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Google Won’t Buy Ailing Newspapers, Could ‘Merge Without Merging’

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Their fortunes are poles apart and yet inseparable — one is hauling in buckets of advertising, the other is losing it at an alarming rate. Google (NSDQ: GOOG) sympathizes with the newspaper business’ predicament and continues to say it can help, but, sadly for NYT-Google acquisition speculators, CEO Eric Schmidt says he isn’t about to buy or bail out any news publishers.

Schmidt tells Fortune: “The good news is we could purchase them (newspapers). We have the cash. But I don’t think our purchasing a newspaper would solve the business problems. I think the solution is tighter integration. In other words, we can do this without making an acquisition. The term I’ve been using is ‘merge without merging’. The web allows you to do that, where you can get the web systems of both organizations fairly well integrated, and you don’t have to do it on an exclusive basis.”

Schmidt also rules out investing in newspapers and, though he’s concerned enough about “companies that are in a terrible business situation who support an important public good” to advocate models like Sandler Foundation-funded ProPublica, there’ll be no parachute payments through anything like the benevolent fund: “We didn’t want to co-mingle philanthropy with business. We are in the advertising business.”

More after the jump

Google is tip-toeing on precarious ground. Having built a successful business of its own, it has no real obligation to help out ailing newspapers, but the chasm between their contrasting fortunes, and the suggestion that Google is making some of its money from the very content news publishers generate, is prompting some to wonder if Google doesn’t have some kind of moral duty to help. Schmidt, though, is advocating the same kind of relationship that Google has operated to date (“We’d like to help them better monetize their customer base, we have tools that make that easier”). But Belgian newspapers have already taken Google to court and won over indexing of their stories. If the gulf between the two widens further in lieu of additional support from Google, some publishers may yet wonder if they’re really getting sufficient upside.

4 Responses to “Google Won’t Buy Ailing Newspapers, Could ‘Merge Without Merging’”

  1. Angus: newspapers will give up classifieds as soon as they stop being profitable. Right now, they apparently still are. Some newspapers have stopped running classifieds on days that aren't profitable. It's a nice thought about charging more for papers, but then they'll lose readers and lose a lot more in ad revenue. There are people whose entire job consists of running scenarios of how purchase price increases impacts ad revenue and price accordingly.

    digital bear: google and microsoft already get real time feeds, as does anyone wtih an RSS reader. So why buy what is already free?

    G: buying one newspaper (or two or three) isn't enough to salvage the majority of the content they index and search, and generates their revenue. There's millions of news sources that help search revenue. And frankly, most of the search revenue is not from news because not many advertisers buy keywords around war, impeachments, and elections; they buy keywords around cars, loans, travel, and other consumer transactions that drive traffic predominantly to ecommerce sites. I've worked for a news site trying to compete on keywords for those topics, we couldn't because the ecommerce sites can pay so much more.

    I think the only that will save any newspaper is enough of its competitors going under so that they have less competition for fewer ad dollars. And that may include just surviving as a website. And in the end, that's how all dying industries end up. There's only so much M&A, cost cutting and creative solutions out there to prop dying businesses.

  2. Newspapers are losing their classified business to Google because their technology is less effective than web for searching and directorising.

    People either buy newspapers to be informed or for classified information. The problem is the 'OR', as each party is aware they are paying for the part they don't want – the journalist or the advertising production business.

    Newspapers should largely give up on classified advertising, focus on creative solutions where paper can be inventive and striking and charge more for the news portion of the proposition, which a smaller number will continue to want.

  3. digital bear

    Why is no one thinking creatively:

    Google, Microsoft & Yahoo should pool money to buy the major newspapers put them into a "national news" trust that has set deliverables and an independent editorial board.

    Google, Microsoft & Yahoo then receive real time feeds of the news and they compete on packaging & technological uses of the editorial. The three already rely on outside news and compete on how they present & package vs. the editorial.

    The model has been done in other instances and it is not just a moral duty but it does make business sense if as "G" points out they want to have a society that reads more than gossip, journals and microblogs- which yields low timespent, minimal loyalty and no command for higher advertising rates.

    The problem is that Yahoo is afraid of its own shadow so it might have to be left to Google & Microsoft.

  4. "moral duty to help" – ARE YOU SERIOUS?

    if anything – without newspapers – GOOG will be indexing blog posts and moronic commentaries. it is more about business sense if any – although the newspapers are best left to their ills – no one but they can fix what ails them.