us a little nervous about the proportional value.”
“We’re not saying we have worked out exactly the right model,” Krishna Bharat said when I asked about Fast Flip details. “We just want news to be available, fast, all over the place on the Internet.”
YouTube Direct. Projects like Living Stories and Fast Flip are tactical in their potential. Google’s hope is that broader use of YouTube videos could substantially boost a news organization’s long-term ability to engage an audience. Amateur-produced video is perhaps the most powerful new tool of the Internet era in journalism, making the whole world a potential witness to dramas, tragedies, achievements almost anywhere. The idea behind the various YouTube projects is that the same newspapers that once commanded an audience with printed reports of local news, sports, crime, and weather could re-create their central role by becoming a clearinghouse for video reports.
Steve Grove, a former ABC news staffer (and another onetime intern for The Atlantic) has worked at Google since just after it acquired YouTube, three years ago. His team has tried to establish YouTube as a news operation on its own, for instance as a center for footage from Haiti after the earthquake in January. But Grove is also working with newspapers and broadcast-news stations to encourage them to use YouTube clips (while Google bears the storage and upload costs) as a way of reestablishing their role in their communities. For instance, Google offers, for free, the source code for YouTube Direct, which any publication can put on its own Web site. Readers can then easily send in their video clips, for the publication to review, censor, combine, or shorten before putting them up on its site. After a blizzard, people could send in clips of what they had seen outside. Same for a local football game, or a train wreck, or a city-council meeting, or any other event when many people would be interested in what their neighbors had seen. The advertising potential might be small, for YouTube and the local paper alike. The point would be engagement. Al Jazeera used YouTube Direct during the elections in Iraq this spring to show footage from around the country.
If YouTube Direct had existed when I was living in China, I could have set it up to receive videos from people who had seen something worth sharing: the aftermath of a huge event, like the Sichuan earthquake; local effects of pollution; new buildings going up or old ones being torn down; the other daily dramas of modern China. Of course some sites already carry videos. And of course YouTube is often blocked by Chinese censors, so people inside the country might not see what their neighbors posted. Such complications aside, I could quickly see the potential of a tool with which people could easily share information in a new way. Setting up such a site is next on my to-do list.
Another tool extends the lessons of the YouTube Debates during the 2008 presidential campaign, in which Grove invited YouTube users from around the country to send in clips of brief questions for the candidates. Anderson Cooper of CNN then introduced YouTube clips of the questions CNN had chosen to use. They ranged from serious to silly and included one asking Barack Obama whether he was “black enough.” YouTube has added a feature that lets users vote for the questions they want asked and has used the method effectively many times since then, including for an interview Grove conducted with Obama at the White House early this year. “We feel this is a tool with tremendous potential for connecting newspapers with their audiences,” Grove told me. “There is tremendous leverage to this kind of reporting.”
Whatever comes of these experiments, two other broad initiatives are of unquestionable importance, because they address the two biggest business emergencies today’s news companies face: they can no longer make enough money on display ads, and they can no longer get readers to pay. According to the Google view, these are serious situations, but temporary.
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.
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