Googzilla’s Assault and Old Media’s Nuclear Winter
March 15, 2008
Last summer, I gave a short talk to the Board of Directors of one of the US’s major news gathering organizations. I knew what to expect. I had worked for Barry Bingham Jr., owner of the once-prestigious Courier Journal & Louisville Times Co. After I left the Courier Journal a year or so after Gannett bought the Louisville mini-conglomerate, I worked for Ziff Communications. Bill Ziff was a media sensation. He created niche magazines, building properties to a peak, and then — almost without fail — selling them at a premium price. Mr. Ziff was not “old media”; he was among the first to be a “new media” innovator. Health forced changes at Ziff, and his empire was sold. His leaving the New York publishing sector was, I believe, a respite for news and publishing companies against which he and his staff waged commercial warfare.
Old Media Wants to Understand “the Google”
Last year, I was entering the sacred confines of “old media” in the Big Apple. My task was to participate in one of those interview-style presentations so much in vogue. A polished “old media” journalist was going to pepper me with questions. To make the interview more spontaneous, I was not given the questions in advance. Goodness, I had to match wits with an “old media” alchemist. I knew only that the subject was Google, an annoyance that continued to challenge the hegemony of “old media”. Even though I was tainted by my association with Mr. Ziff, I assumed that this tweedy group perceived me as sufficiently tame to “explain” what Google was doing to “old media’s” revenues.
Google — then as now — won’t answer my questions. I’m a lone goose consultant who his wings reading Google technical papers, watching dull Google videos by Googlers explaining another technical facet of Google, and reading patent applications filed by Google’s equally quotodian attorneys. But to the dewans (an Indian prince) in the audience, I was marginally less annoying than real Googlers.
The “interview” clanked over well-worn cobble stones. The leitmotif was advertising, specifically money that Google was “taking” from old media. Each question fired at me, meant, “How can these guys make so much money doing online things?” Pretty sophisticated questions, right?
The Business Model Problem
Newspapers and magazines sell advertising. Subscriptions contribute a modest amount to the bottom line. Historically, each “new medium” allows ad revenue to flow from “old media” (Point A) to “new media” (Point B). Radio sucked money, so newspapers like the Courier Journal got into the radio business. When I joined the Courier Journal, the newspaper owned AM and FM radio stations. When TV came along, more ad “blood” flowed. The Courier Journal bought a television station. When databases came along, the Courier Journal entered the database business. Most “old media” watched the Courier Journal’s online antics from the sidelines. Google has figured out the shortest distance from Point A to Point B.
Revenue from commercial online in the 1980s did not come from advertising. Customers paid for access, dealing with specialized timesharing companies. Ziff entered the online business in three ways. We offered electronic products tailored to information technology professionals. Our sales force called on companies and sought licensing deals. Ziff also entered the commercial database business, quickly becoming by the late 1980s one of the dominant players in full text and reference databases for libraries. And, we also struck a deal with CompuServer and created a Ziff branded online service called ZDNet. Both the Courier Journal and Ziff worked long and hard to make money from online. It’s a tribute to the professionals in the Courier Journal’s online business and to Ziff’s various electronic publishing units that both organizations generated positive cash flow.
Google’s Secret
Google, on the other hand, had something that my colleagues at the Courier Journal and Ziff Communications lacked. No, it wasn’t smart people. No, it wasn’t better programmers. Google had a business model “borrowed” from Yahoo – Overture and the burgeoning online “environment” generally described as the Internet. By 2004, when Google went public, Google’s business model and the exploding user base of “the Internet” ignited Google’s online advertising business.
In less than three years, Google had poked its business model into numerous nooks and crannies of “old media”. Unlike the tame online services of the 1980s, Google’s approach was operating “off the radar” of “old media”. Old media used traditional ad sales mechanisms. Old media thrived on an inner circle of competitors who behaved in a polite, club-like environment. Old media called the shots for advertisers, who by and large, had no choice but to deal with “old media” on “old media’s” terms.
Not Google. Google allowed anyone to buy an ad online. Anyone could sidestep “old media” and traditional advertising rules of engagement. More disturbing, other companies were looking at Google’s business model and trying to squeeze money from electronic ads. None of these competitors played by the rules crafted over decades of “old media” fraternizing. Disintermediation, the Internet, and a better business model — these are the problems “old media” has to resolve and quickly.
So, there I was. I answered questions about Google’s ad business. I answered questions about Google’s technical approach to online. I answered questions about Google’s arrogance. I don’t think the interviewer or the audience found my answers to their liking. I can say in retrospect that nothing I said about Google made any sense to these “old media” types. I could have been speaking Thagojian, and the effect would have been the same. “Old media” didn’t understand what the Courier Journal did in 1980, what Ziff did in 1990, or what Google was doing in the early years of the 21st century.
Watching the Money Disappear
Why am I dragging you through history and this sordid tale of my sitting under hot lights answering questions about a company that won’t answer my email? This post caught my attention this morning (6 am, March 15, 2008) in the Charlotte Airport: Google Sucks Life Out of Old Media: Check Out The 2007 Share Shift by Henry Blodgett.
The gist of Mr. Blodgett’s Web log post is: “The year-over-year growth of revenue on Google.com (US)–approximately $2 billion–was more than twice as much the growth of ad revenue in all of the offline media companies in this sample combined. This is such an amazing fact that it bears repeating: A single media property, Google.com (US), grew by $2 billion. All the offline media properties owned by the 13 offline media companies above, meanwhile–all of them–grew by about $1 billion.”
What this means is that “old media” are going the way of the dodo unless the “old media” club gets its act together. One of the more controversial statements I made to the dewans in their posh NY digs was, “Surf on Google.” The idea is simple. Google is the big dog in the advertising kennel. Instead of watching Googzilla eat your lunch, find a way to harness Google. I use the phrase Surf on Google to connote sitting down and figuring out how to create new revenue using Googzilla as an engine, not an enemy.
Problems with Newspapers
I was speaking some unintelligible language to these “old media” dewans. Even old dinosaurs like me listen to an iPods, read news on my mobile device, and often throw out unopened the print newspapers I receive each day. Why don’t I look at these traditional news injection devices? Let me count the ways:
- Courier Journal. It just sucks. The recycled news is two or three days “old” when it hits print. I get current information via RSS, Google News, Yahoo News, and the BBC Web site, among others.
- Financial Times. I get a paper three days out of six. This outfit can’t work out delivery to Harrods Creek despite its meaty price tag.
- New York Times. I look at the Monday business section and maybe flip through the paper. I no longer spend an hour with the Sunday New York Times.
- USA Today. I look at McPaper’s weather map and scan its TV grid to see if the History Channel is running the “Naked Archaeologist,” my current must-see program.
- Wall Street Journal. I scan the headlines and check out the tech information. The banks for which I work expect me to know what the Journal says but I’m not sure my clients read the paper very thoroughly any more. Online is easier and quicker.
People in my son’s cohort spend less time with “old media” than I do. When I sit in airports, I watch what college students do. My sample is small, but I don’t see many 20-somethings immersed in “old media”. If you want to understand what young people do for news, embrace ClickZ stats. It’s free and useful.
I find encouraging that the Wall Street Journal, the New York Times, and the Financial Times “reinvent” their Web sites — again and again. But the engine of “old media” is advertising, and no spiffy Web site is going to make up for lost ad revenue.
Did my statement in June 2007 “Surf on Google” have an impact? Not that I can see. “Old media” are building a fort out of dead trees, traditional technology, and battle tactics used by cities besieged by Alexander the Great. The combatant — Google — is armed with nuclear weapons and is not afraid to use them.
For “old media” Mr. Blodgett’s summary of the financial devastation is confirmation that “old media” now finds itself suffering nuclear winter. There are some fixes, but these are not easy, not comfortable, not traditional, and not cheap. I’m glad I’m in the sunset of my career and no longer sitting in meetings trying to figure out how to out-Google Google. Innovation not contravallation is needed. Can “old media” respond? I’m betting on Google and its progeny.
Stephen Arnold, March 15, 2008
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