The Skirmish That Could Threaten Google News

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Brazilian news organizations that have pulled out of the service say they aren't hurting much. What if others follow suit?

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Schmidt and Hollande met at the Elysee Palace on the 29th. (Reuters)

What if Google had to start paying for each link that shows up when you do a search? It would totally wreck the company's business model, right? And maybe change the nature of search engines too?

An insurrection may be coming, and it is starting with Google News. Here's the timeline. A couple of weeks ago, a group of 154 Brazilian news websites comprising 90% of the country's market share made a pact to jump out of Google News. The websites, which are part of Brazil's National Association of Newspapers (Associação Nacional do Jornais, or ANJ), had been negotiating with the search engine. They wanted it to pay a fee for linking to their content.

Google execs said the plan could only backfire and hurt those websites by wrecking their traffic, but ANJ responded that the website is "irrelevant" and announced that its members had agreed to ban the site, which they then (really!) proceeded to do. (The press release, in Portuguese, is here.) Now ANJ is reporting that its members have only seen a 5% drop in traffic since the embargo.

So far, maybe not a big deal. Brazil is an important emerging market, but it's only one country. Here's what's really a problem for Google: This week, it has been reported that news sites in France, Germany, and Italy are close to pulling the plug on Google News too. They're asking for the same kind of "Google tax," and -- like their Brazilian counterparts -- threatening to ban Google News if the search giant won't comply. The latest reports come after a tense-sounding meeting between French prime minister Francois Hollande and Google executive Eric Schmidt. Google has denied reports that the French government also slapped it with a one billion dollar tax claim.

We've seen both major companies (News Corp.) and countries (France, earlier) threaten to do this before. But now that one country's press has made good on the threat without (from what we know so far) suffering major losses, other countries and companies may have incentive to try Google for two reasons. In the short term, they may now have cause to expect it won't destroy their businesses. In the long term -- and this is great news for them, terrible news for Google -- more bans in more countries will give media companies greater leverage in negotiating with the search company. The soul of a search engine is its comprehension of everything. It is supposed to look through the entire Internet to find you the pages that best respond to your query. If major portions of the Internet's news-universe are foreclosed to Google News, it loses its utility.

If media companies in different countries could cooperate for long enough, they'd have the power to wreck Google's business model.

The consequence: If enough countries' media opt out of Google News, they will either destroy the service or leave the search giant with no choice but to acquiesce to their demands for a "Google tax." In other words, this time, it looks like it could be serious.

So far, search has relied on a sort of implicit compact between media companies and search engines that both parties have assumed is mutually beneficial: By collecting relevant links in one place, Google funnels traffic to content providers. Google gets ad revenue because advertisers want to be at the broad part of that funnel -- the place where a huge number of people are sifting quickly through a large amount of content. Media companies theoretically get ad revenue for being at the funnel's narrow tip -- the place where search (and social, and etc.) spits users out, and where they presumably engage both advertising and content with more depth than they do on the search engine itself.

Sounds nice. The problem is that, in practice, there's an imbalance. Being at the broad opening of the funnel has proven way better for raising advertising revenue than being at the narrow tip. Google is making way more on ads for just directing people to content than the actual providers of that content are making on ads.

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Emily Chertoff is a former writer and producer for The Atlantic's National channel.

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