Digital Media

With micropayments and transaction platforms a buzzworthy sector of the Web right now, it's no surprise that Google would want to get in on the game.

But Mountain View's pitch is a little bit different: the payment platform it plans to build, according to Harvard's Nieman Journalism Lab, is geared toward newspapers that want to charge for digital content.

Google's plans are detailed in a document the company sent to the Newspaper Association for America. The document, a response to a query from the association, also requested more information pertaining to paid-content models.

"While currently in the early planning stages, micropayments will be a payment vehicle available to both Google and non-Google properties within the next year," explained the document (PDF) posted Wednesday by Nieman Lab. "The idea is to allow viable payments of a penny to several dollars by aggregating purchases across merchants and over time. Google will mitigate the risk of non-payment by assigning credit limits based on past purchasing behavior and having credit card instruments on file for those with higher credit limits and using our proprietary risk engines to track abuse or fraud. Merchant integration will be extremely simple."

This is interesting, as Nieman Lab points out, because Google's plan aggregates payments into a bundle for processing, something that could potentially quell publisher concerns about transaction fees. The plan is very preliminary, obviously.

"The Newspaper Association of America asked Google to submit some ideas for how its members could use technology to generate more revenue from their digital content, and we shared some of those ideas in this proposal," according to a statement Wednesday from Google's PR department to Nieman Lab. "It's consistent with Google's effort to help publishers reach bigger audiences, better engage their readers and make more money."

Google's Checkout product, the online transaction service that would likely be the base for a micropayment system, has been around for a few years now. But it hasn't made a huge dent in far bigger competitor PayPal, and it's also been experiencing some big problems, as my colleague Tom Krazit reported Thursday.

It ought to be pointed out, of course, that Google has been the target of harsh criticism from the newspaper industry (as well as other sectors of the publishing business) for profiting from third-party content. Wall Street Journal editor Robert Thomson went so far as to call online news aggregators (not mentioning Google by name) "parasites or tech tapeworms."

Meanwhile, the payment platform that's been getting the most scrutiny and interest in the tech press these days has been, of course, Facebook's "credits" system. But while Facebook's pitch thus far has been toward nonprofits looking for small donations and game developers selling virtual goods, it's still impossible to discount the fact that Google's micropayments move could be aimed at staking a claim in the same territory.

Note: This post was expanded at 7:09 a.m. PDT. And on Friday morning, the Associated Press reported that Google was one of several tech companies, including IBM, Microsoft, and Oracle--that responded to the Newspaper Association of America request, though the AP story offered no details on those other companies' responses.

In a move that makes him seem a bit like Dr. Evil wanting to be paid one hundred billion dollars for Austin Powers' ransom, News Corp. CEO Rupert Murdoch has said that he will charge for all the online content associated with the newspapers and television stations he owns.

Rupert Murdoch, media baron

(Credit: Dan Farber/CBS Interactive)

It's a goal that some in the digital-media space will bill as ludicrous--and some as inevitable.

The Financial Times reported the news Thursday, adding that Murdoch had spotted "some good signs of life" in the battered advertising sector.

He's already got most of The Wall Street Journal, which News Corp. acquired two years ago, behind a pay wall. But he also owns the rest of Dow Jones & Company, the Fox television and film empire, the New York Post, and the U.K.'s The Times. News Corp. is also a partner in Hulu, the joint video venture that offers a big chunk of Fox television content (as well as NBC and ABC) for free on the Web.

Robert Iger, the CEO of new Hulu partner Disney, said at a conference last month that he does not believe Web content needs to be offered for free, and that consumers will be willing to pay for it.

"We intend to charge for all our news Web sites," Murdoch said, according to the Financial Times. "If we're successful, we'll be followed by all media."

In late 2007, well before the market collapse last fall, Murdoch had said pretty much the exact opposite, claiming that a free and ad-supported model would be more beneficial than a subscription model for The Wall Street Journal.

Presumably the new paid-content strategy wouldn't apply to News Corp.'s digital-only assets, like social network MySpace.

It's tough to compete with free.

The use of online classifieds sites, such as Craigslist, has more than doubled in the past four years, according to a study published Friday by the Pew Research Center. At the same time that Web classifies are on the rise, the classifieds business that newspapers once depended on has collapsed, the Pew Internet & America Life Project found.

"Nearly half (49 percent) of Internet users say they have ever used online classified sites," the Pew Center said in the report. In 2005, the percentage was 22 percent.

One out of 10 Internet users visits an online classifieds service each day, up from four percent in 2005.

Not that this is big news but the Pew Center helps to illustrate just how devastating online classifieds has been on newspapers. A graph of newspaper classified ad revenue since 1980 to last year (at bottom) shows that the industry saw a high in 2000 with about $19.6 billion. Last year, newspapers recorded $9.9 billion.

That's a plunge in revenue of about 49 percent.

There's no question either that Craigslist dominates Web classifieds.

"In the world of online classified advertising, Craigslist is by far the most used Web site in the United States," Pew said in the report. "In March 2009, classified sites averaged 53.8 million unique visitors, up 7 percent from February. Craigslist had 42.2 million unique visitors in the month of March."

(Credit: Pew Research Center)

Google CEO Eric Schmidt confirmed speculation that his company had been considering the possibility of acquiring a newspaper, the Financial Times reported Wednesday.

CEO Eric Schmidt

(Credit: Google)

However, in the same interview, Schmidt quickly added that the company has since decided against the idea because potential acquisition targets are either too expensive or have too many liabilities. Schmidt said Google was "trying to avoid crossing the line" between technology and content and was instead working with struggling publishers to make their Web sites "work better" for online advertising, according to the story.

Schmidt also dismissed what he called "clever ideas" suggested about sheltering newspapers in nonprofit structures through the Google.org foundation. "They are unlikely to happen without some massive, massive set of corporate bankruptcies," Schmidt told the Financial Times.

Two reports earlier this month--by Fortune and The Washington Post--suggested that Google has been talking to both The New York Times and the Post about possible areas of collaboration, or even investment. Schmidt's statements to the Financial Times suggest it was more the former than the latter.

Of course, given the contentious history between Google and traditional news outlets, which have never liked the idea of the search giant making money off their content without paying for it, the idea of Google buying a paper had some scratching their heads. Then again, Google does have deep pockets and a keen interest in the health of the news business when it comes to generating online content.

Is anyone else reminded of the adage, "Why buy the cow when you can get the milk for free?"

The Wall Street Journal is expected to begin charging nonsubscribers micropayments for access to individual articles, according to a report Sunday in The Financial Times.

Robert Thomson, editor-in-chief of Dow Jones and managing editor of the Journal, told The Financial Times that "a sophisticated micropayments service" will launch this autumn. The system would charge small fees to occasional users who may not be willing to pay more than $100 a year for a subscription to WSJ.com, Thomson said.

The Journal is one of the few large daily newspapers still managing to charge for online content. The New York Times abandoned a two-year experiment with the Web-subscription model in 2007, suggesting that the company's projections for subscriber revenue were small compared with advertising sales.

Word of the payment model emerges as the newspaper industry is undergoing a dramatic contraction. As readers have increasingly gone online for their news, newspapers have suffered declining subscriber numbers and lower advertising revenue. Many newspapers have cut jobs, and some have warned that they may face closure soon if they can't make further cuts or find buyers for their operations.

That climate has publishers scrambling for new revenue models. New York newspaper Newsday announced in February that it plans to begin charging online readers for access to its content.

Publishers are also taking aim at search engines and news aggregators. Last week, Google defended itself on charges that it is profiting from content produced by newspaper executives, magazine publishers, and the Associated Press.

During a Senate hearing, Google Vice President Marissa Mayer said, "Google News and Google search provide a valuable free service to online newspapers specifically by sending interested readers to their sites at a rate of more than 1 billion clicks per month. Newspapers use that Web traffic to increase their readership and generate additional revenue."

To hear the poobahs of traditional media tell it, Google is to print media what global warming is to the polar caps. At many once-stalwart print publications, profits are melting away.

For several months, leaders at some of the nation's most influential newspapers and periodicals, including The Wall Street Journal, The Associated Press, and the online arm of Forbes magazine have begun blaming Google and similar Web services for at least some of their deepening financial troubles. Google sells ads tied to the news blurbs it "scrapes" from news sites. It links back to the Web sites from which it acquired the content but doesn't share ad revenue with them. This isn't fair, many media execs say.

(Credit: Forbes.com)

In all the very public bashing of Google, however, few if any of the critics has answered why they don't just cut Google out of the equation by preventing the search engine from indexing their Web pages. The task could be accomplished by inserting a single line of code into their URLs. If Forbes.com added a line such as forbes.com/robots.txt, content from the site would be rendered invisible to Google.

Representatives from the Journal and AP declined to comment for this story, but their Web sites speak volumes for them. None of the companies has severed ties with Google and risked losing access to the search engine's millions of users. Traditional print publications, which have seen ad revenue plummet, mass layoffs, and in some cases the shut down of operations, are now hopelessly dependent on Google to lure readers, says media executives. Jim Brady, the Washington Post's former digital chief, says the question of whether Google is good or bad for print journalism is almost irrelevant at this point. Print publications are helpless to do anything about it.

"Get out a sheet of paper and write down all the things Google does for you," said Brady, former executive editor of Washingtonpost.com, as he offered advice to his former peers in old media. "Google allows your content to be exposed to people who would never see it otherwise. If you're able to code your pages well, then you can get an awful lot of leads from Google. It's up to your site to turn those leads into loyal customers...Google is not going away."

Pointing fingers
That's not exactly how Jim Spanfeller sees it. The CEO of Forbes.com asked the question in an opinion piece he wrote for the blog PaidContent.com, "is Google being disproportionally compensated for what is fundamentally other people's work?" He said the answer appears to be yes. He claimed Google "makes roughly $60 million a year directing folks" to Forbes.com.

So why doesn't Spanfeller prevent the search engine from indexing the magazine's content?

"I don't know that this isn't a bad idea," Spanfeller said in a phone interview with CNET News. "But I think that would be hard to do without everyone's competitors shutting (Google) out as well."

This sounds like an acknowledgment that Forbes needs Google to compete and that the search engine may provide publications like his a valuable service. That's at least what Marissa Mayer, a Google exec, told Congress on Wednesday during a hearing on the future of journalism. Google sends 1 billion page views every month to print publications, Mayer testified during the hearing.

Spanfeller argues, however, that Google does do harm. For example, the blurbs the search engine obtains from news sites often includes enough information to satisfy the major questions about a story. For many people, reading a headline and synopsis about three more people dying of swine flu in Mexico is all some readers want to know. There's little motivation to click on links to the site that actually produced the news. To some in media, this violates copyright law.

Spanfeller says there's also frustration when a news organization pays professional journalists to do original reporting and then see links to stories written by amateurs--or worse, blogs that are little more than flimsy rewrites of their content--with higher visibility on Google than their own.

Spanfeller wants Google to do a better job of showcasing professionally created content, and "cease stepping on or over the line of fair use." This means he wants Google to start providing less information in its news blurbs and crack down on sites that use stories without authorization.

"We show users just enough to make them want to read more," wrote Alexander Macgillivray, Google's associate general counsel, wrote last month. "Even though the Copyright Act does not grant a copyright owner a veto over such uses, it is our policy to allow any rights holder...to remove their content from our index."

The cure?
So what do print execs want from Google? First, the search engine could cure a lot of ills by sharing ad revenue with print companies. After all, it's their content Google is selling ads against. Forget it, not going to happen predicts Brady.

"There was a fair amount of pushing from people at the (Washington Post) news group who said: 'We should make Google pay us for our content,' Brady said. "I told them 'They're never going to do it. They wouldn't give us a dime.' (They responded) 'Well then, we should block it.' I said 'Fine, we can go ahead and do that and that's suicidal.'

"Google built a better mousetrap than the newspapers were able to build," Brady continued. "That's part of the reason they're making the money they're making. At some point I don't know what you can do about that other than to try and work it to your advantage."

There are some media execs looking for new ways to get their content in front of readers without help from Google. Amazon on Wednesday showcased a new large-screen e-reader called the Kindle DX. The device is partly geared toward readers of newspapers, and magazines. Newspaper publishers Hearst Corp., and Rupert Murdoch's News Corp. have said they will create their own e-readers designed to deliver their own content.

This kind of effort is fine with Brady. He says this kind of thinking is far more preferable than obsessing about the past.

"We have to ask, 'what's next?'" said Brady who plans to soon open his own consulting business. "That's where everybody needs to get to. Because Google isn't going away and they aren't writing us checks. Let's move on. We're all getting way too hung up on the past, with all the things we should have done 10 years ago, could have done...well, we didn't. Game over. We should be asking 'What are the new rules of this game and how do we best take advantage of them.'"

This is the second part to my early analysis of the new Kindle DX large-format e-book reader. In the first post ("Early analysis of Amazon's Kindle DX: Overview") I discussed the physical and software features of the new device. In the third post, "Early analysis of Amazon's Kindle DX: E-textbooks", I'll talk about how the DX will fit into the educational market.

The new Kindle DX is larger than the Kindle 2 with more than twice the screen resolution.

(Credit: Amazon.com)

But here, let's talk about the DX's suitability for reading electronic newspapers.

Newspapers are about text, and there's only a moderate need for interactivity. For each story, the reader views the headline and perhaps skims the opening paragraph, and if it doesn't look interesting, moves on to the next story.

Even with these relatively undemanding requirements, the Kindle DX isn't as good for reading newspapers as a real newspaper. We're all used to the ability to glance over a full newspaper page worth of articles at once. You can't do that with the Kindle.

This issue boils down to the amount of time we spend reading articles vs. the amount of time we spend glancing at headlines and turning pages. Call that the "reading ratio." A real newspaper offers a very high reading ratio even if we're not reading much of the paper, because it takes so little time to flip through the pages looking for articles to read.

On the Kindle DX, the ratio will depend very heavily on how much of the paper we're reading. For those who just read through the whole paper, the ratio can be fairly high, probably 90 percent or better. It'll still be lower than a real newspaper because it takes a certain amount of time to turn the virtual pages of the Kindle, and page turning is much more frequent.

(Demonstration videos seem to show that page turning takes about the same amount of time on the DX as on the earlier Kindles.)

For those who read only a fraction of the stories in the day's paper, the reading ratio of the Kindle DX will be much worse than a real newspaper because the experience will be dominated by page turning. Since most of us can't simply increase the amount of time we spend reading the paper each day, I'm afraid that the Kindle approach to e-news will actually reduce the amount of news we read.

It's also worth comparing the Kindle e-news experience with that of the iPhone and a laptop. These devices have active displays with fast update rates, greatly reducing the page-turning delays. I use The New York Times application on my iPhone pretty regularly (once or twice a week, at least), and it's really quite easy to flick through the day's top stories, which appear on the iPhone with the headline, a thumbnail photo, and usually about half of the lede.

On the other hand, the delay to read the story itself is quite long, since the Times' iPhone software is not designed to pre-load the stories, as the Kindle does. The iPhone takes about 10 seconds to bring up a story once selected, but once it's in, there are no further delays. The rest of the story scrolls past as fast as I want to flick through it.

At home, on my laptop, The New York Times Web site is even faster. It's easy to skim the titles and ledes of about a dozen stories on the main page for each "section," and loading a story takes no more than a second or two. Once loaded, again, there are no further delays.

The Kindle DX simply can't deliver that kind of e-news experience because the screen technology is inherently too slow to support scrolling or fast page-turning.

In fact, it looks like the Kindle DX isn't even taking full advantage of its own capabilities. The newspaper interface is very basic: one wide column of text, not the multiple narrow columns that help us skim through real newspapers. I wonder why?

But again, I think the DX will do an adequate job for people who like to read most of the day's news stories. How much of the market that is, I can't guess, but I suspect it's a higher fraction among older, wealthier customers.

(Now, continue on to "Early analysis of Amazon's Kindle DX: E-textbooks", or return to "Early analysis of Amazon's Kindle DX: Overview".)

Leaked photos of the alleged 'Kindle DX' device from Amazon.

(Credit: Engadget)

Newspapers hoping the next version of Amazon.com's Kindle e-reader will be a savior for their beleaguered businesses are likely to be disappointed when it's unveiled Wednesday. But this Kindle could win plenty of converts in academia.

Amazon is slated to unveil a new, larger-screen version of the Kindle, which it originally launched late in 2007. Possibly called the Kindle DX, the new device is designed for reading newspapers, magazines, and textbooks, and it's expected to be part of new electronic course material test-runs at six universities this fall. The list, according to The Wall Street Journal, consists of Pace University (where Amazon is holding Wednesday's press conference), Case Western Reserve, Reed College, Arizona State University, the Darden School at the University of Virginia, and Princeton University--Amazon founder Jeff Bezos' alma mater, which already publishes Kindle textbooks.

This move makes loads of sense. Anyone who's been to a U.S. college in the past few decades could tell you that textbooks are very highly--some would say obscenely--priced. They're also bulky, and often difficult to get rid of once purchased: Selling the third edition of an introductory biology textbook on the used-book market is pretty difficult when the fourth edition comes out a year later. Theoretically, this should be the perfect market for an electronic reader like the Kindle.

But just because Amazon has inked a few deals with textbook companies, and a handful of prominent academic institutions, doesn't mean that hordes of incoming freshmen across the U.S. will be moving into dorms this fall with Kindles in hand.

"I do think the textbook market will be the killer app for e-readers," said Sarah Epps, a media analyst at Forrester Research. "(But) we think it's going to start to develop in 2011 and really pick up in 2013...We've been talking to publishers, talking to universities, and what we're seeing is that from the publisher perspective there's some hesitation."

Why's this? There are a lot of questions for the publishing industry, the biggest of which is whether electronic textbooks will take a bite out of the profits that manufacturers are making from paper textbooks. There's also the potential issue of licensed content in textbooks that might not have digital rights stipulated in its original agreement with the publishers. Then, as Epps pointed out, there's the Google problem.

For the past few years, Google has been pushing forward a book scanning and digitization project called Google Book Search, and though it has some prominent allies in the industry, to say that Google Book Search has been controversial would be putting it lightly. The Association of American Publishers sued the search giant in 2005 over potential copyright violations. Authors and publishers of out-of-print books have petitioned for royalties from digitized books. More recently, library industry trade groups have expressed concern in the form of a legal filing over what Google's efforts could mean for their business. An agreement in court has been delayed.

For Amazon, this could mean that it'll have to deal with some publishers who have become quite suspicious of large-scale digital book projects. But on the flip side, this could work to the Seattle-based retailer's advantage: if the digital shift is as inevitable as it appears, and Google is to be the Silicon Valley villain in this story, then Amazon, which has been in the book business for nearly two decades, could be the friendlier alternative.

There's also the potential for the new Kindle, whatever it's called, to have a significant impact outside the U.S. Forrester analyst Epps speculates that it will make waves in developing markets like China and India, where there are millions of university students with tight textbook budgets. "Using e-readers for textbooks would be incredibly empowering for students in their universities," Epps said, "but that's going to take some time."

It's clear that Amazon could shake up the twin pillars of educational publishing and academia with its new Kindle, potentially a much bigger splash than the launch of the original Kindle or its improved Kindle 2 successor earlier this year. What's less clear is how immediate the change will be. And what's even less clear is what impact the new, bigger Kindle will have on the market that everyone was expecting Amazon would target: print periodicals.

Rumor has it that The New York Times will be part of Wednesday's Kindle announcement, possibly lowering its price for a Kindle subscription. But this doesn't mean that Amazon's skinny gadget will suddenly save print media: Newspaper and magazine publishers may think they still get the short end of the stick.

"The way things work now, newspapers and magazines can distribute their content over the Kindle if they want, but it's not a very good model for them. Amazon is keeping the majority of the revenue," Epps said. "In addition, there are some business problems, like that publishers can't count subscribers toward their rate base, so it's diluting rather than adding to their subscription base from the perspective of the business."

But while Amazon has the textbook market in focus, it shouldn't let newspapers and magazines get away from it: this is somewhere that the manufacturer of a rival e-reader could sneak in.

"Some of the other device competitors that will be coming to the market over the next year may be more appealing partners for newspaper publishers," Epps said. "It's another distribution channel for their content, but not all distribution channels are created equal. So there could be a great opportunity for publishers to distribute their content on other types of e-readers, where they have a more favorable business model."

Extra! Extra! You don't have to pay extra to get Wall Street Journal content on your iPhone.

Good news for news junkies and anyone who can still stomach reading about the stock market: The Wall Street Journal just took the wraps off an eponymous iPhone app, offering news, video, and even podcasts. Better still, there's no charge for the app--or the content.

That may surprise Journal subscribers who pay a little more than $100 per year for unrestricted Web access. But it puts the app on an even footing with The New York Times and USA Today apps, among others, which also provide news at no charge.

The Journal app bears a striking resemblance to the Times app, with a five-icon toolbar that spans the bottom of the screen and a banner ad just above that. (Hey, somebody has to foot the bill.)

But this isn't just the Times repackaged. For one thing, the Journal app seems to load much faster than the notoriously pokey Times, and it sports prominent buttons for Video and WSJ Radio.

The latter consists of a two-minute podcast that starts streaming immediately when you tap through. But it lacks a time stamp, so there's no way to know without listening if it's any newer than the last podcast you played.

As for the videos: they flat-out refused to play, though we'll cut the app some slack on its first day; no doubt looky-loos have stampeded the Journal's servers.

Other amenities include a button to save articles for future reference and another to e-mail them to friends. Plus, you can customize the toolbar with any of 16 icons, giving you one-tap access to sections like Tech, Opinion, and Barron's.

Thus, despite a few early kinks, the WSJ app is sure to delight the business crowd--especially considering that they don't have to tap their slush funds to get it.