Meritocracy Consulting Blog

In previous posts I discuss the rumor and widespread hype around a deal where Bing would exclusively license News Corp content, presumably at the expense of Google.

I generally state  my repulsion to these types of deals, and then outline Google’s response to this exclusive licensing deal in the short term and long term.

Next, I conclude that the financial impact on Google might be roughly $2 billion dollars per year, which of course provides a new, tangible incentive to resolve this problem.

I believe that they ultimately will find a solution that undermines both Bing and News Corp, and in this post I outline what that solution might look like?

First we should ask, what does heavily fund a replacement to old fashioned news organizations mean?

Well, I’m sure Murdoch would hope that it means that Google would chase them into their domain of expertise (sourcing news, analyzing news in realtime and producing live broadcasts/coverage, etc…).  This is a mere hope, Google knows that they can’t cross that chasm for a wide range of reasons…and they don’t want to…the margins are too low.  So, “funding a replacement” means that Google would provide massive incentives and open software platforms that empower smaller news organizations…and pay them just enough to want to do it professionally, but not enough to get big to destroy them .  Note that a study recently came out showing that the average blogger makes $40-70k.  The “invisible hand” that determines how many bloggers can afford to source news and write about it is noone other than Google.  With the stroke of their magic adsense wand they could increase or decrease the number of bloggers just by adjusting their payout percentage…including adding financial incentives for organization’s that report the news how they want it.

To be clear, I do NOT think that Google has much interest in what the news is, they just want access to index the “best news in the eyes of their users”…they don’t want their users getting better access somewhere else.  When I said that Google will provide incentives to encourage smaller organization’s to produce news exactly “how they want it”, I simply am describing how Google will use incentives for content creators to use their formats, do proper tagging, produce higher quality, etc…

To summarize, I believe that Google is capable of solving the problem that news providers do not make enough money (of course as a news provider, this is the exact problem that Murdoch wants solved).  If Google is involved in the creation of a true solution to making news online profitable, does Murdoch believe that Google will strive to create a solution that leaves a place for him at the table?

It would appear that as far as online news goes, Murdoch is nearly desperate, willing to try radical changes with the hopes of getting people to pay for the news.  Currently Google is not working to solve this problem and therefore Murdoch is left to do something on his own…or suck it up, because:

1) Currently, the incentive for Google to “solve” Murdoch’s problem is very small, close to $0…

2) If a MSFT (aka Bing)-Murdoch deal was done, the value for Google to “solve” this exact same problem  would immediately increase by the amount of money that Google ends up spending to get their own exclusive or non-exclusive content deals

3) Also, the value of taking down Murdoch and his newly demonstrated exclusive dealing nature would increase by the perceived value (by Google) of any lost search traffic as a result of these shady deals, or possibly even reduced market share as people try out “Bing”.

If Murdoch is entirely undermined by Google when Google is hardly trying to undermine their business, imagine how ugly things may get if news organization’s launch a preemptive strike.

The above analysis shows how Bing and News Corp would catalyze three new incentives for Google to address this problem head on with both a strong short term and long termresponse….now let’s look at some specific numbers.