Google: Ads the Only Hope for News Business

For all the talk of emerging models that could breathe new life into the flagging news industry, Google’s CEO only sees one answer: better ads.

Eric Schmidt sat for an on-stage interview this afternoon at a conference in Washington hosted by the Atlantic showcasing newsmakers and prominent journalists titled, appropriately, “The First Draft of History.”

Schmidt had kind words for the social benefit of the plush economics of newspapers in their heyday, where fat revenues from print advertisements could support robust news-gathering organizations.

“Those economics are under attack,” Schmidt said. “That attack is not going to end.”

He added, “I don’t have a good answer for it and I think it’s very sad.”

Dynamic serendipity?

The best Schmidt could offer was a conception of a new breed of intelligent online news product. Much like how Google and other Web giants tailor ads based on users’ Web activities (spend a lot of time looking at car Web sites, and you just might see more car ads), news sites could develop profiles about the sort of stories their visitors like to read, and present content that would match those interests.

That would obviously be a significant departure from the static front page of the printed newspaper, but it would also be a shift from most news organizations’ Web sites, which have generally presented the same information to every visitor.

The dynamic news product he described would be one that “knew everything about you, knew what you read, what you were interested in.” It would also be able to glean insights into people’s relationships across the social Web, using that analysis to connect the dots and produce recommendations based on what your friends are reading. That way, Schmidt suggested news sites could manufacture the serendipity many worry will disappear with the demise of the newspaper.

As for revenue …

“A highly targetable information product is also one that is highly advertisable,” Schmidt said. “I don’t see another solution.”

Of course, many other solutions have been proposed, such as philanthropic efforts, federal subsidies to public media and adjustments to the tax code and antitrust laws to give newspapers a more favorable position.

To Schmidt, those all fall short. It is worth noting, however, that one of his top lieutenants, Google Vice President Marissa Mayer, earlier today presented the findings of a two-year study on civic information in the digital that she co-chaired. That report concluded, among other things, that philanthropy and government support were both critical policy directions to ensure a vibrant digital media.

But as Schmidt pointed out, advertising, which traditionally has been the dominant source of revenue for newspapers and other media outlets, is a much leaner proposition on the Web. People sometimes refer to the conversion of analog dollars into digital dimes.

“The question,” said Schmidt, “is how do we make up the difference?”

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