Murdoch vs Google – back to business school

There’s been a lot of talk in the blogosphere lately about Murdoch, Google, Bing, and the possible future business models of news and search. Rupert Murdoch has been making noises that News Corp will block the Google search bot; Nicholas Carr added his thoughts a few days ago, and TechCrunch is expanding on the rumours.

So, what’s happening is this: news business (and news sites) are not having a good time financially, to put it mildly. They look in envy at Google and think “how did our advertiser money go there?”, and more pointedly “how do we get it back?”. The wet dream is “we could make Google pay for linking to us”. Not very likely? Well, they say, we could block the Google index bot, and then Google either pay up or will not make money from us. Of course, the sites will lose the traffic, so who’s hurting is not clear.

The is interesting; until a few years ago, search sites could index all web content that mattered, and everyone agreed it was cool as it drove visitors to the sites. The first major examples of content outside search reach was closed-community blogging sites such as LiveJournal, where people post under “friend filter”. With the rise of Facebook a major content site was outside search reach, and suddenly Facebook was seen as a challenger to Google with a (not quite clear) social search model. Now, content sites appear to be seriously pondering teaming up and locking out search-engines (that do not pay).

The rhetoric is part entitlement – “we pay for the content, the profit is rightfully ours” – and part concern for society as we know it – “democracy depends on quality journalism, and without income news businesses will not be able to afford it”. In reality, it’s all straight out of business school. The term we’re looking for is bargaining power. In retail, Kellogg’s and Walmart slug it out over who get the profit when you buy Cornflakes. Now, Google and News Corp may slug it out over (advertiser) profit when you read news. Until recently, the wisdom was that Google has all the bargaining power. In business school analysis, the limited resource is (to keep with our Wallmart example) “shelf space” at Google. There’s many news sites and only one Google.

Murdoch is probing to see it that has changed. The wild card is Microsoft. Looking for traction for Bing, they just might pay for linkage, partly out for desperation, and partly out of spite. Plus there’s Facebook looming in Googles horizon. This will be interesting to watch. Any change in this space will have great impact on the future of internet business – and could dramatically affect Googles ability to fund experiments and innovations.

Me, I’m not betting on Murdoch. I’m not convinced that access to (some) news sites is so important to Google that they’ll break their business model to keep it. Or that they are that scared (yet). Most of all, I’m not sure a search site that pays for linkage is a viable business proposition. But clearly Murdoch would like a share of the profit, and Microsoft wouldn’t mind damaging Googles core business, so the fight may be on.

2 thoughts on “Murdoch vs Google – back to business school

  1. The thing about Livejournal being outside searchability isn’t just friendslocking, which after all should be outside searchability: it requires a password, which as I understand it bots can’t manage (and if they could, the point of a password would be lost). The thing is that entire journals, including the publically viewable content, can be set as not searchable (my own LJ/dreamwidth account is an example, and it seems to work since my user name gets hits to mentions in other people’s LJs, not my own).

    But that’s a different issue, of (relative) privacy: you can visit my space and read my public content, but you’re not likely to stumble across it in some unrelated context. I’m not trying to hold Google hostage for money to add me to their searches.

    In general, it seems to me that in addition to the general woes of traditional businesses trying to maintain an income in the internet era, that there’s a whole parallel non-monetary community growing into existence on the net, or at least a community whose approach to money is not “business”, whose behaviour do not follow Chicago-school economics. I think these people have always been around, but previously have been so relatively invisible that business people could pretend they weren’t important, or even real enough to make it into Chicago-school models of what a human being is.

    And of course these are people who do have enough buying power to have internet access in the first place; I imagine it’s only the tip of the iceberg. And Murdoch et al are the Titanic.

    • Good point about non-searchable content on LJ and elsewhere. Thanks.

      You’re right about all those people with a non-business approach becoming visible. Not so long ago, even if I wanted to spend time telling people around the world about Murdoch, I couldn’t – it would cost too much. Likewise, you couldn’t have found me from around the globe because of the transaction cost (time). The reduced transactions cost makes it possible to do things for free that would have been very hard before. Just look at wikipedia.

      This is one of the threats for Murdoch. And of course, it doesn’t help (Murdoch) that while this free, community-based exchange takes eyeball and advertisers away from him, Google can actually make money helping us lower the transaction cost.

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