According to a Fortune story that appeared yesterday, Google seriously considered and then decided against buying some or all of a hedge fund’s 19 percent stake in the New York Times. According to the article:
Last month, sources tell me, former Hollywood mogul David Geffen made an offer to buy the 19% stake in the Times held by hedge fund Harbinger Capital Partners, but no deal was struck. (Geffen and Harbinger declined to comment.). And a few weeks before that, Scott Galloway, a Web entrepreneur and New York University Business School professor who is one of two Harbinger appointees on the Times board, made an overture to Google co-founder Larry Page about Google buying the Times Co. Even though Google CEO Eric Schmidt has publicly lamented the state of the newspaper industry and dismissed the notion of Google investing in it, people involved said the company looked seriously at the opportunity before deciding to pass.
No one but the people involved know how real or serious those discussions between Google and Harbinger Capital actually were. But it’s probably wise that Google didn’t buy into the Times.
Rather than buying a direct stake in a newspaper company there are many simple things that Google could do to help newspapers (which might also win points with Congress and anti-trust regulators as an ancillary benefit). One of those things is donating all ad revenue generated from Google News to a fund that would distribute it to participating publications using some sort of formula to be determined.
But according to TheWrap Google may also be developing an improved, “personalized” news service that could generate more traffic and page views for newspapers:
Google does have plans for a solution. In about six months, the company will roll out a system that will bring high-quality news content to users without them actively looking for it.
Under this latest iteration of advanced search, users will be automatically served the kind of news that interests them just by calling up Google’s page. The latest algorithms apply ever more sophisticated filtering – based on search words, user choices, purchases, a whole host of cues – to determine what the reader is looking for without knowing they’re looking for it.
And on this basis, Google believes it will be able to sell premium ads against premium content.
The first two news organizations to get this treatment, Schmidt said, will be the New York Times and the Washington Post.
Does the New York Times make more money from this arrangement, I asked? No, Schmidt confirmed, it won’t. But by targeting the stories that readers will want to read, it will get more hits out of the stories it has, which will drive its traffic and ultimately support higher advertising rates beside the stories.
Google news already has recommendations. Nonetheless, this is provocative. (There’s lots more Google News can do to improve the user experience.) But we’ll have to wait and see whether there’s anything real in this report. The potentially problematic part is this:
Google believes it will be able to sell premium ads against premium content . . . Does the New York Times make more money from this arrangement, I asked? No, Schmidt confirmed, it won’t. But by targeting the stories that readers will want to read, it will get more hits out of the stories it has . . .
This will potentially become a “political” problem for Google: if it builds a better Google News and sells brand ad space on it, keeping all the revenue.
Newspaper publishers want favorable rankings and treatment from Google. Rather than search, News is the place that they could reasonably ask for it (based on trust or authority). And Google should be sharing at least some of the ad revenue it makes off those pages with news publications and content producers. If Google is really seeking to help the newspapers, that’s one simple thing it could do.