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Summary:

The idea that Larry Page and Sergey Brin somehow owe it to society to invest in journalism — because their company has allegedly siphoned billions of dollars in advertising revenue out of the newspaper industry — is just plain wrong-headed

Over the past several months, we’ve seen billionaire tech-company founders invest substantial sums of money in journalism: first Amazon CEO Jeff Bezos acquired the Washington Post for $250 million, then eBay founder Pierre Omidyar promised to spend a similar amount on a brand-new media entity called First Look Media. According to a couple of the business writers at Breaking Views, however, the ones who should really be investing in journalism are Google co-founders Larry Page and Sergey Brin.

Why? Because the Google guys have apparently sucked the lifeblood out of the media business by siphoning off billions in advertising revenue over the past decade or so. As the authors of the post put it:

“Few have made their money at the expense of the old-school pillars of the fourth estate quite as obviously as the Google guys… if any tech moguls have reason to feel they owe it to the now cash-strapped world of journalism to give something back, it’s Messrs Page, Brin and Schmidt.”

Google didn’t invent the internet

Sergey Brin And Larry Page

The idea that Google and/or other online services such as Craigslist are to blame for the decline of the traditional media industry is a theme that pops up repeatedly in journalistic circles. The online classified site that Craig Newmark started in his San Francisco apartment (and originally pitched to at least one newspaper, as I recall, only to be rejected) is often blamed for removing billions of dollars in classified advertising from the newspaper business, demolishing one of its key revenue pillars.

In a similar way, Google critics note how much advertising money has disappeared from the newspaper business over the past decade or so — more than $40 billion, or about 60 percent of the ad revenue the industry generated at its peak in 2000, according to figures from the Newspaper Association of America — and they draw a direct line connecting that with the in advertising revenue that Google brings in every year from AdWords. As Rob Cox and Richard Beales put it in their BreakingViews post:

“It’s uncanny, therefore, that of the $60 billion plus of potential annual ad sales that print publications seem to have lost, Google had grabbed about $44 billion by 2012, from virtually nothing in 2000. That two-thirds of slice of the spoils is about equal to the company’s market share of the online search business.”

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It’s important to note that the $60 billion in “potential” sales the authors refer to is an estimate of how much the traditional print-advertising business might have been worth by now, if the growth rate that the industry saw during the late 1990s had continued through the past decade. In other words, it’s a fictional number — much like the potential future sales revenue that the record industry claims to have lost due to music downloading and file-sharing.

Should Ford have invested in buggy whips?

There’s no question that the massive growth of online advertising has had considerable impact on the traditional print media industry. To the extent that brands have chosen to spend pennies on AdWords and other programmatic tools and services, instead of thousands of dollars on display advertising in newspapers, there has clearly been a shift of spending from one place to another.

Advertising

In a similar way, many people who might normally have paid money to place a classified ad in a newspaper have chosen instead to post one for free on Craigslist. Is that Craig Newmark’s fault? Hardly. He stumbled on an opportunity — one that was also open to newspapers and other media outlets — and he pursued it. Blaming him (or Google) for their decline is like blaming Henry Ford for the decline of the buggy-whip manufacturing industry, or blaming the manufacturers of a submarine because your boat sank beneath the waves.

Google has prospered because it was an early adopter of a new form of algorithm-driven advertising, one that served the needs of many advertisers as well or better than much more expensive forms of marketing. It may be the most prominent example of that phenomenon, but it is hardly the only one — and to hold Page and Brin to account for this is the same as wishing that the internet could somehow be uninvented.

Would it be nice if Larry or Sergey decided to invest some of their billions in journalism, the way Bezos and Omidyar have? Sure — just as it would if anyone decided to do so, regardless of how they made their fortunes. And perhaps they could bring some of their web smarts to the media business, the way some (including me) would like Jeff Bezos to do. But to say they owe it us or to society to do so is just wrong-headed.

Post and thumbnail photos courtesy of Flickr user George Kelly and Shutterstock / Gl0ck

  1. Sorry, you didn’t convince me. So what if they didn’t invent the Internet. They did figure out a good way to advertise on other people’s content without sharing anything with the people who did the work. They could have built a system that actually paid the content creators. They could have tossed in a microcent every time someone clicked on a search link. But no, they kept ALL of the money for themselves. And they still do it. They seem to think that Google News is a service. It’s just a leech on the hardworking reporters.

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    1. Should I call the wambulance?

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  2. The vast majority of Google’s revenue comes from searches with commercial intent I.e. “cheapest coffeemaker” or “Miami hotels”. They dont earn very much from news related searches like “benghazi interviews”. I would argue they make their money on the backs of commercial enterprise, not journalists. Sergey and Larry owe the news industry nothing.

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  3. Joseph Campbell Friday, January 3, 2014

    The irony is that Google is probably more of a savior than a killer of journalism and editorial content. How many thousands of blogs, fan sites, writers, startup outlets, etc., have been discovered by Google’s search algorithms? How many talented artists and great stories have found a launching pad on YouTube and other Google outlets? How much content has been spread into new languages due to Google translate?

    Google has forced journalistic outlets to innovate and search for new ways of doing things. It has made information dissemination more efficient. While at times that has been bad for the average journalist trying to make a buck, from a big picture perspective, it has been good for helping people get access to information, and that includes journalism.

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  4. Somehow I hear a faint sucking sound, like “kissing muffled”. Like a bad marriage, I think letting these wonder boys off the hook totally is as bad as blaming them wholly.

    What do you think? The concern here should not be the New York Times and the big boys Google may have hurt, maybe it’s Om’s little competitors? Maybe the written news from the citizen (remember that idea) got washed out with the baby?

    Google sold us a bill of goods, like any other corporate blood suckers.

    End of Story.

    Me

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  5. Matt always sides with the internet guys in his editorial missives. If you follow him, you’ll notice that he even takes the side of internet pirates who out and out steal content. His thesis is that it’s not theft but probably advertising. He is assigned to comparing horse and buggies to Ferrari’s, and every time the Ferrari’s win. Big surprise.

    My opinion is that Om has Matt writing these pro-fremmium editorials to help massage the minds of the youthful readership that this publication may have. Read this publication long enough and you can see thru it’s editorial bias.

    These editorials are just filler between the real news that you might find under other pen names.

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  6. You can’t single out Google just because it’s the largest digital company. Patch, for example, invested hundreds of millions into journalism in the US and continues to search for the model that will work going forward. There are many who are investing in the future of journalism.

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  7. Well, if the Google duo aren’t smart enough to invest in content, they’re going to be joining the buggy-whip makers in the dustbin of history. A temporary anomaly has given great wealth to the people who invented the digital equivalent of the printing press and the library card catalogue. The actual value being exploited resides in the underlying information that the Internet “prints” and Google indexes; Google does not actually own any of that information. Regardless of how nimble Google leaders are, they cannot indefinitely continue to control and reap the vast majority of the profit from assets they do not own; the owners will eventually assert themselves. And this is the real way to view what Bezos and Omidyar are up to: They know — know in their hearts — that content will again be king, and not long in the future. They want to figure out the *way* content becomes king again, before anyone else. Because that’s where the money will be.

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  8. Obviously, Google is not to blame. I don’t think it’s about blame. I think the Internet is incredibly poorly designed. Rather than being free, everything on it should cost something in order to compensate creators. We have a proven system for doing this through organizations like ASCAP and BMI. The principal of royalties for profiting from the content of others is well established. Google came along, and, at least in the case of Youtube, knowingly robbed content creators for years in order to build up the business. The ideal system would be one in which every click resulted in a nano-charge on your phone bill, maybe 1/1000 of a cent for a news story, for example. Sites like Google that link to other sites could also pay in very tiny increments.

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  9. Sigh. Why do we have to sing this song over and over and over?

    [Pause]

    Oh, I see why – none of the critics take issue with the chart (notice 2000 wasn’t the first slump). Nor is anyone talking about how monopolies can generate excess profits (look at that 20+% ROI in the fat-and-happy days) — and monopolies are simply begging for another business to figure out how to upend them. Which is what free-or-almost-free publishing has done. Not Google. Google just figured out how to help people find stuff.

    @PhilHood – you’ve gotta be kidding. Please tell me you are being facetious.

    @johnmecklin – the money is in porn and commerce (selling things). Not “content” (whatever that is).

    @rebuttal – love how you own your opinion by using an anonymous name – and provide no sources for your argument (I’m being generous calling this an argument)

    @PhilButler – what bill of goods has Google sold you?

    @bob – read @alan’s comment. All of you >> read @alan’s comment. and @JosephCampbell (heh).

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