Topix Blog

July 18, 2009

News Flash: The Bad Guys Win

by tolles at 9:08 AM

Sigh.

I guess its time for another crop of news products from journalists. Why is it that when these guys all go onto the field of battle "once more into the breach" style, they don't understand which side of the Agincourt analogy they are on. They face superior weapons and a difference in culture and ethics. They are the French in this battle. They die.

While I applaud Howard Weaver for trying to switch from defense to offense, he seems to be going off with some pretty faulty assumptions:

Google, Yahoo, MSN and AOL are making more money from online content than the newspaper industry makes from everything. Many billions of those dollars are tied directly to the distribution of news and news searches, and that’s the money news companies must find a way to get.

Let’s say those online giants – call them GYMA – make $15 billion a year from news and news-related content (searches, archives, etc). I think that’s a conservative guess

Uh. No. That's just wrong.

AOL annual revenue is $4.2B, Google $21.8B, MSN ~$2B, and Yahoo $7.2B

So, since the grand total is around $36B, Google news is pretty much a non revenue products, and Google was doing just fine with little or no news results in their main index until the last couple of years. Yahoo does put news ina lot of their products, but certainly, nowhere near 50% of their advertising is sold against news, as is the same for AOL and MSN.

(Oh and last time I checked the newspaper industry advertising revenue was $37.85B)

News is a crap search product, and a loss leader, which is a big reason why Google news was in beta for years, and unmonetized, and why many news-centric searches get no ads next to them.

News is an unprofitable search. Since we at Topix are an adsense partner, and I am a downstream beneficiary to what revenues there are here, I know what kind of eCPM news brings and how hard it is to make money on aggregated "news" content.

Howard goes on to identify his view of the problem:

The problem for news companies is that Google spans the globe, and they individually can’t. Only by banding together to offer the collective judgment of thousands of journalists about hundreds of relevant stories and presenting that in web-savvy ways can they reach the scale necessary to win a share of the billions already flowing to Google, Yahoo, AOL and MSN.

So if you built a news aggregator, powered by journalists, this would somehow unlock the value and get to $1.5B in annual revenues?

NO. YOU WOULDN"T.

If that was true, Daylife, Inform, newsvine and the myriad of other startups would be actually makiing a ton of money and chewing up the pop charts. Or Digg for that matter, or the Huffington Post.

BUT THEY AREN"T, ARE THEY?

Closer to home, I have some experience in running a news site here at Topix, and having talked to Howard while he was at McClatchy (and one of our investors), I am somewhat puzzled since I actually talked him personally about the economics of news search a few years ago.

We've built a site which is,according to comScore, the #2 "newspaper" site online. We actually had a program for a while where' we'd give 50% of all ad revenues back to publishers who wanted to syndicate content to us. Didn't work worth a damn.

An old politician in Juneau once reminded me that “you can’t beat something with nothing.”

One point where I agree with Howard. We've since moved on to try and create community around our news, which is percolating along, and focus on local -- which seems to be an area where we can compete with the lack of anything else out there. The success that we're having is creating a product where Google (or the newspapers for that matter) can't, or are unwilling, to compete on even terms. (Hello no more comments on Google news).

But Jeez, why is it that all the old newspaper guys think there's some giant pile of money at the top of the trust pyramid? There isn't. All the money is at the bottom. In the muck. In the details. Where Gawker plays. Where Techcrunch plays. It's not aggregating the "top trusted content, it's owning a category and being the best and, ideally, only ones there.

Journalists don't win this game. Publishers win this game.

People who care about pageviews and winning, more than they worry about concepts like "trust".

The "bad guys" win.

I’m a real dinosaur in the news business in one respect, at least: I spent the first 20 years of my career in life-or-death competition for readers and revenues. The good guys won (that was us) and I’ve never flinched from a competitive fight since

So, while I again applaud Howard -- I'd just urge him to look with a clearer eye towards what's going on and join the right side here. Really, there is no money in building a news aggregator focused on trust. If anything, it can be a start or a loss leader for whatever your real product is. But it is NOT a strategy for direct monetization.

Trust me on that one.