/Is Google Really Skimming Billions of Dollars in Revenue From the News Industry?

Is Google Really Skimming Billions of Dollars in Revenue From the News Industry?

Photo: Andrew Harrer/Bloomberg via Getty Images

According to a new study released by the News Media Alliance, megaplatform Google earned nearly $5 billion in revenue by leveraging news content last year. Google, which dominates online advertising, does not have a news division of its own; it relies on the work of dedicated news outlets. The study comes from the News Media Alliance, which is not exactly an unbiased third party when it comes to the journalism industry and its relationship with the tech platforms that have replaced them as advertising conduits.

“They make money off this arrangement, and there needs to be a better outcome for news publishers,” David Chavern, president and chief executive of the alliance, told the New York Times, which breathlessly parroted the study’s talking points. $4.7 billion is a large number, and it could do a lot to prop up the ailing news industry. But whether the number is even accurate is a looming question that the Times doesn’t bother to address.

Perhaps the main reason you shouldn’t take any stock in the $4.7 billion statistic is that it’s based on a made-up dollar amount from 2008. From the report:

Content on Google Search that does not directly result in revenue still provides Google significant benefit, as users who come to Google for free content are the same users clicking on ads. While it is difficult to measure the monetary value of this content, Google has provided a benchmark. Specifically, Google estimated that Google News, a product without ads, brought in an estimated $100 million in yearly revenue in 2008. Although Google has provided no more recent estimates of the value of news content, the $100 million quoted by Google for Google News (which has no ads) can be extrapolated in a straightforward way to suggest an estimated $4.7 billion of revenue in 2018 to Google from news content on Google Search and Google News.

That $100 million stat comes from Marissa Mayer, who floated it at a conference when she was head of Google Search. The report cites two contemporaneous write-ups. One is an article from Fortune that says Mayer estimates Google News’ value this way because it refers people to Google’s search engine for other (ad-supported) queries. The second piece, from The Next Web, cites the Fortune article but has a more misleading headline: “Ad-free Google News generates $100 million per year?”

You don’t have to be a finance genius to know that there is a difference between a product’s estimated value (often arbitrary) and how much revenue it actually generates. They are not at all the same thing. Yet, despite the fact that the figure is ten years old and neither of the cited pieces features a direct quote from Mayer to clarify anything, the News Media Alliance decided to use the figure as the basis for its calculations.

The report also does little to really nail down what “making money from news content” really means. Google’s news strategy has four main components, according to the NMA: It shows excerpts from news sites in search results, aggregates multiple sources onto a single page with its Google News service, people post videos about news on YouTube, and Google lets people set up news alerts. Many of the same complaints in this report could be applied to any sort of intellectual property. If I search for a type of music, Google might list a popular band before eventually listing some amateur group. If I look for a book on a topic or query “disaster movie,” Google would probably give me a number of specific titles it thinks is relevant. Google’s function is indexing and ranking everything — not just news — and, in most cases, sending people straight to the source. That’s what makes Google useful. Google’s not necessarily taking over anyone’s turf, and when it has overstepped, it’s gotten hit with antitrust enforcement from bodies like the European Union. Regarding news, Google presents headlines and short snippets (not the entire article), and it usually sends people to other websites.

That’s not to say that media organizations don’t have some valid gripes with Google. Some would argue that Google excerpts are so long that they reduce readership, or that Google is not aggressive enough about taking down infringing material. But the report fails to make the case that Google is aggressively and intentionally exploiting news organizations specifically. The reality is Google has hurt the sustainability of news organizations, but it’s not because it’s draining money from them with aggregated blog posts and news alerts. It’s because Google built a system for online advertisers to reach people that’s better than advertising with news companies, and that has hurt their bottom line.

Per the News Media Alliance’s own press release:

According to the report, since January 2017, traffic from Google Search to news publisher sites has risen by more than 25 percent to approximately 1.6 billion visits per week in January 2018. Corresponding with consumers’ shift toward Google for news consumption, news is becoming increasingly important to Google.

One could also argue the inverse: that the stat shows that Google is increasingly important to news publishers! Google is increasing traffic to publisher sites … and that … somehow … means that … Google is … being stingy … with publishers?

You cannot deny that Google and Facebook have completely eaten up the digital-advertising market and left next to nothing for anyone else, including news orgs. But the evidence offered does not suggest that Google is deriving value from the news industry by replacing it. Rather, it’s adding value for consumers by organizing it in a very useful and convenient way. For instance, the report argues, Google is using dastardly tactics like engineering its search algorithm to prefer recent articles over older ones. Oh no!

For example, the interpretation of the query “iPhone” has changed as new iPhone models are released. The first iPhone was introduced in 2007. Google assumes that users searching for iPhone at that time were looking for the new first iPhone model at the time, and that most users now are looking for the most recent or upcoming iPhone model

Again, I’d ask: What’s your point?

The digital-advertising duopoly that wrecked news organizations is something to reckon with, but this isn’t the way to do it. It’s ironic that a study on Google’s power over the news industry, produced by a trade organization with a vested interest in saving the news industry, would fall victim to … sloppy reporting.