Could Google’s investment be a welcome boost for the publishing industry?
The publishing industry is in need of innovation, and therefore Google, whatever its underlying motives, should be welcomed as a possible sinner on the road to repentance.
When a corporation has an image problem there’s nothing quite like a swift donation to charity. It doesn’t really matter where the money goes – Battersea Dogs & Cats Home, sick children or a struggling football club. It’s the thought – the symbol – that counts. The corporation cares and here is the practical help, the evidence.
Yet you can be sure that when the corporation is Google, which had revenues of $17 billion and operating income of $4.4 billion in the first quarter alone this year, and it suddenly produces £107 million for a good cause, there will be no shortage of cynics.
This week’s donation is the Digital News Initiative in which Google will work with European publishers to find new ways of raising digital revenues through the better use of ads, apps and analytics.
What’s not to like about £107 million, even though it is spread over three years, and publishers such as The Guardian, Financial Times, El Pais of Spain and Germany’s Die Zeit have signed up.
It would be equally foolish of news operators to try to ignore Google, as long as it operates within the law.”
Three Googleistas in Paris, Hamburg and London will be made available to train journalists in the ways of the digital world.
Rupert Murdoch, who once railed against the “content kleptomaniacs”, is, however, looking the other way – at least for the moment.
There was even the eating of a little bit of humble pie this week when Carlo D’Asaro Biondi, head of Google’s strategic relationships in Europe, unveiled the fund.
Google had always wanted to be a friend and partner to the news industry, “but we also accept we’ve made some mistakes along the way,” it says.
You could say – such as sucking up their expensively created work, including original and exclusive stories, and pinging summaries around the world in seconds and selling advertising on the back of it. And, at least in the past, this has happened without employing a single journalist to check the information. Maybe it still does.
Those with a suspicious mind will note that the announcement of the digital initiative comes two weeks after the European Commission accused Google of using its 90 per cent dominant market share in search to undermine competitors by distorting internet search results in favour of its own shopping services.
This allegation, if proven, is big potatoes for both Google and the Commission.
The allegation is that Google has broken EU anti-trust laws and the result could be serious for the US company.
The EU has the power to fine Google hundreds of millions of euros. A fine of more than €1 billion (£763 million) was upheld last year on microchip manufacturer Intel.
Even more significant, the EU has the power to insist that Google changes the way it does business, something that could hit its profits for years to come.
The case will wend its merry way for years and could end in what amounts to an out-of-court settlement.
The cynicism arising from the coincidence of timing between the announcement of the anti-trust charges and the launch of the Digital News Initiative is probably misplaced.
Google has been working on the news initiative since last summer. And while the vast search engine group has known of clouds on the Brussels horizon for years, maybe it is entitled to the benefit of the doubt on this occasion.
The discovery of new streams of revenue, new forms of co-operation, new sources of knowledge and experimentation are vital.”
The sorry truth is that the traditional news business has seen such a threat to its funding model in the past decade, not least from Google, it can ill afford to be too picky about where any new stream of revenue or source of expertise can be found.
It would be equally foolish of news operators to try to ignore Google, as long as it operates within the law.
Mathias Dopfner, chief executive of German publisher Axel Springer, put the dilemma memorably last year in an open letter to Google chief executive Eric Schmidt, arguing that publishers who could remove themselves from Google listings and go elsewhere if they weren’t happy was about “as realistic as recommending to an opponent of nuclear power that he just stop using electricity.”
The discovery of new streams of revenue, new forms of co-operation, new sources of knowledge and experimentation are vital.
Ownership and new sources of revenue are already changing dramatically: the $250 million purchase of the Washington Post by Amazon’s Jeff Bezos and the $250 million investment in independent journalism by eBay founder Pierre Omidyar are powerful examples.
Then, particularly in the US we have had outbreaks of journalism funded by charitable foundation and even crowd-funded journalism. Caution, obviously, has to be urged when donations from charitable foundations come with strings attached.
The actions, as a contrarian investor, of the sage of Omaha, Warren Buffett, should also not be overlooked. When many newspaper owners were heading for the exit Buffett continued to buy newspapers and now owns more than 60 including the Omaha World Herald.
But Buffett is a form of conventional support from someone who has noticed that well run, adapting papers can still be profitable and the worst financial troubles usually flow from excessive levels of historical debt.
The Guardian’s willingness to accept, and even create new streams of revenue are instructive – quite apart from joining Google’s Digital News Initiative.
For some time the newspaper has accepted more than £2 million a year from the Bill and Melinda Gates Foundation to help fund reporting on sustainability in the developing world. It would be journalism that would be difficult to pay for by commercial means. Guardian executives insist there are no strings attached beyond the basic subject area.
The Guardian is going one step further by launching an ambitious programme of live events, with partners – as many as 2000 a year.
Then there is a membership scheme. You can become a Guardian member for free and get information on events, partners pay £135 a year and get discounted tickets and patrons pay £530 a year.
The need is for more innovation, not less; and therefore Google, whatever its underlying motives, should still be welcomed as a possible sinner on the road to repentance.