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Thursday, January 28, 2010

Google Economist Explains Why You Won't Pay For Online News

Posted By on Thu, Jan 28, 2010 at 3:30 PM

More dough that won't be spent on online journalism
  • More dough that won't be spent on online journalism
Google economist Hal Varian gave a primer on the economists of news last night to a standing-room-only audience at Berkeley's Graduate School of Journalism. A lot of what he talked about has been said before: He showed slides of declining newspaper circulation and charts showing the tiny, 5-percent sliver that online advertising revenue represents in the total newspaper revenue pie.

But the statistics were even grimmer  than you might be expecting : Overall newspaper circulation has  been in decline since 1990, "well before the Internet," Varian noted, while newspaper circulation crossed against the nation's population has been declining since 1960;  and circulation per household has been dropping since -- wait for it -- 1945. You can't blame the Web for that.

Like many other media experts, Varian said he was skeptical that readers would or should be willing to pay for news online. (As of last week, the New York Times is banking you will.) But he provided a novel explanation for why, exactly, people won't spend money on an online product that they were willing to buy in hard copy.

click to enlarge Hal Varian
  • Hal Varian
Most media pundits blame newspapers for their initial decisions not to

charge for content online. Once news was available for free, there was

no going back, at least according to popular wisdom. That's why no one

is willing to pay for online news, according to the conventional wisdom.

Varian has a more interesting explanation. He presented a slide of

Google search data, in which the amount of  Google Web search activity

in general was compared with amount of activity on Google news over the

course of the week. 

It turns out, that compared

with Web search access, Google news access goes up during the day, down

in the evening, and way, way down over the weekend. This data is

consistent with the results of other studies that indicate Americans

still spend much more time with print newspapers than they do with news

online -- one Nielsen study found that Internet users spent an average of 38 minutes total per month

on newspaper sites.  "What that says to me  is that reading the news

online is a worktime activity. ... Most people aren't paid to sit at a

computer and read newspapers. They're snatching things throughout the

day," Varian said.

Well, duh. But Varian makes a good point: People who click on a news article or a video at work as a distraction

from other tasks aren't going to want to pay for it. People are willing

to pay for newspapers not because they're used to paying, according to

Varian, but because "It's a much nicer experience to sit there with a

newspaper and a cup of coffee and have that be your leisure time


To the extent that reading an actual newspaper is an

activity in itself, Varian argued, people are willing to pay for it, in

a way they aren't willing to pay for a couple minutes of distraction at

work. So the challenge for newspapers would be to reinvent a

way to make reading news  a leisure-time activity. Then -- and only

then -- will readers be willing to pay for content.

This, of course, is the grand hope that motivated the journalistic excitement over the announcement

of the iPad this Wednesday. If Steve Jobs could make the way people

read news pleasurable enough, journalists hoped, maybe people would be

willing to pay for it.

Varian's explanation sharpens this logic

and suggests an interesting a work time/leisure time, won't pay/will

pay divide that could be useful to mainstream newspapers as they try to

save their struggling business.

As for the tension between some news agencies and Google

over Google News, Varian painted a very rosy picture of the

Google/newspaper interaction, noting that 35 to 40 percent of traffic

is coming to news sites through search engines.

Not that ad revenue from clicks has provided the answer for news organizations so far.   


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Lois Beckett


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