Newspaper Industry Takes Aim At Google (again) – Says Yahoo Advertising Deal Will Cause Even More Financial Pain and Make Newspapers More Google Dependent Than Ever Before

Philip M. Stone September 16, 2008

Newspapers just don’t like the way Google operates. They can’t get the search engine to support new web-crawling technology that gives newspapers greater online content control, and as if Google’s search and online marketing dominance isn’t already too great it then does a deal with Yahoo to make it even more dominant. And with that the World Association of Newspapers (WAN) says “enough is enough” and is asking regulators to block the deal.

After Yahoo’s merger talks with Microsoft broke down in June, Yahoo management wanted to gain back some investor confidence and agreed quickly to an advertising deal with Google that Yahoo believes will generate an estimated $250 million - $450 million in incremental cash flow – nothing to sneeze at.

Under the deal Yahoo can run Google ads next to its own internally generated search on not only its search sites, but also on its non-search web sites and Yahoo will get a revenue share from Google. 

Ever since that deal was announced it hasn’t proven too popular with competitors. Microsoft, for one, opposes it, as do advertisers who fear it will mean less competition in the search advertising market, leading to higher prices – the Association of National Advertisers has formally asked the US Justice Department to formally block the deal.

Now WAN weighs in, too, saying the deal “means less revenue for newspapers”, that the deal “will also force newspapers to pay more to attract readers,” and “that the deal will force newspapers to become even more dependent on Google than they are today. By handing Google control of up to 90% of paid search and content advertising, Google will exert tremendous power over both newspapers’ ability to reach readers and their ability to generate online advertising revenue,” a WAN statement said.

WAN really hates what it calls “Google’s hostility to publishers.” Much of it comes down to dollars and cents – WAN quotes a Google executive admitting recently that Google News “drives $100 million in advertising revenue to Google itself yet provides nothing –not a penny – to the newspaper companies whose work appears on those pages.”

And WAN is none too happy that neither Google not Yahoo have adopted the Automated Content Access Protocol (ACAP) web crawling technology that allows online publishers to retain greater control over their online content. (It tells the robots up front what they can and cannot access as opposed to the current system where they go after everything).

So it seemed only right to put the question to Timothy Balding, WAN President, that WAN’s plea to regulators to reject the Google/Yahoo deal was just “sour grapes” -- a way of being able to stick the knife into Google? 

“I really can’t speculate about our viewpoint had Yahoo/Google agreed to endorse and implement ACAP,” Balding told ftm in an email exchange. “”It’s true, however, that by such action they would have at least have demonstrated real commitment to give a fair deal to newspapers, beyond all the angelic rhetoric about how they love and respect us deeply.” So, no love lost there!

But Balding continued, “What I can say is that the danger to newspaper revenues represented by their advertising agreement would not be diminished by their cooperation in ACAP and it’s our responsibility to take action where we see such major threats.”

ftm suggested that perhaps WAN’s objections to the Yahoo agreement was setting the stage for a compromise – support ACAP and the objection to the Yahoo deal goes away.  Balding basically thought ftm too Machiavellian.  “We’re not into horse trading, so the idea of any ‘compromise’ such as you suggest seems to me to be highly improbable,” he said.

But warming up to the dismissive attitude taken by Google and Yahoo to ACAP, Balding commented, “Frankly, ACAP is not going to go away and global opinion about the need for search engines to respect copyright and content information is getting more vigorous every day. We hope that Google/Yahoo and others will come to their senses soon and realize that there is a really serious issue here which they can’t eternally escape and that ACAP is the fairest, most practical and most equitable solution for them, too.”

The Google/Yahoo deal only applies in the US but WAN has asked European regulators to be vigilant. They may not need to be, however, as the signals coming from Washington indicate the Department of Justice may see this deal as the key to opening the entire Google Pandora’s Box, investigating not just this deal but how the company does business (remember how it took on Microsoft?)

And there are analysts out there who believe if the Justice Department does that then Google could very quickly back out of the deal because once you start dealing with the Department of Justice nothing is private any more  and there just may be things that Google would rather keep to itself. Also, the Justice Department has a pretty solid record that when it takes a company to task for anti-trust it usually wins.

Justice is said to have hired a former US antitrust chief. Also attorneys general in at least 11 states have launched their own investigations over whether the deal gives Google too much control over the online advertising market, and thus adversely affects competition.

Yahoo, on the other hand, really wants the deal to go through. It can taste the cash. “We’re committed to move ahead,” a senior Yahoo executive said. The Justice Department’s expected involvement doesn’t necessarily mean the deal gets killed (unless Google pulls out) but there could be conditions attached, for instance, on how much inventory Yahoo makes available and whether a Yahoo ad takes precedence over a Google ad.

But to WAN Google’s online dominance is the real issue. With print having the troubles it is having it is very important that publishers are able to earn as much as possible from their online properties. WAN believes that only if publishers are truly economically independent are they really “free”, and Google is inhibiting that.

WAN’s bottom line: “Most publishers are acutely aware that Google’s ever-tightening grip on Internet traffic, its unbridled use of online content, and its dominance in online advertising poses a very real threat to the continued viability of the independent content generation industry.”

Couldn’t be much clearer than that.