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Murdoch's wink

November 24, 2009

Could the status quo of the commercial internet be shaken as a result of an old man's misinterpretation of a question?

Maybe so.

Earlier this month, Rupert Murdoch sat down for an interview with Sky News Australia (a company that Murdoch's News Corporation partially owns). A little way into the interview, the following exchange took place:

Interviewer: The other argument from Google is that you could choose not to be on their search engine ... so that when someone does do a search, your web sites don't come up. Why haven't you done that?

Murdoch: Well, I think we will. Uh, but that's when we start charging. We do it already, with the Wall Street Journal. We have a wall, but it's not right to the ceiling. You can get usually the first paragraph of any story, but if you're not a paying subscriber to wsj.com, there's immediately - you get a paragraph and a subscription form.

Murdoch seemed to be saying - and was widely reported to have said - that News Corp is planning to block Google from indexing its content. But when you listen to his full answer, in which he confuses opting out of Google's search engine with raising pay walls on sites, it's hard to know what he was actually intending to say.

But inadvertent or not, Murdoch's suggestion that he'll pull News Corp content out of Google's database could turn out to be a brilliant signaling strategy, one that, as Mike Arrington has written, could ultimately alter the balance of power on the Net.

Last spring, in my post Google in the Middle, I described the dilemma in which newspapers find themselves when it comes to to Google's search engine. On the one hand, Google is an important source of traffic for their sites. On the other hand, Google prevents them from making decent money online - by massively fragmenting traffic, by undermining brand power, and by turning news stories into fungible commodities. Individual newspapers can't live with Google, but they can't live without it either:

When it comes to Google and other aggregators, newspapers face a sort of prisoners' dilemma. If one of them escapes, their competitors will pick up the traffic they lose. But if all of them stay, none of them will ever get enough traffic to make sufficient money. So they all stay in the prison, occasionally yelling insults at their jailer through the bars on the door.

Of course, there has always been a way to break out of the prison: If a critical mass of newspapers were to opt out of Google's search engine simultaneously, they would suddenly gain substantial market power. Newspapers are struggling, but they remain, by far, the world's dominant producers of hard news. That gives them, as a group, a great deal of leverage over companies like Google who depend on a steady stream of good, fresh online content. Google needs newspapers at least as much as newspapers need Google - a fact that's been largely hidden up to now.

What Murdoch effectively did in his interview with Sky News was to send a signal to other newspaper companies: We'll opt out if you'll opt out. Murdoch positioned himself as the would-be ringleader of a massive jailbreak, without actually risking a jailbreak himself.

There are signs that the signal is working. Bloomberg reports today that the publishers of the Denver Post and the Dallas Morning News are now considering blocking Google in one way or another. More ominously (if you're Google), Microsoft has apparently responded to the signal by offering to pay News Corp to make Bing the exclusive search engine for its content. Microsoft doesn't have a lot of weapons to use against Google in the search business, but getting prominent news organizations to block Google would be a very powerful weapon. (Steve Ballmer would be more than happy to reduce the basic profitability of the search business, as that would inflict far more damage on Google than on Microsoft.)

Faced with a large-scale loss of professional news stories from its search engine, Google would likely have little choice but to begin paying sites to index their content. That would be a nightmare scenario for Google - and a dream come true for newspapers and other big content producers.

Of course, for now this is all just speculation. The odds are that none of it will come to pass. The idea that newspapers might come together to pursue a radical and risky strategy seems far-fetched. Then again, maybe the time has finally come for newspapers to take a deep collective breath and apply the leverage they still hold. They don't have a whole lot left to lose.

Comments

"Faced with a large-scale loss of professional news stories from its search engine, Google would likely have little choice but to begin paying sites to index their content."

Or start buying news companies? Google has the money to do it - at least in the US.

Posted by: Cesar Cardoso [TypeKey Profile Page] at November 24, 2009 05:59 PM

Nick, I fully agree to you. Indeed, just in yesterday I wrote a post myself on this issue. Murdoch's move may not necessarily be the smartest. But the move truly is remarkable. It represents a newest progress in Web evolution.

By the way, I finished reading your book one month ago, and wrote a post of my thought on the Big Switch you initiated. I must say that your book is fantastic. Thank you.

yihong

Posted by: Yihong Ding [TypeKey Profile Page] at November 24, 2009 06:13 PM

Thanks, Yihong.

Posted by: Nick Carr [TypeKey Profile Page] at November 24, 2009 07:15 PM

Actually, I think Cesar has a worrying idea. Google could very easily afford a team of journalists reporting from around the world.

Newspapers wouldn't stand a chance, how many people consume news on-line? each google story with google ads would knock the papers for 6

Posted by: TempleDene [TypeKey Profile Page] at November 24, 2009 08:10 PM

I read TechCrunch, ReadWriteWeb and The Business Insider daily. They have stories sourced from these papers. These stories link back to the full article on the paper's site - or at least more of the article on the paper's site.

I assume this falls outside Google's search of the source paper's site.

How would Google be stopped from indexing these?

Posted by: Duke Willims [TypeKey Profile Page] at November 24, 2009 10:58 PM

During a recent StackOverflow podcast, Joel Spolsky and Jeff Atwood talked about designing the site to assume that Google would be the front end, i.e. that is how people would find the content on the site. You can't argue with their results. I think the point Murdoch fails to understand is the one that Duke alludes to. On the web, there are no islands. As long as linking exists (and it should), you are not going to get your content read regardless of how you try and make it available. Google is the front end for most people and I just don't see enough people fundamentally changing their behavior to get information which, with few exceptions (the WSJ being one) they can get elsewhere.

Posted by: Deepak Singh [TypeKey Profile Page] at November 25, 2009 12:48 AM

A couple of observations:

I don't think the endgame for newspapers is to block Google from indexing their content; that's a tactic. The endgame is to get a share of the profits of the search business while also paving the way for other experiments on the revenue side of the business (paywalls, etc.).

For a niche site like StackOverflow (or TechCrunch, etc.), the Google-as-front-end strategy can work very well. But the cost structure of a niche site is very different from the cost structure of a large newspaper. It's a mistake to think that the same strategy will work for both sorts of entities.

Posted by: Nick Carr [TypeKey Profile Page] at November 25, 2009 08:56 AM

I agree with Cesar, google could buy some news companies, or can also start a way for turn every of theirs users in a freelance journalist , giving adwords credits as a payment.Google just spend money in google street view, why not on reporters? I can't sense as obvious that people will flock to Bing as quickly as they sign with Murdoch.

Posted by: Demian [TypeKey Profile Page] at November 25, 2009 11:48 AM

Your argument is plausible; it would be persuasive with numbers attached. In particular, a quantification of how many Google searches lead to clicks on the papers' sites.

Posted by: Sam Penrose [TypeKey Profile Page] at November 25, 2009 01:36 PM

I disagree with Cesar et al. Google is unlikely to hire reporters or buy news outfits. There are several reasons:

1) Eric Schmidt has been clear and emphatic that "Google is not very good at producing content," and should stay out of that game. I suppose that he is reflecting the authentic strategic direction of the board and executive.

2) Speaking of signaling, Google buying a paper or a news staff would be a horrible signal to every content producer who advertises using AdSense and/or allows their content to be indexed. It would be received as a declaration of war.

3) The FCC would very likely take a strong interest.

4) The anti-trust folks at the DoJ would very likely take a strong interest.

In short, no way. What I take to be going on is very much along the lines of what Mr. Carr is saying. I see the current kerfuffle with News Corp. as the opening gambit in creating a new market for fungible content that's usefully aggregated. It's all about negotiating price and contract terms, now. We'll indeed see what other content providers jump on board. I doubt that we'll see something like a "Bing exclusive" exactly but I won't be surprised if we see some B2B technology development - web APIs joining (paying) search engines and aggregators with content providers. Time will tell, of course.

Posted by: Tom Lord [TypeKey Profile Page] at November 25, 2009 04:15 PM

Google are themselves the poster child for rapid shifts in power online, and they do indeed have some vulnerabilities. Yet this topic is almost like climate change - the ecosystem is finding a new energy minima, and I feel that there are some new niches as yet unfilled. The total game-changing component yet to be created is a nano-payment system (to invent a new term!) that allows us to spend a few pennies here and there on online content and perhaps for the first time align the revenue model with what we actually want to read. I know this thought isn't a new one, but I feel that we won't get to the end-game until that is really addressed...

Posted by: David Evans [TypeKey Profile Page] at November 26, 2009 08:39 AM

I also think that, "If a critical mass of newspapers were to opt out of Google's search engine simultaneously, they would suddenly gain substantial market power".

Posted by: jasmine [TypeKey Profile Page] at November 27, 2009 06:53 AM

The problem is one of timing.

Rupert Murdoch makes his living off of NEWS.

Google makes its living off of monetizing SEARCH.

The News Corporation can merely put the stuff they want to hang onto, NEWS, on separate servers until its no longer news, but it instead has become OLDS.

Trying to work out a deal with Microsoft is a red herring.

The News Corporation isn't quite big enough or international enough to achieve a total shut out, there us NO Fox TV in Canada, most of Europe or in Asia, but it will attract their current followers to make the switch to Bing to follow, if these people aren't already switching because Bing is Microsoft's default and they are too unperturbed, uncaring or just unable to switch back to Google.

It was good enough for F.W. Woolworth, for the century or so that it lasted, and it may be good enough for Rupert Murdoch.

The News Corporation makes it money out of and off of being the contrarian news source. They make their money from the media churn of opposition.

In England they were AGAINST the E.U. treaty because that was the way to stir up controversy and newspaper sales.

In Ireland a few miles away and part of the same British empire, they were FOR the same treaty.

News Corporation have no trouble being inconsistent and duplicitous as long as the sales go up.

Look for News Corp products to disappear behind Google's ROBOT.TXT files and not to disappear behing Bing's ROBOT.TXT files and for them to try to exploit that red herring.

It really makes no real difference to Google.

Posted by: twitter.com/msbpodcast [TypeKey Profile Page] at November 27, 2009 02:58 PM

What a depressing combination of unionization and hypocrisy. Murdoch is the archetype of rapacious capitalist, always out to destroy his workers (who always attempt take too much of his money) by denying them congress. Now he wants congress to increase his share of someone else's revenue stream. To quote the King: "It is a pity".

Posted by: BuggyFunBunny [TypeKey Profile Page] at December 1, 2009 12:13 AM

I think we are missing a very fundamental point, Google is a direct competitor of newspapers. What are newspapers, but an older technology version of a news aggregator, generating most of it's revenue from ads. Somewhere along the way, newspapers starting building their own writing staffs to try and differentiate themselves (back when there was more than one paper per city).

Using the net, Google (among others) has blown that paradigm completely apart. Especially since newspapers have been shedding those writing staffs as fast as they could once they had a monopoly established in their geography.

So the blockade strategy will only work if the papers come up with content so compelling they can convince people to find them in that vast sea of information, the same problem that the writers had, which is why they worked for the newspapers in the first place, so people could find their stories.

How will they be found, build their own search engines?

Posted by: Mike Snow [TypeKey Profile Page] at December 9, 2009 06:42 PM

News sites are shooting themselves in the foot. If their content is not indexed, no one is going to buy what they can't find. The news sites need to wake up themselves before the search engines wake up to the fact they can charge the news sites to index their content.



In fact they're already paying them anyway as the news sites own internal search engine appliance is probably supplied by the very search engine companies they're trying block.

Posted by: Chris Velevitch [TypeKey Profile Page] at December 16, 2009 12:33 AM

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