Over lunch I did something old-fashioned—I picked up and read a print copy of the New York Times. I was startled to find, on the front of the business section, a large, colorfully decorated feature headlined “Is Google a Media Company?” The graphic accompanying the story shows a newspaper masthead titled “Google Today,” followed by a list of current and imagined future offerings, from Google Maps and Google Earth to Google Drink and Google Pancake. Citing the new, wikipedia-esque service Knol, and using the example of that service’s wonderful entry on buttermilk pancakes, the Times story argues that Knol’s launch has “rekindled fears among some media companies that Google is increasingly becoming a competitor. They foresee Google’s becoming a powerful rival that not only owns a growing number of content properties, including YouTube, the top online video site, and Blogger, a leading blogging service, but also holds the keys to directing users around the Web.”
I hope the Times’s internal business staff is better grounded than its reporters and editors appear to be—otherwise, the Times is in even deeper trouble than its flagging performance suggests. Google isn’t becoming a media company—it is one now and always has been. From the beginning, it has sold the same thing that the Times and other media outlets do: Audiences. Unlike the traditional media outlets, though, online media firms like Google and Yahoo have decoupled content production from audience sales. Whether selling ads alongside search results, or alongside user-generated content on Knol or YouTube, or displaying ads on a third party blog or even a traditional media web site, Google acts as a broker, selling audiences that others have worked to attract. In so doing, they’ve thrown the competition for ad dollars wide open, allowing any blog to sap revenue (proportionately to audience share) from the big guys. The whole infrastructure is self-service and scales down to be economical for any publisher, no matter how small. It’s a far cry from an advertising marketplace that relies, as the newspaper business traditionally has, on human add sales. In the new environment, it’s a buyer’s market for audiences, and nobody is likely to make the kinds of killings that newspapers once did. As I’ve argued before, the worrying and plausible future for high-cost outlets like the Times is a death of a thousand cuts as revenues get fractured among content sources.
One might argue that sites like Knol or Blogger are a competitive threat to established media outlets because they draw users away from those outlets. But Google’s decision to add these sites hurts its media partners only to the (small) extent that the new sites increase the total amount of competing ad inventory on the web—that is, the supply of people-reading-things to whom advertisements can be displayed. To top it all off, Knol lets authors, including any participating old-media producers, capture revenue from the eyeballs they draw. The revenues in settings like these are slimmer because they are shared with Google, as opposed to being sold directly by NYTimes.com or some other establishment media outlet. But it’s hard to judge whether the Knol reimbursement would be higher or lower than the equivalent payment if an ad were displayed on the established outlet’s site, since Google does not disclose the fraction of ad revenue in shares with publishers in either case. But the addition of one more user-generated content site, whether from Google or anyone else, is at most a footnote to the media industry trend: Google’s revenues come from ads, and that makes it a media company, pure and simple.
