Google stoops to conquer: Schmidt frets about decline of US investigative journalism

Posted by Peter Kirwan on 27 August 2008 at 12:15
Tags: Google

Last year, Sly Bailey cheekily appended a quote from Larry Page, co-founder of Google, to a presentation she gave to analysts and investors.

Page’s quote ran: “Newspapers have a good future. A laptop runs out of battery and you can’t tuck it under your arm.”

Nice, upbeat, stuff. During the past year, however, the prognosis from The Googleplex seems to have darkened a bit.

During June, Eric Schmidt, Google’s chief executive, was to be found telling conference audiences that there was a “a huge moral imperative” to help the US newspaper industry with a “shared problem” that he described like this:

“Newspaper demand has never been higher. The problem is revenues have never been lower. So people are reading the newspaper they’re just not reading it in a way where the newspapers can make money on it.”

But only a month later, at a conference held by AdAge in the US in late July, Schmidt has started to sound doubtful about the possibility of helping the news business.

At this conference, Schmidt started by criticizing the “conventional wisdom”:

“More people are online than ever, the existing ‘older businesses’ will in fact discover how to monetize in the new formats, that new information will become possible, and we’ll all get through this.”

Schmidt wasn’t buying it. He told the audience: “I’m sorry to be such a downer, and I’m very worried about it, so I’d rather just confess. . . The evidence does not suggest it’s true.”

Schmidt went on to describe the prognosis for US newspapers as “particularly bleak”:

“It’s a tragedy for America because the newspaper industry — in particular investigative reporting — is so fundamental to how our democracy works.”

“The classic example is how many people are covering the war in Iraq to find out what’s really going on — after we as a country spent a trillion dollars on it? Seems like we should spend a little more to cover it.”

Indeed. These latest (apparently unscripted) comments mean that Schmidt has been caught ruminating publicly upon the problems of the US newspaper industry three times in as many months.

Call me fanciful, but this does make me wonder what’s being discussed away from the podium. If Schmidt’s comments indicate the existence of smoke, where’s the fire?

PS: For those of you with a strong constitution, Valleywag, Silicon Valley’s in-house gossip site, has an little survey entitled “Five ways the newspapers botched the web”.

It’s a bestiary of messed-up Stateside efforts at online diversification that runs from Knight Ridder’s 1983-vintage effort Viewtron (”We’re dancing naked on the stage of history”) to New Century Network, launched in 1995 (”The graddaddy of fuckups”)

It’s gory in extremis. Coincidentally, the dismissive tone nicely captures the attitude among many in Silicon Valley toward the US newspaper industry.

It’s a fact that large swathes of the US software industry regards the news business as the latter-day equivalent of the midwestern steel-making plants that shut their doors during the Reagan era.

This may put Schmidt’s touchy-feely obsession with newspapers into context. The cynical interpretation is that Google’s chief executive shares the views of his peers, but needs to massage perceptions of his company in the run-up to US government anti-trust intervention.

Clearly, The Googleplex would also like the US media to take an enlightened view of its emerging monopoly status. This is something that certainly didn’t occur in the case of Google’s rival Microsoft, which endured a decade of negative media coverage after the Department of Justice instituted anti-trust proceedings in 1998.

If US newspapers resemble the Irrawaddy delta, is Google’s Eric Schmidt planning an airlift?

Posted by Peter Kirwan on 13 June 2008 at 00:30
Tags: Gannett, Google, Guardian Media Group, News Corp, Yahoo

Eric Schmidt, the chief executive of Google, is not what you’d call a loose cannon.

This is a man who, in previous incarnations, became an arch-enemy of Microsoft’s expanding monopoly during the 1990s. Now, at the top of a company surrounded by anti-monopoly moaning, this poacher has become a extremely adroit gamekeeper.

So it’s been fascinating to watch Schmidt talking with apparent compassion about the plight of US newspapers twice this week — once in Washington DC and once in San Francisco.

In Washington DC, he said:

“We all care a lot about this. Newspaper demand has never been higher. The problem is revenues have never been lower. So people are reading the newspaper they’re just not reading it in a way where the newspapers can make money on it. This is a shared problem. We have to solve it. There’s no obviously good solution right now.”

In San Francisco, he said:

“It’s a huge moral imperative to help here.”

To the best of my knowledge, this is the first time that Schmidt has talked in public about Big Media’s plight in the same way that the boss of Oxfam might talk about the need to get aid into the Irrawaddy delta.

Perhaps Schmidt had read the news earlier this week about Gannett’s £3bn write-down — and found his heart melting with pity for the content companies that supply Google with so much valuable raw material.

Perhaps. But it seems equally likely to me that Schmidt’s plaintive outburst was prompted by reading advance copies of the European Commission’s 100-page report on Google’s acquisition of Doubleclick. (The full monty was published yesterday. You can download it in PDF format here.)

The Google-Doubleclick combination is highly controversial. By some accounts, Google already controls around 70% of the paid search ad market, which in turn comprises slightly less than half of all online advertising. By acquiring Doubleclick, which has a big market share in online display, the company could extend its dominance from search to the serving of what we might still call banners and buttons.

In the event, the Commission approved Google’s acquisition three months ago. But the retrospectively published report will have made grim reading for Schmidt.

Among other things, the report says this:

“Many advertisers depend on Google’s search ad services and. . . the revenues derived from Google’s search ad intermediation make it an almost irreplaceable source of income for many publishers.”

The report also suggests that Google’s rivals “do not seem to be a real alternative”. That’s because — in the Commission’s eyes — Google possesses a “sufficient degree of market power to be able to foreclose rivals in the ad serving market”.

Irreplaceable source of income? Power to foreclose rivals? No real alternative? This is monopoly talk.

Just in case you were in any doubt about that, a Brussels-based lawyer called David Wood has been giving Business Week the benefit of his views on the document.

Wood believes that the European Commission has put Google “on effective notice that its behavior will now be measured as that of a dominant undertaking”. He adds:

“This has always not been about whether the transaction would be cleared but what would happen afterwards. The next phase is looking at the behavior of these companies [Google and Doublclick]; let’s see if their behavior is allowed by competition law standards.”

In passing, it’s worth noting that Wood works for a lobbying outfit called The Initiative for a Competitive Online Marketplace, or ICOMP for short.

ICOMP is an anti-Google lobbying front funded by Microsoft and run on a day-to-day basis by Burson-Marsteller, the PR agency.

Don’t let that make you too skeptical about Wood’s comments.

Instead, ask what exactly was going through Eric Schmidt’s mind when he decided to make nice with the ailing US newspaper industry this week.

As Eric Schmidt knows well, ICOMP represents Microsoft’s effort to use against Google exactly the same lobbying tools that he and his allies used against Microsoft in the 1990s.

With the insight of a poacher turned gamekeeper, Google’s boss knows precisely where this particular road leads. In Microsoft’s case, it led to the company being tied down by anti-trust actions that started in 1998 and continue to this day.

Not coincidentally, Google’s monopoly has been the subject of comments by interested onlookers such as Rupert Murdoch, Sly Bailey and Paul Myners in recent weeks.

For the moment, however, ICOMP’s list of supporters mostly remains a rag-bag of obscure European names, including hotel groups in Spain and ad agencies in Austria.

This is not yet the kind of broad front that creates big waves in Brussels. In the name of shareholder value, Google would to keep it that way — for as long as possible.

Better than anything else, this explains the paroxsym of pro-newspaper sentiment that seized Mr Schmidt this week.

Google monopoly: Techcrunch founder backs Microsoft as saviour

Posted by Peter Kirwan on 28 May 2008 at 17:42
Tags: Google, Media

If we’re seeing the beginnings of a proper debate about Google’s dominance (monopoly?) in the UK, something similar seems to be happening in the US.

There, Michael Arrington, the Web 2.0 guru who runs TechCrunch, spent part of his Sunday penning a lengthy article entitled “The Importance Of A Competitive Search Market”.

In some respects, Arrington is arguing ahead of the pack. He claims, for example, that Google’s dominance of search means that “little effort is put into innovation”. Specifically, he offers up one example of what he believes is going wrong:

For example, the CPC (cost per click) model is flawed, but in Google’s favor because it puts fraud risk inefficiently on the advertisers, who have no way of controlling it at the search engine level. CPA (cost per action) models work much better, but Google has done little more than test them. The current system is great for Google and bad for advertisers. But advertisers have nowhere else to go. . .

And another: the fact that Google “doesn’t share enough revenue with content sites that show their ads”.

The only thing keeping them even close to honest is the fact that Yahoo and Microsoft will occasionally compete for those partners. Take that away, and Google will go back to keeping the majority of advertising revenue generated at those sites. . . That is a terrible outcome when you look at it from the perspective of the health of the Internet.

As a good Silicon Valley boy, Arrington wants everyone to get behind Microsoft and help it to provide Google with some real competition.

The thought of Microsoft as a liberator of media and advertisers is novel. Given the lack of success the company has met with in search markets thus far, it’s also an unlikely one.

Arrington acknowledges as much when he writes: “There’s a reason monopolies get broken up by governments. Market forces can’t generally undo them.”

Far from Google’s slick conference, an awkward squad of media owners and agencies starts to protest

Posted by Peter Kirwan on 28 May 2008 at 17:34
Tags: BBC Worldwide, Google, ITV, Media, Trinity Mirror

Was James Ashton of the Sunday Times invited to meet Sergey Brin and Larry Page at Google’s high-falutin’ Zeitgeist conference in a hotel on the outskirts of Watford last week?

It doesn’t look like it.

Last weekend, Ashton chose not to focus on Google’s own version of the World Economic Forum, complete with cameos by Gordon Brown and Queen Rania of Jordan.

Instead, he latched on to something that Google would rather not see mentioned: its evident monopoly of the search market.

Ashton’s piece kicks off with Neilsen’s suggestion that Google’s market share has risen from 57% all UK-based searches in July 2005 to 81% last month.

Google, he adds, is used on average 23 times a month by every person in Britain. Ashton writes:

It has got to the point where media buyers cannot afford to exclude Google from their online campaigns by relying on the smaller search engines of Yahoo and Microsoft.

Against this backdrop, Ashton wheels out an impressive cast of malcontents. There’s Sly Bailey asking The Lords for lighter touch regulation. (“I am not arguing that they should be regulated more, I am arguing that we should be regulated less.”

Alongside her, there’s Sir Michael Grade of ITV who (in Ashton’s words) “regularly invokes Google’s liberty when campaigning to overhaul contract-rights renewal”.

Or how about John Smith, chief executive of BBC Worldwide, who recently wondered aloud at an industry conference whether regulators “might start to gain an interest in search engines.”

Here, too, is Jason Carter, the UK managing partner for digital at mega-agency Universal McCann, asking for relief. (“We would like more competition in the marketplace.”)

At this point, it’s worth stepping back and looking at the anti-Google coalition stitched together by Ashton.

It’s cross media (from Trinity Mirror to ITV). It’s both public and private sector (from ITV to BBC). And it includes both advertisers and media owners (who typically agree on something — anything — with about the same frequency as our planet receives visits from Halley’s Comet).

The problem, as one of Ashton’s sources put it, is that regulators “aren’t sure” how to regulate Google.

With good reason. The challenge is international — and complex. And for all the regulators know, Google’s plans to move into other forms of advertising might not bear quite so much fruit as its ventures in search. That would leave a company dependent on rapid growth in a difficult situation.

For all of that, Ashton’s piece does point to a coalition in the making. Yes, it’s blurred round the edges and unsure of its aims — but it’s a coalition none the less.

Big Brother boss says: Kill off TV news to fund my Chirac-style folly

Posted by Peter Kirwan on 23 April 2008 at 17:18
Tags: BBC, BBC Worldwide, BSkyB, Google

Whatever happened to David Elstein?

Once upon a time, Elstein was head of programmes at Sky. As part of his job, he regularly called for the abolition of the licence fee.

In the market for ideas, Elstein’s purpose was to say the unthinkable — and get it incorporated into debate, to his employer’s advantage.

These days, Peter Bazalgette, the former public school boy responsible for a raft of trash TV, including Big Brother, seems to have taken Elstein’s place.

There’s only one slight problem. Like a lot of blokes in their mid-50s who have made lots of money from Big Media, the founder of Endemol hasn’t got much of a clue about the emerging digital universe.

At a Royal Television Society dinner last night, Bazalgette blithely called (among other things) for the government to abolish the news and current affairs obligations of both Five and Channel 4

By doing this, both channels would (presumably) become cheaper to produce and more popular.

HM Government, Bazalgette suggested, could then cream off some of the resulting expansion in profits by charging both channels for their use of digital (Freeview) spectrum.

In addition, Bazalgette proposed the privatization of BBC Worldwide, BBC Radio 1 and 2 and Channel 4.

After raising £3bn+ from such ruses, Bazalgette wants the government to launch something called, er, Boggle.

What Bazalgette has in mind is a “public service distribution platform and search engine”.

And its purpose? As Bazelgette sketchily framed it, Boggle would “link the existing online offerings of museums, galleries, theatre companies, opera houses and concert halls”.

It would also give all of these venues “seedcorn monies” to “improve” their “content offerings”.

But that’s not all. Boggle would also allow the “next generation of comedy talent” to post videos. The most popular would attract “some Boggle funding”. Last but not least, Boggle would create “a search engine to market it all”.

Confronted with this dim-witted slew of half-baked concepts, it’s hard to know where to start.

“Seedcorn monies” for museums? Fine. A few hundred million wouldn’t go amiss. But do we need a new quango to distribute it? What does the Arts Council do for a living?

Hasn’t Bazalgette heard of YouTube? Remarkably enough, young comics already use it to post videos of their gags. And then there’s Google, which owns a perfectly good search engine already. . .

In his haste to embrace a broadband future that he patently doesn’t understand, Bazalgette — the free market provocateur — actually ends up sounding like former President Chirac, who decided that French taxpayers should foot the bill for a French language search engine designed for French people.

A blizzard of straight-faced reports accompanied Bazalgette’s speech. Somewhere in them, I read that Ofcom will “study” this plan for a new quangocracy whose birth requires the death of much of what remains of news and current affairs on independent television.

Toss it into the nearest litter bin, more like. If this reflects the standard of debate within the TV industry, Big Media is in more trouble than we thought it was.

Come back David Elstein; all is forgiven.

PS: According to his biography on the Royal Television Society web site, Peter Bazalgette is currently “building a portfolio of investments in digital growth companies”. On the evidence of last night’s speech, widows and orphans would be well advised to invest their money elsewhere.

Google’s Q1: How weak — and why?

Posted by Peter Kirwan on 17 April 2008 at 01:07
Tags: Google, Independent News & Media, Media

Google’s Q1 results will hit the wires this afternoon (Thursday). They will be watched even more keenly than usual.

In particular, we’ll be interested in the company’s UK performance. The UK is Google’s most advanced outpost outside North America.

During 2007, the company grew its UK revenues by 58%, well ahead of the overall growth rate for online advertising (which the IAB estimates at 38%).

The law of big(ish) numbers says that a repeat performance is unlikely during Q108. By way of background, here are some numbers that need to be beaten:

Google: Reported UK revenues:

• Q4 2007: $692m
• Q3 2007: $661m
• Q2 2007: $600m
• Q1 2007: $578m

In the US, Google suffered another ugly month during March. According to Comscore, the number of clicks on the company’s paid search ads in the US rose by just 2.7% last month.

This caps a unpleasant quarter, during which Google’s clickthroughs — according to Comscore — rose by just 1.8%. For comparison, growth was 25% in Q407 and 48% in Q3.

Google isn’t saying much publicly about the Comscore numbers, which have provoked a vast amount of speculation during the past eight weeks. (Some of which you can read here and here.)

The big question is whether the slow growth in clickthroughs will be mirrored by weak revenue growth.

The optimists doubt it. Behind the scenes, they say, Google has been tweaking the way it serves paid search ads. This will result in much higher revenue growth than Comscore’s traffic numbers suggest.

The pessimists say it’s possible that Google will soon have to settle for growth rates below 30% — and less in rapidly-maturing markets like the US and the UK.

Behind all of this lies a fascinating debate about Google’s relative vulnerability to economic hard times.

Do consumers click on paid search ads more or less frequently during a recession? We’re about to find out.

For Big Media, the prospect of a weakened Google is fascinating. Weaker companies typically become more reliant on the goodwill of partners, less able to dictate from a position of strength.

For some, including Gavin O’Reilly of Independent News & Media, who continues to push ACAP, a weakened Google might feel like good news.

But if Google’s paid search business really is starting to reach a plateau, this will only lead to the company redoubling its efforts to generate ad revenues elsewhere.

So far, we’ve only seen hints of what Google has got planned for Doubleclick, the banner ad-serving platform it formally acquired in late March.

Alternatively, Google might decide that it is time to give the online classified market — up by 54% in the UK last year — a run for its money. More aggressively, there’s always the option of really going after the TV industry’s ad revenues.

Elsewhere, Google’s oddly threadbare mobile ad platform could do with a bit of updating, too.

One thing’s for certain: despite its efforts to compete with Apple and Microsoft as a producer of software, Google will never forget the ad business. It’s where the money is.

So keep being worried, Mr O’Reilly. Even if the investors desert the company in droves this afternoon, there’s plenty of life left in the Googleplex.

Supping with the devil: Google, Yahoo & newspapers

Posted by Peter Kirwan on 27 November 2007 at 11:09
Tags: Google, Yahoo

Farhi’s excellent article contains some information on the US newspaper industry’s continuing dalliance with Google and Yahoo. That dalliance takes the form of three joint ventures. For the most part, they’ve been heavily under-reported. Here are the agreements as Farhi sees them:

Yahoo has struck up a partnership with 19 newspaper companies that own 264 daily papers. Here’s how Farhi describes the mechanics of a deal which apparently results in the newspapers “taking a majority of each dollar generated”:

When an advertiser seeking to hire, say, a nurse, in St. Louis buys an ad through the St. Louis Post-Dispatch, the newspaper places the ad on its site, which is co-branded with HotJobs and automatically linked to HotJobs’ national listings. As a result, the advertiser gets his message in front of both local job candidates and others across the country. HotJobs, in turn, gets a local sales agent � the Post-Dispatch � to sell more listings.

An extension of the above project based around behavourial targeting. Here’s how Farhi describes it:

Using Yahoo!’s search capabilities and technology, the companies hope to marry national and local display ads to their visitors’ interests. People interested in, say, pickup trucks (as identified by tracking software and registration questionnaires), would likely see national ads for Ford, and perhaps for local Ford dealers, when they logged on to a newspaper’s site.

As he points out, CPMs for behavioural ads are a lot better than for untargeted banners. (Always assuming, of course, that newspapers can deploy the required technology without alienated their readers on privacy grounds.) Exactly how much better? According to Paul Ginocchio of Deutsche Bank, some members of the Yahoo consortium could see online ad growth rates of 40% for the next two years. . .

Google has moved on from its not-entirely-successful experiments in selling print ads on behalf of publishers. The search giant is currently running an experimental ad exchange (or trading system) that allows 225 newspaper sites to sell ad space on an auction basis.

Under an experimental program that was expanded this summer, Google is running auctions that enable thousands of smaller advertisers to bid on ad space � size, section and date of their choosing � on some 225 newspaper Web sites. The newspapers are free to accept the offer, reject it or make a counteroffer (Google says more than half the bids have been accepted). The process is streamlined by Google’s technology, which automates billing and payments.

More candidates for top job at GCap

Posted by Peter Kirwan on 27 November 2007 at 10:56
Tags: BSkyB, GCAP PLC, Google, United Business Media, emap

At the Guardian, Caitlin Fitzsimmons and John Plunkett have been chatting to headhunters. They’ve come up with a few more candidates for the vacant chief executive’s role at GCap. All are very long shots.

Malcolm Wall, chief executive of Virgin Media’s content division, is one of them. Perhaps this isn�t so surprising, since Virgin Media now seems more interested in super-fast broadband provision than competing head-on with BSkyB.

But Wall looks increasingly like an almost-man. He almost succeeded Clive Hollick at United Business Media. He almost became chief executive of ITV. And he almost got the top job at EMAP when that still meant something. Too many almosts, we think.

Then there’s Shaun Gregory, the former EMAP radio exec who is now UK chief executive of pan-European free mobile operator Blyk (a long shot, given that Blyk only launched a few months ago).

They’re also suggesting Mark Howe, the country sales director at Google UK. (He’d have to be insane, right?)