Contra Chris Dixon: News isn’t such a lousy business for Google

Over on his blog, Hunch co-founder Chris Dixon thinks he has proof that Google isn’t making money off of hard news:

Notice there aren’t any ads on the page. This is because ads for “afghanistan war” generate such low revenues per query that Google doesn’t think it’s worth hurting the user experience with a cluttered page. Google can afford to do this on news queries (along with many other categories of queries) because their real business is selling ads on queries where the user likely has purchasing intent. Big money-making categories include travel, consumer electronics and malpractice lawyers. News queries are loss leaders.

via News is a lousy business for Google too cdixon.org – chris dixon’s blog.

Dixon shares a screen grab of a Google search page if you type in “afghanistan war.” But when I do the same, I get plenty of ads:

And let’s take some more obscure examples. Here’s Guantanamo Bay, which brings up a couple of ads from human rights promoting organizations:

And to get really obscure, here’s a search on “military commissions” that returns an ad:

I’m guessing that NYU’s Brennan Center doesn’t pay for search engine marketing at the same rate as the Shyster and Shyster law firm that focuses on personal injury suits, but it’s evidence that if you’re buying on any old hard news search term, Google is selling.

Beyond that, Chris is certainly right that advertising against hard news isn’t the most lucrative business out there, but I think that he takes it a step too far in his subsequent analysis:

It’s an historical accident that hard news categories like international and investigative reporting were part of profitable businesses. The internet upended this model by 1) providing a new delivery method for classified ads (mainly Craigslist), 2) increasing the supply of newspapers from 1-2 per location to thousands per location, thereby driving the willingness-to-pay for news dramatically down, and 3) unbundling news categories, making cross subsidization increasingly hard.

The internet exposed hard news for what it is: a lousy standalone business. Google arguably contributed to this in many indirect ways, including by helping users find substitute news sources. But the idea that Google takes profits directly from newspapers is simply misinformed.

The digital revolution in news has certainly upended old models. I’m sure we’ll never again hear of an R.W. Apple Jr.-like figure expensing the Times for his wine cellar in London (although with Thomas Friedman treating the Times as his personal AMEX Black Card, I may be made a liar of in this case). The production of hard news will never be the same again.

But that doesn’t mean there’s no money to make off of it. You just have to be smarter in how you go about manufacturing the product. That’s why GlobalPost was able to earn $1 million in its first year – it produced a product that other news outlets wanted to buy. Politico is syndicating its very inside the beltway political news coverage, and outlets like Talking Points Memo that blend original content with aggregation continue to hire after recent employment binges.

If anything, having a singular focus on ‘hard news’ might be good for these organizations as they don’t need to consider the trade-offs between low-nutrition/higher-revenue fluff and higher quality/lower earning news. They can chart an even-keeled course forward based on an assumption that there are limits to what they can earn producing great original content focused on hard news events. Perhaps the Internet has exposed why hard news is better as a standalone business – the people who own hard news-producing publishers can concentrate on making money where it can actually be earned. They may not get filthy rich, but they’ll be able to keep telling good stories.