Google CEO Eric Schmidt's speech at the annual meeting of the Newspaper Association of America has been widely anticipated throughout the industry, as criticism of Google from newspaper publishers grows. The New York Times said the meeting "had the makings of a high-tension face-off" and more than one article described Schmidt's descent "into the lion's den;" a "battle of two Goliaths," according to FTM's Philip M. Stone. But in the end, the occasion seems to have been anticlimactic, with Schmidt giving a lengthy, uncontroversial speech followed by restrained questions.
However despite disappointment at the lack of a "face-off," what Schmidt said is worth noting, particularly his focus on future partnership opportunities. He praised the newspaper's importance in public life, and described how impressed he was that newspapers had started off strongly on the Internet, by introducing features such as blogs and reader comments. However, he continued, this innovation had tailed off, and newspapers need to act quickly to restore this if it is to get out of the trouble in which it finds itself now.
Online is the future
He declared, unsurprisingly, that the future of news is online, and suggested that newspapers should be moving their readers online, and should be aiming to build an audience five to ten times the size of their print base, which is possible because of lower distribution costs. He expressed his belief that online news is "still relatively unpleasant to read" compared to newspapers, and expects presentation and the quality of the sites to significantly improve in order to build the audience sufficiently.
Newspaper revenue: primarily ad-based
He explained that he believes revenue will be largely ad-based, with more interactive ads that include e-commerce: "Advertising that is useful is going to work." "We think we can build a business -- again, with you guys -- with significant advertising resources, where the advertising is targeted to the content," he claimed, and encouraged publishers to create more personalised news products that could be delivered effectively online or to mobile phones or other devices.
However, he added that there is a limited opportunity for some paid online content, although not on the same scale as free, as such models rely on scarcity, while the Internet has brought ubiquity. He proposed three layers of revenue for news content, similar to that of the TV business, believes Time: a free model which would make up the bulk of a news website, a subscription model which would allow access to all articles, and a micropayment system for specific articles, priced at about 1 to 3 cents each. He agreed that micropayment is not current feasible due to high transaction fees, but said that a much work is being done on that technology to bring costs down.
The big questions: copyright and fair use
With regards to the controversial issues of copyright and fair use, Schmidt reiterated the fact that newspapers which do not want to be picked up by Google can easily implement code to stop this from happening, and that Google directs a lot of traffic to newspaper websites. And indeed very few, if any, newspapers have decided to avoid the Google crawlers as they do not want to lose the Google driven traffic. Schmidt expressed surprise at reports that the Associated Press' recent announcement that it will be going after sites and portals that do not license AP news correctly is targeted at Google, and drew attention to the company's deal with the AP to host and distribute material. Resolution of any dispute, he pointed out, depends on how 'fair use' is interpreted, as all lawyers see it differently.
When asked about ranking, Schmidt insisted that the Google algorithm does already favour "credible brands" on Google News. On the general search, however, he said that the ranking signals determine rank and relevance, but trustworthiness is not incorporated: "We have not come up with a way to algorithmically handle that in a coherent way." Improving search rankings was one of the aspects of the Associated Press content control campaign announced on Monday.
Schmidt also loosely outlined a concept he called 'Entertain Me' which would deliver professional content from sources like newspapers, but also encompasses user-generated production such as Wikipedia-style reference information and real-time Twitter-style updates, reported the WSJ. The service will know what you have already read and will predict what will interest you, and if it is on a phone it will deliver news and information based on your precise location. It will also include "mood mapping:" essentially meaning that users can constantly share their opinions and emotions with friends, according to Editor & Publisher. This service would be primarily advertising-based.
As well as disappointment with publishers' lack of aggressive questioning, "a wasted opportunity," according to Philip M. Stone, some critics were extremely unimpressed by what Schmidt had to say. Time writer Douglas A. MacIntyre believes that "Schmidt's ideas are deeply flawed and, even if they were valuable, they come too late in the cycle of destruction that marks the end of the financial viability of newspapers." This attitude is decisively negative, and although Schmidt did not address all of the issues that Google's enemies would have liked, it does seem clear that cooperation between publishers and the Internet giant will be essential for success, and any indication from Google that it is willing to do this should be seen as an advantage.