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Schmidt a fitting keynote for newspaper convention

Giving the CEO of Google (NASDAQ: GOOG) the last word at the newspaper convention seems a fitting end-cap to the ailing industry's annual show.

Eric Schmidt closed down the Newspaper Association of America's show in San Diego with a keynote address urging his audience to come to grips with the irreversible trend of user-generated content and social media, to meet consumer demand rather than try to dictate it and, above all, to innovate.

"We have an opportunity to redo the way information is processed in our society," Schmidt said. "My point is that the notion of this sort of community-generated information is already in aggregate more than professionally produced information and is likely to become more important, so when you build products, when you think about how your users consume things, you'll discover that it's really in both places."

I say fitting because to many, Schmidt's company has done more than any other to hasten the demise of the printed product and the legacy business model it carries. To lay the death of newspapers at his feet would be unfair and a gross oversimplification of an extremely complicated issue. Just the same, he would be as appropriate a man as any to deliver their eulogy.

But Schmidt came to praise the newspaper industry, not to bury it. He began his talk by telling his audience just how much he thought of the work they do, and that reporters would be a necessary and enduring part of our society for centuries to come.

But consumer habits being what they are -- fickle -- Schmidt counseled that newspapers develop ways to live alongside user-generated content like Wikipedia and blogs. If there is one lesson to be pulled from phenomena like Facebook and Twitter, it's that people don't want to be alone with whatever they're reading or watching or looking at anymore. Communities can be built on top of any content-consuming (to invoke the vernacular) experience. Schmidt imagines a movie theater where the spectators are Twittering away throughout the screening. It's not too far-fetched -- it's already become a trade show at media and technology conferences (and presumably those of other industries I'm less involved with).

"All of us now live in this mixed world of user-generated content and professional content," Schmidt said.

The one-to-many media model that newspapers were born into has been in a stage of deepening discredit for some time. Newspapers get that. What they don't get is how to make money off their expensive-to-produce content in the always-on era.

For Schmidt, the answer is still advertising. Admitting he has a bias (given that Google's revenue is 98 percent ad-driven), Schmidt nonetheless held out hope that newspapers could do a better job of tapping into their data about what types of stories readers are interested in to serve more relevant ads. Sound familiar? It should -- that same data has been the cow that keeps on milking for Google.

Better ad tech could allow newspapers not only to serve more engaging, meaningful ads tailored to the stories person likes to read or the videos they like to watch, but it could also do a better job of customizing the online news experience. If you read this story yesterday, odds are you'll be interested in reading this follow-up today, essentially.

But more sophisticated ad targeting, though doubtless exciting for news executives (and troubling for privacy watchdogs), is hardly an immediate solution for an industry that will likely be much smaller when it reconvenes for its conference next year. At the moment, the debate is dominated by the idea of trying to resurrect some kind of payment system where (gasp!) users would be asked to pay for the content they consume.

Monetization schemes vary based on the size of the audience, Schmidt said. If you're Google, say, and you're looking at a global audience in excess of a billion people, advertising is the ticket. "If you're building a business with a couple million readers, maybe you should use the to-be invented micropayments systems. It's obvious that you'll need those sorts of things."

He suggested that the technology was evolving to the point where micropayments, historically a better idea in theory than practice, could actually work, so a reader would pay a penny or two for access to a really good article.

The notion of leaning on Web portals and aggregators -- Google being exhibit A -- to recoup some of the ad dollars they leach off of the content producers. News Corp. chief Rupert Murdoch broached the idea at a cable conference last week in Washington. Then on Monday, the Associated Press announced its intention to go after the Web sites that won't pay freight in court.

To many, that meant Google. To enough, in fact, that the search giant put up a blog post trying to explain that the relationship between Google and the news industry was happy and symbiotic.

Schmidt took up the issue in his speech on Tuesday, reminding the audience that Google ahs a multimillion dollar deal with the Associated Press not only to distribute their content, but also to host it at our servers, so I was a little confused about all the excitement in the news in the last 24 hours."

He added, "We have a very, very successful deal with the AP, and hopefully that will continue for several years."

Of course, there has been widespread speculation that the AP will try to drive a harder bargain from Google when it comes time to renew that deal, but such was not the topic for Schmidt's closing keynote.

Instead, he cautioned against "partially-thought-out" conceptions of fair use, the legal term for the limited reuse of proprietary content. Ask a lawyer to define the term and you'll get different answers depending on what law school he attended, Schmidt said. The important thing, he said, is to stay away from destructive legal wars that could ultimately alienate the lifeline of the business -- the customer.

"Think about it in terms of what your reader wants," Schmidt told his audience. "These are ultimately consumer businesses, and if you piss enough of them off, you won't have any."

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