Everyone and their uncle, it seems, is weighing in on News Corp.’s reported talks with Microsoft to block Google from searching its sites and give the privilege to Microsoft’s Bing search engine instead.
Many are focusing on News Corp. CEO Rupert Murdoch’s complaints that Google is “stealing” the content of his newspapers, and couching his complaints as an old-time publisher who doesn’t understand the new “link economy.”
Others have characterized reports of the talks as a ploy to get a better deal from Google in News Corp.’s negotiations over the search giant’s handling of ads on the News Corporation’s MySpace property. A few are taking a look at the numbers.
But none I know of have come up with what I’d consider a realistic figure of how much Bing might have to provide News Corp. to make up for lost revenue for any given property, and under what conditions the deal might make sense, at least as a financially-based business decision, for News Corp.
So, let’s set aside polemics for a moment and use The Wall Street Journal’s Web site to see what Microsoft might have to pay to get News Corp. to let Bing handle that property while cutting off Google. For any other News Corp. property, such as the New York Post, The Sun in Britain and the London Times, it would be a matter of plugging in those figures to come up with a price. This spreadsheet has my calculations and estimates for Google, and some other figures I considered in the research for this piece.
Only the people at WSJ.com know the actual numbers, such as their “sell-through” (the percentage of ads spaces they sell), average ad revenue per page, average page views from visitors from Google and the like, but I’ve poked around and used my own experience to come up with what I hope are realistic figures. Let me know if you have better ones, and please state your source.
As a start, let’s assume Bing would have to offer to replace revenue lost to WSJ.com from Google.
Compete.com estimated that WSJ.com has been getting about 30 million visits per month recently, and others have estimated the site gets about 125 million page views per month. Bernstein research analyst Jeffrey Lindsay said up to 14 percent of WSJ.com’s visits come from Google search and another 10 percent from Google News.
Assuming an average per-page ad revenue of about $6 (based on a Bear Stearns analyst and my own estimates of the number of ads per page), and an average of 1.2 page views per Google visitor (a reasonable number based on my experience with news sites), we come up with monthly ad revenue of $51,097 from Google users, or $613,164 per year.
Next comes revenues from selling WSJ.com subscriptions. Assuming that one-tenth of one percent of Google visitors subscribe to the Journal online for an average annual price of about $82 (based on prices listed on WSJ.com), we get about $6.9 million per year. Adding the advertising and subscription revenue, we get about $7.5 million that Bing would have to pay to replace the revenue lost from Google.
Again, the calculations are on the spreadsheet you can see here. The calculation adds users back in who would be lost but had done “brand searches” for WSJ.com, and so would likely find the site even if WSJ articles were blocked. Let’s say there’s about $500,000 in other revenues from Google visitors, for other kinds of e-commerce, partner relationships and the like.
If my estimates are right, Bing could make a persuasive financial argument for WSJ to go with it and shut off Google for the price of about $8 million for a year. (If we remove the 10 percent of users to News Corp. properties said to come from Google News — reports do not specify whether News Corp. properties would be removed from the news pages as well as from search — then the amount lost goes down to about $4.4 million. We’re also, for the sake of this exercise, assuming that WSJ.com will still be on Yahoo and other search engines.)
As a further incentive, News Corp. would get that $8 million from Microsoft without having to do the work of serving ads to the Google users, fulfill subscriptions or try to “convert” them in other ways, and would also likely realize the revenue faster than from advertisers, who can be notoriously fickle, fluctuating and slow to pay.
If I were News Corp., I would argue in the negotiations that Microsoft should pay more, as my properties would be suddenly removed from the engine that accounts for some 65 percent of all Web searches. And, given that Google brings in 44 percent of WSJ.com’s new visits, according to Bill Tancer, a Hitwise analyst, we’d be giving up a hefty chunk of the ability to acquire new users.
If I were Microsoft, I would argue that the fee should be less because much of the traffic would be restored through Bing over time. I might also argue that without search traffic from Google, WSJ.com could charge more for its ads because a higher proportion of its users would be loyal and higher-value subscribers rather than transient search users. Without Google users, metrics like page views per visit, time on site, recency, frequency and loyalty would all likely get better, and create more value for WSJ.com.
So, will News Corp. drop out of Google? To make an educated guess, I’d have to see their numbers and know their considerations. Being freely available to all is only one business model on the Web, and the Journal is one of the few sites that can say it’s consistently made tens of millions of dollars by charging for subscriptions for content online.
Should News Corp. drop out of Google? Based on what I know today, I wouldn’t recommend it. Maybe some blocking of Google here or encouraging of Bing there might work to News Corp’s advantage. While News Corp. has some of the world’s leading news brands, including Fox News and the aforementioned news organizations, collectively they don’t have the advantages of The Wall Street Journal, a paid publication considered a must-read for much of the well-to-do business community.
Even for WSJ.com, it’s hard to see how blogs can be prevented from picking up WSJ material and get it into Google that way. If I were Microsoft, I would raise that concern to further lower the price I might have to pay. And, compared to the $80 million or so WSJ.com makes from subscriptions every year, plus millions more in ad revenue, the amount it would get from Bing is relatively small.
Will other publishers follow suit and block Google? I wouldn’t recommend it, in most cases, for much the same reasons.
But do important decisions often get made on the basis of short-term financial gain?
You bet. And I wouldn’t bet against Rupert Murdoch to do whatever he thinks is in his financial interest.
