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Google’s olive branch to news publishers comes at a cost

  • Google announced earlier this month it would drop its chokehold on paywalled sites, helping publishers gain new subscribers using its own data and algorithms.
  • Media executives said millions of dollars would be ploughed back into journalism and envisioned a double-digit spike in subscription conversions.
  • This debate has come as tech giants themselves face questions over the rise of 'fake news', and their own role in delivering responsible journalism.
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The relationship between media groups and Google has long been strained, with the tech group’s power over consumers sparking mistrust about the gradual closing of access and siphoning of revenues from the industry.

When Google announced earlier this month it would drop its chokehold on paywalled sites, helping publishers gain new subscribers using its own data and algorithms, media executives openly rejoiced. Some said millions of dollars would be ploughed back into journalism; others envisioned a double-digit spike in subscription conversions.

Now, Richard Gingras, Google’s head of news, has revealed a twist: in an interview with the FT, he said the group planned to take a finder’s fee for each new subscriber it brings to publishers. This would be significantly less than 30 per cent and so more generous than 70-30 split for its AdSense model.

“We want to have a healthy ecosystem where we’ll benefit both as a society and with our business,” he said. “We are still working it out, we’re not experts in the subscription business, but the rev shares will be very, very generous.”

The question for publishers is whether this is simply Google trying to insert itself between the customer and the media business, drawing out new revenue streams for itself. Or whether its innovations in data use and artificial intelligence could still help revive the economics of the online news industry increasingly moving to paywall-based models.

This debate has come as tech giants themselves face questions over the rise of ‘fake news’, and their own role in delivering responsible journalism.

“Google, along with Facebook, are the twin suns of the news universe — they’re essential to the digital news economy and publishers have no choice but to navigate around them,” says Ken Doctor, news industry analyst and author of Newsonomics.

According to data from web analytics firm Parsely, Facebook and Google jointly send 76 per cent of all external traffic to news sites. “The real question is not the revenue share, but can [Google] move the needle on subscriptions?”

Publishers tend to agree, with increasing digital subscriptions a core goal given the decline in print. “We’ll certainly consider [revenue shares] in the way that we would with any acquisition channel analysis — that is, does the cost to acquire a subscriber come in at an acceptable level that is less than the revenue created,” says one global media executive, who asked not to be named.

“But more than that, our key tenet is the direct relationship with the customer, so 10, 30 or 90 per cent share of revenue is actually secondary to the condition of a direct relationship.”

Although Mr Gingras insisted Google was not planning to create a subscriptions business, there are still worries about such a move given the business advantage for Google to broker payments for digital goods.

“News subscriptions are currently a tiny dot on potential new revenues for someone like Google, but it does make sense for them to become more of a middleman, which they have tried to do for half a dozen years since Google Wallet,” Mr Doctor says.

“Whether those goods are subscriptions or music or movies, that is a significant part of Google’s business strategy and they haven’t been as successful at it compared to Apple or Amazon.”

The Californian giant’s move to mollify publishers has been a long time coming. In 2007, it introduced First Click Free — its controversial policy requiring publishers with paywalls to provide a minimum of three free stories per day via Google search.

Ever since, it has faced growing criticism from subscription-based publishers claiming it has strangled their business model and penalised them for non-participation. News Corp-owned Wall Street Journal, for instance, said its referrals from Google News plunged 94 per cent in the first five months of 2017, after it opted out.

“Our subscription project came [from] the emerging recognition that consumers are indeed willing to pay for quality journalism,” Mr Gingras says.

“Also, we were seeing market trends simply in the number of publishers who were putting up subscription models. Ten years ago, I could probably count the number of newspaper paywalls on my two hands. Two years ago, it was probably three dozen. Now, it’s several hundred. Next year it’ll be a lot more.”

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Google is not alone in trying to fix its fraught relationship with online media. Facebook announced on Thursday that it too was testing a new way to help publishers such as the Economist and the Washington Post sell more subscriptions. The social network, however, will require publishers to provide at least 10 articles for free to start with, unlike Google, which will let publishers decide how many free samples they want to provide.

“[Facebook] is a proprietary environment. It is, in a sense, a walled garden. To really get the most out of an environment like that, as a publisher, you really need a business relationship with them,” Mr Gingras says.

“The open web is absolutely critical to the future of any publisher. This is actually where we share a common objective with publishers.”

Like Facebook, Google has been dragged into debates about their role of gatekeepers to news — in particular given accusations over the rise of fake news stories.

Mr Gingras said platforms such as Google are dependent on the survival of high-quality content on the web. “Is it a good idea for society? Of course. But, if you also look at it simply in terms of the nature of our business, the truth is the more successful publishers are, that’s likely beneficial to Google, as well. That’s our motivation.”