Amid Tensions Google’s Eric Schmidt Addresses Newspaper Conference

Google CEO Eric Schmidt addressed the Newspaper Association of America conference in San Diego this morning. It comes against the backdrop of the AP copyright controversy, rising tension between Google and newspapers and publisher frustrations with their own declining revenues. Some have accused Google of devaluing their content.

Schmidt’s talk was generally sunny and upbeat especially about the role of technology in solving problems. The most interesting part of the talk was the Q&A session. Here’s a summary and general paraphrase of the question and answer part of the speech:

Question: In addition to advertising, you spoke about subscriptions and micropayments. Please elaborate on the last two.

Schmidt’s answer: On the Internet we think you’re going to end up with all three. There’s free television, cable television and pay television. That structure looks to us like the structure of all these businesses with the audiences getting smaller with the pay models. The vast majority of people will only want the free model, so you’ll have to deal with advertising.

Question: You’ve said that news organizations are trusted, have credible brands. Is there a way to look at search so that news organizations with credible brands . . . that the algorithm is tweaked not only for the benefit of the publishers but for the users?

Schmidt’s answer: We actually do that in the case of Google News. There’s a relatively fixed set of sources, which are selected based exactly on the sort of trust you’re describing. In Google search we’re careful not to bias it using our own judgment of trust; we’re never sure if we get it right. We use complicated ranking signals . . . and we change them periodically, which drives everybody crazy.

(He spoke also about the trade-off between popularity and trust or credibility in Google’s general search algorithm and said “we’ve not come up with a way to algorithmically handle that in a coherent way.” In this case “that” is a lesser known but credible source that’s getting less traffic than a more popular source.)

Question: Speak frankly about how newspapers have performed digitally over the past 10 or 15 years. And if you became the CEO of an American newspaper company, what would be the top few things you would do in the digital space?

Schmidt’s answer: I was very impressed by how quickly all the newspapers I talked with in the 90s embraced the Web. They quickly repurposed existing print stories on the Web and created reporter blogs. The criticism if I can offer one is that there wasn’t an act after that. And the act after that is a much harder question. How do you keep engagement; how do you keep from being disintermediated into just a set of stories with your brand on them, which has happened to some newspapers?

If I were involved with the digital part of the newspaper, I would first and foremost try to understand what my reader wants. It’s obvious to me that the majority of the circulation should be online rather than printed. There should be 10 times more readers online because there are no distribution costs.

So the question becomes, how do we get to 10 times more readers online and what do they want to see? My own bias is a technology one; I think the sites are slow. They’re actually slower than reading the paper. And that can be addressed.

Question: AP decided to take a more aggressive approach to intellectual property rights. What impact will that have on Google and intellectual property generally. And how do you see intellectual property rights over time, will they continue to erode?

Schmidt’s answer: We have a multi-million dollar deal with the AP not only to distribute their content but to host it. We have a successful deal with AP and hopefully that will continue for many many years . . .

The resolution of the second question is determined by how you interpret Fair Use. From our perspective, there is always a tension around Fair Use. But ultimately it’s a balance in favor of the interests of the consumers . . .

Think in terms of what your reader wants. These [newspapers] are ultimately consumer businesses and if you piss off enough of your readers you won’t have them anymore. If you make them happy, you will grow them quickly.

There are laws that govern intellectual property. It’s important that you respect the law. We try very hard to respect the rights of the copyright holder. But all of these partially thought through legal theories are now being challenged by the ubiquity of the internet.

Question: Google has been at the forefront of conditioning audiences to where the headline and the extract are enough. Google sits in the middle between the content and the audience. How can the media industry in general partner with Google to help support that professional content, when the headline and extract are enough?

Schmidt’s answer: Everyone has an opportunity to opt-out of this using robots.txt. You should understand that. But we think we can build a [personalized] business with you guys with significant advertising resources, where the advertising is targeted toward the content.

Question: One of the issues that’s still a problem for us is . . . there are no defined standards of what an eyeball is. What is truth to you when it comes to external or internal sources of audience counting?

Schmidt’s answer: We look at clicks and how long people stay on a page. Your question shows us how early we are in this industry. It took many many years for the creation of audit circulation bureaus for magazines. A uniform standard will be developed over time.

Comments: Schmidt was generally open and charming but didn’t offer the newspapers any real, concrete solutions. Being more user-centric is good advice but general. The audience was polite and didn’t really challenge him. I’m sure there was a lot of unexpressed frustration in the room. Google is seen, as much by some as Craigslist, as a villain and destroyer of newspapers.

The truth is much more complex. Newspapers have seen some of their business commoditized by news aggregators, of which Google is merely one. They have also failed to create the user experiences and products that might make them more successful online. Yet they are relatively successful online and among the top sites in their respective markets in many instances. However they suffer from the same tension faced by all traditional media: revenues reside in the traditional product but audiences are increasingly online.

There are no easy solutions but setting Google up as a scapegoat, as newspapers have often done with Craigslist, obscures things that they have control over and actions they can take in adapting to a dynamic media marketplace. With their complaining, newspapers strike me a little like Albert Books in the movie Broadcast News. Even though he was smarter, he “lost the girl” (Holly Hunter) to the more attractive but dimmer character played by William Hurt — and spent much of the movie feeling sorry for himself.

It doesn’t do newspaper publishers good to point fingers or see themselves as victims. They now need to move forward in constructive ways.

Related links and additional information:

• WSJ Blog
• LA Times Blog
• ZDNet