Google holds 71% of the search market; Bing, 10% (chart).
Cory Doctorow has a clear crystal ball. Earlier this month, Rupert Murdoch accused Google of stealing his content and threatened to cut the search giant off. Cory guessed that Murdoch might be angling for a search-engine payment deal:
Murdoch has no intention of shutting down search-engine traffic to his sites … what he’s hoping is that a second-tier search engine like Bing or Ask (or, better yet, some search tool you’ve never heard of that just got $50MM in venture capital) will give him half a year’s operating budget in exchange for a competitive advantage over Google.
According to the Financial Times, that’s just what is going on. (And Mark Cuban speculated about this approach last year.)
If the FCC thinks it’s important to require that bloggers disclose when firms give them products to review (a requirement from which news organizations are exempt), they should require Microsoft and News Corp to mark these search results “paid advertising.”
After all, in 2002, the FCC advised search engines “to provide conspicuous labels for commercial search listings or face possible action.” If a web site restricts its results to only one search engine, that sounds like a commercial search listing to me. (IANAL)
And will Microsoft privilege News Corp links over competing news organizations that don’t succumb to the bribe? (And how will we know?) One of the reasons consumers trust Google is because the company does not co-mingle organic and paid search.
What’s in it for News Corp.?
Short-term? Cash flow.
Advertising revenue for Fox Interactive fell 16% in the first quarter 2009; most of that division is MySpace. In August, News Corp. announced a fourth-quarter $203 million loss “due to huge charges at MySpace” and laid off 700 workers. Moreover, earlier this month, News Corp. announced that year-on-year earnings dropped $22 million.
The MySpace deal, which was touted as visionary in 2005, has not met expectations as traffic (eyeballs) moved to Facebook. In 2006, Google and MySpace signed a $900 million contract making Google the exclusive search advertiser on MySpace. Reportedly this deal accounts for a third of News Corp. revenue from MySpace. However, because MySpace has not “met minimum traffic requirements and guarantees,” News Corp. may be short as much as $300 million on that contract.
Long-term? That’s a good question. Google provides 25 per cent of WSJ.com’s total traffic, and about half of that comes from Google News. The $64 question: which has the greater long-term value, the eyeballs coming to news sites from Google or Microsoft’s bribe?
What’s in it for Microsoft?
The New York Times has 17.4 million unique17. web site visitors a month; the Wall Street Journal, 8.0 million. However, Murdoch owns far more properties worldwide than the New York Times, so that’s potentially more eyeballs that might become captive to Bing.
If Microsoft can make this deal work with News Corp., it may be able to bribe other news organizations away from Google. According to the Financial Times:
… Microsoft has also approached other big online publishers to persuade them to remove their sites from Google’s search engine. [...] “This is all about Microsoft hurting Google’s margins,” said the web publisher who is familiar with the plan.
Microsoft is doing what it always does: it’s trying to buy its way into a market that it’s been unable to crack, even after throwing millions (billions?) at it (while Google spent its time building an index and sticking to the knitting, so to speak). According to BusinessInsider:
Microsoft has been investing hundreds of millions a year in its Internet business for more than a decade and that investment has yet to generate a single dollar of return. If you add up all the losses investment, in fact, you get a number that is similar to what Microsoft plans to invest over the next 5 years: $8 billion.
[...] the reason Bing had lost $8 billion over the previous decade was that it had been trying desperately to catch up with other industry leaders–namely, AOL and Yahoo–and that it had tried and failed to do this despite hemorraging money while both of those companies coined it.
This is not the first time that Microsoft has tried to circumvent the open web or used its Windows monopoly rents to kick its way into a new market:
1998: The browser war between Microsoft and the Netscape Communications Corporation already threatens a truly global marketplace that is fully accessible with any browser on any computer platform…. Such appetites ignore that the Internet exists in the first place because its technical protocols are open standards, freely available for use by everyone.
1999: In fact, the rise of Microsoft’s Internet Information Server (IIS) as the dominant Web server on NT shows much the same pattern as the rise of IE as the dominant browser: Microsoft got pole position by exercising its unique leverage as an operating system vendor.
Nor is it the first it used its deep pockets to bully a market leader:
1999: Microsoft publicly pressured AOL to adopt an open messaging standard after the leading online service blocked Microsoft’s new messaging software from communicating with its own offering.
However, this gauntlet is symbolic. Google has said that news traffic is a minor portion of its business. Google had 146 billion unique visitors in June 2009. If every single New York Times unique visitor started at Google, that would be 0.01 percent of Google’s monthly traffic.
Nothing I’ve read explains why Microsoft is willing to invest so much money to try to buy eyeballs away from Google. The Murdoch skirmish does nothing for its franchise moneymakers, Windows and Office; both face long-term reduced profitability due to the disruptive nature of digital information.
The real question: how will the internet public react?
Will consumers reject this contractual vertical integration and tell Microsoft and Murdoch to take a hike? What about the advertisers, will they want to have their ads on web pages that are restricted to only one search property? Will bloggers link to articles from news organizations that defect from the open web? Or will the Twitter search integration that is taking place at both Bing and Google (eventually) make this entire discussion moot?
This article first appeared at WiredPen and also appears at The Moderate Voice and Newsvine.
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5 Comments, Comment or Ping
Xurxo
Trying to win Google by having one resource in exclusive, even if it is one really big, is as useless as trying to dry a lake with a bucke, even a really big bucket.
Media outfits won’t get as much top results and visibility in Bing as in Google News, and a Bing News is too small right now.
At the same time, Bing would even loose traffic if they prioritize Murdoch’s content over other that could fit better the user’s interest. That’s one of the reasons that make Google so powerful.
From Murdoch’s point of view it can make sense to be out of Google, if they are sure of their ability to engage, retain and get money from users. Not sure about a special deal with Bing bringing more users, but maybe money from Microsoft.
And for Microsoft this move looks just like an attempt to make some noise, hitting the air hoping that it may hurt Google.
Nov 28th, 2009
Sam
I suppose that Murdoch’s attempt to earn extra-money on the struggle of Google and Microsoft will succeed. I’m agree that News Corp. do not have big share in traffic, but the question is not in statistics. It’s all about investment relations.
Both Google and Microsoft have now too big stakes of pie, and they are gaining from monopolistic skim the cream off. So, they want to have good relations with Murdoch’s news industry. Any other media outlets, especially small, didn’t get such deal with Google.
By the way, the paid content is becoming more real option and this wave is coming from Asia and Australia (http://www.theaustralian.com.au/australian-it/internet-users-willing-to-pay-small-fee-for-online-news-content/story-e6frgakx-1225799135054).
Mobile Internet makes this model easier as well.
Nov 30th, 2009
Andrea Sherrodd
I agree with Xurxo’s comment — this sounds like a lot of work for very small results. And while it may look good from Murdoch’s end of the table, the points Kathy brings up about bloggers linking to different news stories from different news corporations and Twitter searches are valid arguments. The moment this becomes a hassle for the reader, everybody loses. If I’m reading something and have to switch back and forth between search engines to follow links, I’m probably going to get frustrated and shut the whole thing down. Maybe I’ll go use Twitter search integration instead.
I also can’t help thinking about how Murdoch would probably lose many readers that are devoted to Google — I hardly know anyone who uses Bing regularly, but most people I know use Google on a daily basis. By taking themselves out of Google searches, won’t they be effectively taking themselves out of the game altogether?
Nov 30th, 2009
Holly Wood
I find it frightening that Murdoch could merge with Microsoft to create a Murdoch-biased search engine. Fox News is known by many people for being a biased news source, which defeats the true purpose of journalism that should come from a non-biased perspective. Murdoch having control over a search engine for his own benefit seems to be a form of controlling information and yet another example of the thought police from George Orwell’s 1984 that we’re seeing with the internet, time and time again.
Having a vertical search engine that pulls information from one silo that has a select few sources isn’t allowing for the researcher to get information from all sources, like a horizontal search engine that draws from all sources, despite whether they’re competing sources or not. If Murdoch and Microsoft do merge on this deal, it doesn’t seem like it would make Bing any more successful. Microsoft obviously wants to dominate the market share in all things technology, but if they can’t do a better job than competitors like Google and Yahoo, who appear to be focusing more on consumer needs, then I don’t see how Microsoft takeover the market share. It just goes to show that all the money in the world doesn’t matter when it comes to pushing a product, if the product can’t sell itself, then all the money in the world won’t make a difference. Microsoft has proven this time and time again given the myriad of examples Kathy gave in this blog post.
Dec 1st, 2009
matt d
Personally I don’t think that it’s any surprise that a major publishing organization might want to try to find a way to monetize their content. Publishers have been trying to find a model for the last 15 years to do that effectively. Companies have been able to rely on advertising to support the revenue stream up until the last few years but that is continuing to evaporate both from the current economic conditions as well as the lack of really great return on the marketing investment (erroding Clicks) advertisers are finding.
Meanwhile they publishers still have expenses to generate and distribute that content across traditional and digital platforms. I’m not justifying the strong-arm tactic but I think that it comes down to a question of finding a revenue source or scaling back similar to what’s happening in the local newspaper journalism markets. Most companies don’t have a busines splan for downsizing intentionally (current automakers aside).
Finally, it seems a little simplistic to say that a company’s goal is to just to tear down another company. Any company that puts out a product aims to make that product number one in their market, drive revenue and reward it’s investors. No company says “I just want to be # 5 in the market, that good enough let’s not bother anymore.”
Something to consider here is that in the game of eyeballs or in this case searches, capturing market share in terms of traffic requires having something (technology, content, brand awareness) the competitor doesn’t have. We the consumers want, rather demand, something more for our participation, loyalty or interest. Getting that advantage usually takes $$. How much is too much is only relevant in terms of the potential return on that investment fiancial or otherwise.
Dec 8th, 2009
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