{"id":114217,"date":"2017-10-06T10:15:51","date_gmt":"2017-10-06T14:15:51","guid":{"rendered":"http:\/\/countingpips.com\/?p=114217"},"modified":"2017-10-06T07:14:42","modified_gmt":"2017-10-06T11:14:42","slug":"analyzing-googles-plan-to-rescue-the-newspaper-industry","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/10\/analyzing-googles-plan-to-rescue-the-newspaper-industry\/","title":{"rendered":"Analyzing Google\u2019s Plan to Rescue the Newspaper Industry"},"content":{"rendered":"
October 6, 2017<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Analyzing<\/p>\n

\"LouisI almost feel bad for subscription news companies (formally known as newspapers).<\/p>\n

Talk about death by a thousand cuts\u2026<\/p>\n

According to The Atlantic<\/em>, \u201cBetween 2000 and 2015, print newspaper advertising revenue fell from about $60 billion to about $20 billion, wiping out the gains of the previous 50 years.\u201d<\/p>\n

\"chart;<\/p>\n

But the revenue destruction is only half the story\u2026<\/p>\n

The demise of print media has also served to erode society.<\/p>

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America\u2019s skilled workforce of journalists has been replaced by Twitter\/Facebook troglodytes. And somewhere within that perverse transition, we lost sight of the truth.<\/p>\n

Will we ever find truth again?<\/p>\n

Let\u2019s start with a half-truth\u2026<\/p>\n

Google suddenly seems keen on saving the beleaguered newspaper industry.<\/p>\n

Weird, right? Google says that it\u2019s reversing a decade-old policy that forces publishers to offer free web content in order to get primo search-engine listings.<\/p>\n

But before you start nibbling on shares of The New York Times Cos. (NYSE: NYT) or Time Inc. (NYSE: TIME)\u2026<\/p>\n

Let\u2019s unpack the timing of Google\u2019s odd decision and then I\u2019ll determine whether or not it\u2019s worthy of an investment.<\/p>\n

The Fake News Dilemma<\/h2>\n

\"JonathanWith great power comes great responsibility.<\/p>\n

And Google, as the world\u2019s undisputed leader in web search, wields quite a bit of power.<\/p>\n

As Louis notes above, Google has forced publishers of news content to offer readers several free articles to be included in its popular Search or News apps \u2014 even if they have a paywall.<\/p>\n

This policy made a wealth of free information available to the world, and generated a flood of traffic for Google.<\/p>\n

But it also led to the demise of hundreds \u2014 if not thousands \u2014 of reputable news organizations who bore the expense of producing Google\u2019s subsidized \u201cfree news.\u201d<\/p>\n

So why after all these years would it reverse the policy?<\/p>\n

The answer is simple\u2026 fake news.<\/p>\n

Investigations launched in the wake of the 2016 U.S. presidential election found scores of false news stories made their way to the top of Google search results.<\/p>\n

As you may know, Google uses a powerful, hands-off algorithm to pick precisely which websites match a search query.<\/p>\n

And with enough firepower, an entity can easily prop up free, fake news stories before they\u2019re flagged.<\/p>\n

It\u2019s impossible to know for sure, but investigators believe that fake news could have had a material impact on the election\u2019s result.<\/p>\n

Google, under fire from both sides of the aisle in Washington, decided to take action to stomp out fake news by reversing its FCF policy.<\/p>\n

The decision will undoubtedly boost the shares of premium publishers like The New York Times<\/em> in the short term.<\/p>\n

But the damage of FCF to paid journalism has already been done\u2026<\/p>\n

Publishers still rely on web traffic from places like Google and Facebook.<\/p>\n

And if overall search volume goes down as free articles disappear, many publishers won\u2019t win the long game.<\/p>\n

The Future of \u201cNews\u201d<\/h2>\n

\"MartinThe relationship between Google and the newspapers had been a symbiotic one. Google lured readers into a few articles a month from each newspaper, thereby encouraging them to buy subscriptions.<\/p>\n

Now the freebies that encourage readers both to use Google and to read the newspapers are disappearing.<\/p>\n

So who wins?<\/p>\n

It isn\u2019t necessarily Google. Many people have a need to get the news \u2014 and analysis of the news \u2014 in as reliable and thoughtful a manner as possible.<\/p>\n

For them, genuine journalism is essential.<\/p>\n

For others, news is merely another form of entertainment \u2014 from celebrity snippets, sports, crime news, etc.<\/p>\n

For the second contingent, the content they desire doesn\u2019t require genuine journalism.<\/p>\n

That means the market will be segregated\u2026<\/p>\n

At the top end, newspapers employing their own journalists will continue, although the web will become their principal delivery mechanism. Advertisers will continue to want to reach this market \u2014 and will pay to do so \u2014 while its consumers will pay for subscriptions in moderation for the content they want and need.<\/p>\n

At the low end, content providers will continue to be synergistic with Google, splitting the advertising revenues that result.<\/p>\n

While that doesn\u2019t make Google supreme, it does mean that it will be a conduit for all types of news going forward \u2014 similar to the cable TV companies in the 1980s.<\/p>\n

Google\u2019s Next Revenue Stream<\/h2>\n

\"LouisMuch like we discussed yesterday<\/strong><\/a> in relation to the demise of broadcast television at the hands of streaming video, all that matters for us as investors here is growth.<\/p>\n

While The New York Times<\/em> and other legacy print publications are making impressive strides to convert to all-digital models, they\u2019re burdened with too many costs. Any impressive digital growth is going to be weighed down by the vestiges of the old model.<\/p>\n

That means we should be on the hunt for up-and-coming, all-digital news outlets.<\/p>\n

With high-quality work and enough traction, their growth promises to be unbounded. The only problem? Most of these newcomers are still privately held, so we can\u2019t invest in them directly.<\/p>\n

That leaves us with Google.<\/p>\n

As Google\u2019s vice president of news rightly pointed out to the Financial Times,<\/em> \u201cAdvertising alone can no longer pay for high-quality journalism.\u201d<\/p>\n

The only hope is a combination of advertising and<\/em> subscription revenue, with the latter playing an increasingly critical role.<\/p>\n

And as Martin articulated, Google isn\u2019t just an advertising juggernaut. It\u2019s also an increasingly vital conduit, which opens up a new growth opportunity \u2014 bundling subscriptions to multiple news outlets and taking a cut of the action.<\/p>\n

After all, it\u2019s a hassle to remember a half dozen or so log-ins and enter them every time you find a relevant article in a Google search. By eliminating this hassle, Google could deliver a valuable benefit to users and <\/em>create a new revenue stream in the process.<\/p>\n

It\u2019s a win-win!<\/p>\n

The latest data indicate that the time is ripe to consider such an offering, too. In the last year, consumers\u2019 willingness to pay for online news increased notably across every <\/em>age group:<\/p>\n

\"chart:<\/p>\n

In other words, consumers are quickly waking up to the reality that you get what you pay for, even when it comes to news.<\/p>\n

Bottom line: As Jonathan concluded before, \u201cPublishers won\u2019t win the long game\u201d in the new digital paradigm. So we need to go where there\u2019s unlimited growth potential, and that means betting on the advertisers and traffic generators instead.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese
\nChief Investment Strategist, Wall Street Daily<\/em><\/p>\n

The post Analyzing Google\u2019s Plan to Rescue the Newspaper Industry<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com I almost feel bad for subscription news companies (formally known as newspapers). Talk about death by a thousand cuts\u2026 According to The Atlantic, \u201cBetween 2000 and 2015, print newspaper advertising revenue fell from about $60 billion to about $20 billion, wiping out the gains of the previous 50 years.\u201d But the revenue destruction […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-114217","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/114217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=114217"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/114217\/revisions"}],"predecessor-version":[{"id":114234,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/114217\/revisions\/114234"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=114217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=114217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=114217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}