Google, Schmidt, and the Gray Lady Resuscitator™

"Why doesn't the newspaper know what I read yesterday?..."

Why would I want that? People shouldn't be afraid of their newspapers etc.

I particularly love this Waxman quote

Writing of the dense crowd of Hollywood and Meeja celebs, present at the party , she writes:

"A single suicide bomber would have ended filmed entertainment for the rest of the decade."

What? A whole 19 months? That's pretty monumental, given the vapid and ephemeral nature of this modern age. Just think: in 19 month's time, we may have begun paying off the first ten percent of our monumental debt (assuming we haven't all died of pig flu). The thought that we might have to do so without Jim Berkus or Tom Freston is... Well, it's terrifying, isn't it?

Schmidt wants to dumb-down the public?

Let me get this straignt -- in Eric Schmidt's brave new world of goonews, readers will only see news that their past reading history suggests that they may want to read? In other words, if America suddenly institutionalizes torture in its war against terror, no one will read about it on Google -- simply because the issue has not been on the American political agenda prior to that war?

There are certainly problems with a lack of objectivity in mainstream media, due to various economic, political, and ideological pressures, as well as secrecy in high places. But putting readers in a box and feeding them only what they prefer to read is a huge step backwards. This might be okay for mindless entertainment media, but not for news media. Taken to the extreme, it would make everyone oblivious to global current events, and unqualified to vote in a democratic society.

We know that Schmidt pushes this because the ads alongside the news will be highly targeted and make Google richer than it already is. But for Schmidt to pretend that it's also a step forward for society is absurd and potentially dangerous.

Faster Horses...

The future of media will not be anything that looks like the current structures...

A lesson worth remembering is that at the turn of the 20th century, people had a transportation problem...and the solution turned out not to be a "faster horse"...but a Ford.

And one should note that the Ford didn't arise out of the "horse industry's" R&D efforts, nor the "Horse Industry Revitalization Act" nor the horse industry's attempts to experiment with new Business Models.

I think the future of the media business will look as different as Ford and Toyota's operations look from horse traders and blacksmiths.

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What's historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplace.

Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970's).

Unfortunately the Internet came along and changed all the rules!

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The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being "too low" is inverted...the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.

An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media's monopoly control of distribution and supply.

To paraphrase Nietzsche, "God is dead. God remains dead. And we have killed him with the Internet..."

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The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero...infinite supply pushes price levels to zero!

What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won't allow the monopoly conditions to be re-constructed because only ONE VERSION each story has to leak out to start the cycle all over again.

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Another way to think about this is that once data becomes publicly visible on the Internet, its monetizable value rapidly dissipates to zero.

This is at the core of why Google can extract $25B a year from the economy without creating ANY content...what they create is meta-data about content (which CAN be monetized)...and all that meta-data remains non-visible. Only the results of decisions based on that meta-data by their search and advertising platforms is made publicly visible.

The lesson is that Google DOES NOT monetize other people's content...it monetizes its OWN meta-data. This is certainly one path to making the news profitable...not search per se...but various other approaches to the monetization of meta-data that's within the reach of publishers.

So the exquisite irony is this:

In the future, the only content that will have monetizable value is content that no one is ever allowed to read! (i.e. the meta-data)

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There are certainly ways to make online news profitable...and many of us are working to develop such approaches...but I can assure you they don't involve inventing a "faster horse"...

Dale Harrison

dale.harrison@inforda.com