By Carl Howe
Note to Rupert Murdoch: Jerry McGuire notwithstanding, yelling “Show me the money” is a loser as an Anywhere media strategy.
Murdoch has been making quite a fuss lately about how little Google pays News Corp for its content. Hoping to get Google (NASDAQ:GOOG) to up the ante, Murdoch has been threatening to remove all News Corp (NASDAQ:NWS) content from Google and ink an exclusive search deal with Microsoft’s Bing search engine. Microsoft (NASDAQ:MSFT) has appeared eager to pay News Corp millions for its content in hopes of wresting search market share from Google.
In the traditional media business where content distribution was tightly controlled by a few major companies, this type of exclusive media distribution deal might have worked. In today’s Anywhere world, where ubiquitous connectivity provides readers with a universe of choice, I expect that such a deal will make News Corp’s business worse, not better.
First off, we should dispel any concept that Google is stealing News Corp’s content. As any webmaster can tell you, News Corp can terminate Google’s use of its content any time it wants by adding a robots.txt file to its Web site. In fact, with just a minute’s work, it can give Bing exclusive rights to index its content and lock Google out at the same time. The fact that News Corp doesn’t do this indicates that perhaps News Corp knows that life without Google would hurt it badly.
Numbers can help us understand why News Corp needs Google more than vice versa. Eric Schoenfeld at Techcrunch cited data from Hitwise that showed that the Wall Street Journal (News Corp’s flagship U.S. publication) receives more than 25 percent of its traffic from Google. Now that statistic might simply indicate that Google had a lot of Wall Street Journal stories, but traffic numbers don’t bear that out. A quick check of the Google News search results shows that the WSJ comprises less than 2 percent of Google News stories — and there are frequently numerous other sources for the same stories. In fact, the New York Times is 3.5 times more frequently searched for and cited than the Wall Street Journal as shown in the Google Trends graph above. And if we venture beyond the U.S., the BBC—a content source that News Corp. frequently competes with—is 41 times more frequently searched for and cited. So eliminating Google would likely cause advertising revenue on the WSJ to drop somewhere around 20 to 25 percent, but not having WSJ content would hurt Google’s business hardly at all.
Here’s a more dramatic comparison that perhaps illustrates how unfair a fight this is. Subscription circulation for the Wall Street Journal, including 400,000 online subscribers, is 2.1 million. Google’s has more than 300 million visitors daily. So if an advertiser has to choose which of these two venues to advertise in, which one do you think they’ll choose?
And what about Microsoft’s Bing? No matter how much News Corp may wish it, Microsoft didn’t accumulate a cash horde of more than $33 billion by paying out money when it doesn’t have to. And frankly, Bing doesn’t have the traffic to substitute for Google. While the WSJ might be less unhappy losing only 20% of its search visitors instead of 25%, that’s still a loss, and the WSJ’s advertisers aren’t going to pay the same ad rates for less traffic. That means that WSJ ad revenue will head south if this deal goes through.
The irony of all this is that Rupert Murdoch knows how badly he needs Google traffic because of another News Corp property: social networking site MySpace. Murdoch bought MySpace for $580 million in 2005, and Google paid MySpace $300 million a year for a guaranteed level of search traffic through Google based on MySpace visitors. Unfortunately, MySpace visits have suffered at the hands of Facebook and Twitter ever since its News Corp purchase. Now that MySpace doesn’t deliver the traffic it used to, Google now is offering only $50 million a year for MySpace’s traffic. Murdoch saying “Show me the money” may simply encourage Google to give up that deal entirely and keep nearly a third of a billion dollars more for its own profits.
There’s nothing wrong with Murdoch’s concept of exclusive media content garnering subscription revenue provided it can drum up enough subscribers. But Metcalf’s Law, which states that the value of a network increases as the square of the people who connect to it, means that News Corp’s content will be worth less without Google’s traffic. And somehow, I suspect that the headlines will be significantly more critical when News Corp’s advertisers are yelling “Show me the money!” instead of Rupert Murdoch.