Google’s optimism

There’s plenty to discuss in James Fallows’ excellent Atlantic piece on how Google plans to save the news industry.  It has some good background on what’s hurting the industry, notes that hard news never made money, touches on un-bundling and re-bundling (aggregating), and plenty more.

I want to briefly highlight two points.  First, Google is supposedly agnostic about paywalls:

…people inside the press still wage bitter, first-principles debates about whether, in theory, customers will ever be willing to pay for online news, and therefore whether “paywalls” for online news can ever succeed. But at Google, I could hardly interest anyone in the question. The reaction was: Of course people will end up paying in some form—why even talk about it? The important questions involved the details of how they would pay, and for what kind of news. “We have no horse in that race or particular model in mind,” Krishna Bharat, one of the executives most deeply involved in Google’s journalistic efforts, told me, in a typical comment. His team was already working with some newspapers planning to put their content behind paywalls, others planning to remain free and hoping to become more popular with readers annoyed when paywalls crop up elsewhere, and still others planning a range of free and paid offerings. For Bharat and his colleagues, free-versus-paid is an empirical rather than theological matter. They’ll see what works.

[Emphasis mine.]  Read that bolded line again.  Of course people will pay for news?  Really?  If it doesn’t seem all that obvious to you, you’re in good company.

But I’d offer a couple thoughts to put Google’s position in context:

1) Google has pissed off enough newspaper editors already (as Fallows discusses); why piss them off even more by pointing out that paywalls are unlikely to work?

2) If you include advertising as a way “people will pay in some form” then the statement is actually pretty reasonable.

Which brings me to the second point worth calling out.  Google is bullish on the potential of web ads to bring in big revenue:

Newspaper and magazine publishers have felt trapped by the death of print, says [Neal Mohan, VP of Product Dev.], because display ads in print have been such a crucial cash cow. The switch to online display ads has not offset the losses in print, since the “per eyeball” revenue from online display ads has been so much lower…Online display ads may not be so valuable now, he said, but that is because we’re still in the drawn-out “transition” period. Sooner or later—maybe in two years, certainly in 10—display ads will, per eyeball, be worth more online than they were in print.

I know very little about the economics of web ads so I’m in no position to comment here, but I certainly hope he’s right.

In any case, it’s a characteristically terrific piece by Fallows.  I highly recommend reading the whole thing.