Summary:

In its latest move to extend an olive branch to the news industry, Google (NSDQ: GOOG) is donating $5 million to non-profits dedicated to de…

In its latest move to extend an olive branch to the news industry, Google (NSDQ: GOOG) is donating $5 million to non-profits dedicated to developing “new approaches to journalism in the digital age.” The company says it will be giving $2 million to the Knight Foundation, which will use some of the money to “augment” the Knight News Challenge, which in the past has funded news startups, including Everyblock and Spot.us. The remainder of the cash will be dedicated to unspecified international projects.

Google says in its announcement that it’s making the donations because while in the past it has “mostly focused on working with news organizations to develop better products for users, we also believe it’s crucial to encourage innovation at the grassroots level.” The company harps that “journalism is fundamental to a functioning democracy.”

Of course, many news executives have accused Google alternatively of building a business on the back of their content and not giving their original content sufficient visibility in search results — and in the process, severely damaging the journalism industry.

In recent months, however, some of that tension has subsided. The company renewed a deal with the AP to host the news agency’s stories on its Google News site and also disclosed for the first time the percentage of AdSense revenue it shares — a statistic that publishers had long demanded to know.

Today’s announcement was made by Google sales chief Nikesh Arora and not by an executive at the company’s Google.org philanthropic arm. That seems to be a nod to the financial importance to the company of a healthy relationship with the news industry, which not only provides it with revenue via AdSense but whose support will also be needed if Google wants to launch a long-rumored paid content system of some sort.

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