Microsoft News Corp. Deal Is a Google Killer [UPDATED]
We’ve seen Microsoft pay users in the past to search on Live.com. Now rumors are that the company is pursuing a more clever strategy of bribing providing incentives to not users, but sources. According to the Financial Times, Microsoft is talking to News Corp. and other publishers about taking their sites off Google and putting them on Bing. And it’s a smart enough strategy to potentially turn the entire online media world on its ear.
One website publisher approached by Microsoft said that the plan “puts enormous value on content if search engines are prepared to pay us to index with them”.Microsoft’s interest is being interpreted as a direct assault on Google because it puts pressure on the search engine to start paying for content.
Oh, but it does a lot more than that. Why do people go to search engines? To find information. And clearly there’s plenty of information on the web that isn’t the property of media companies.
However, many of the more trafficked information sites are those of newspapers, magazines, online reporting outlets, and broadcast companies. The sites come up on search engines because they have what people want. Moving to Bing just for payments, even on the order that Microsoft can and might provide, would be foolish. There is no way that Microsoft alone could pay out enough to keep the industry afloat.
But then, this isn’t about getting money from Microsoft so much as it is about changing the current dynamics and of taking Google out of the catbird seat. Think about News Corp. for a moment. That includes the following:
- The Wall Street Journal, New York Post, Dow Jones, and 31 news properties in the U.K. and Australia
- Harper Collins
- Fox Broadcasting in the U.S. and Sky television
- other television cable channels including National Geographic, the various Fox variations, Speed, STAR, Fuel TV, and FX
- 20th Century Fox
- sites including Hulu, Beliefnet, AmericanIdol.com, and Rotten Tomatoes
- MySpace
Many of the media companies have comparatively extensive sets of holdings, and few media companies have been effusive in their pleasure with Google. Given the low rates of online ads and you have to wonder how much Microsoft would have to kick in before the media companies felt relatively little pain. There might be just enough available to get some of the bigger names to drop Google and take up Bing. You can guess that Associated Press would do something like this at the drop of a hat. But I suspect many other sources might as well.
That would have a market tilting effect. Consumers in large part go to Google because of two factors: they expect to find the information they want (probably because they’ve heard that Google has the most available) and they work from habit. But upset the perception of where information is available, and you have a chance to see habits go out the window. It’s happened before, both when AltaVista came onto the scene and then when Google pushed it out.
Google reps are already starting to protest:
Matt Brittin, Google’s UK director, told a Society of Editors conference that Google did not need news content to survive. “Economically it’s not a big part of how we generate revenue,” he said.
But wait a moment. Although Google News isn’t a big part of the revenue, being perceived as having the world’s information on tap is key to the company’s positioning. Major sources jumping ship to Bing would upset that perception. No matter how much Google managers would eventually protest, they couldn’t sit back because the company would start to lose share.
The only way to counter would be to offer similar amounts of money — that is, if Microsoft didn’t negotiate exclusive deals. And that would be an end to the Google Miracle of reaping profits from content that didn’t cost much, if anything. Effectively, it means that if Microsoft is willing to invest enough for a while, it might undercut Google’s business strategy at a time that it is still completely dependent on search advertising revenue.
[UPDATE: Although Google may protest, it seems that it's becoming reconciled to paid content.]
Image via stock.xchng user mzacha, site standard license.
Erik Sherman is a freelance journalist whose work has appeared in Newsweek, the New York Times Magazine, Technology Review, the Financial Times, Chief Executive, and other publications. Follow him on Twitter.
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