For media agencies, producing good content is expensive, and giving it away online has never made much sense as a sustainable business model. As readers have dropped print subscriptions and migrated to the web, newspapers have suffered years of plunging revenue. Many hoped the losses would be temporary as advertisers also moved online, but news sites still aren’t reaping the benefits. According to the Newspaper Association of America, in 2011, for every $25 lost in print revenue, newspapers made only $1 online.
While many news organizations, including the Globe and Mail and the Postmedia chain in Canada, have put in place online paywalls, a more radical solution is unfolding in France that could put an end, once and for all, to the industry’s crisis. French newspapers, with the help of the socialist government of François Hollande, are going after Google.
Many companies spend millions to advertise on the Internet, but instead of doing so on sites that produce content, the money largely goes to search engines (i.e. Google) and web aggregators (widely used sites that provide links to news content). Last month, leading French newspaper publishers called on the government to adopt a law that would require Google to make payments to news sites for displaying links to their content. Google, which earns $3 billion every month in ad revenue, said in a statement that it “could not accept” the move and “would be required to no longer reference French sites” as a consequence of such a law. Forcing Google to pay for linking to news content, a spokesperson says, would threaten Google’s “very existence.”
Hollande met with Google chairman Eric Schmidt last week and, undeterred, said he hoped “negotiations will be carried out rapidly and be conclusive by the end of the year between Google and the editors of the press.”
This isn’t the first barrage in the media war on Google. In October, 154 Brazilian news outlets asked Google to share ad revenue in return for listing their content in search results. When Google refused, the Brazilian papers removed themselves from the company’s search results, a move Google warned would backfire. But on Oct. 20, the papers said they had seen only a five per cent drop in traffic. If those numbers are true, they call into question the long-held belief that Google’s relationship with newspapers is mutually beneficial. Google earns ad revenue from links to newspaper content, but it should also be sending traffic to those news sites, which can in turn be monetized.
Google may be unconcerned about the loss of Brazil’s newspapers, but there is a real danger here, say observers. With every site that opts out of the search engine, Google becomes less valuable as a resource that claims to search the entire Internet for the best response to any query. In addition to France, Germany and Italy are also drafting legislation that would force Google to share profits with news agencies. If enough major content providers decide to remove themselves from Google’s search results, the company may have no choice but to cave to their demands and offer a healthy slice of its ad revenue—something most papers have not seen in a very long time.