Posts Tagged ‘News Corp’

Google vs Rupert Murdoch- who will win?

Tuesday, October 20th, 2009

We all know that News Corp’s Rupert Murdoch hates Google. Six months ago, he launched an attack on Google,

Rupert Murdoch threw down the gauntlet to Google Thursday, accusing the search giant of poaching content it doesn’t own and urging media outlets to fight back. “Should we be allowing Google to steal all our copyrights?” asked the News Corp. chief at a cable industry confab in Washington, D.C., Thursday. The answer, said Murdoch, should be, ” ‘Thanks, but no thanks.’ “

Google, with its huge armies of software robots and off-line human agents (e.g. the book scanning project, Street View), is like a huge vacuum cleaner that tries to suck in the entire world’s freely available information in order to index, analyse and categorise them.

The end product of their effort is a wealth of meta-information (information about information) and information in which they grant access to the masses through their famous search engine (and other lesser known information services). In this information saturated world, the divide between the haves and have-nots lies in the line between those who are information-rich and those who are information-poor. Google, with their wealth of meta-information, is the gate-keeper for those who wants to cross from being information-poor to information-rich.

Paradoxically (counter-intuitive, we would say), unlike conventional businesses, Google does not charge for access to their meta-information (who pays when doing a Google search?). For example, a large percentage of you reading this blog are brought here free-of-charge by Google’s search engine. Interestingly, you may notice that Google provides all kinds of free services (e.g. Gmail, Google Maps, Google Doc, Picassa, Google Reader, Blogger, YouTube, etc). So, how on earth does Google makes its money if it is giving things aways for free?

To understand this paradox, we have to appreciate the entrenched position taken by two diametrically opposed camps in the digital world. We will requote Graeme Philipson from an article we wrote three years ago (see Analysing Web 2.0 businesses: Shoutwire vs Digg case study),

We are not even a decade into the digital millennium and already the battle lines have been drawn. Two camps have emerged, each with widely divergent views on the nature of information, who owns it and how it should be distributed.

The forces are at this stage evenly matched, and it is not apparent from the day-to-day squabbling which side will emerge victorious. But one side must, because their views are diametrically opposed and can?t coexist in the long term.

On one side are those who believe information is a commodity that can be owned, bought and sold, and its distribution controlled. This naturally leads to a restrictive view of information. This group comprises most of the music, publishing and film industries, and most hardware and software companies.

On the other side are those who believe that information by its nature should be free, and that its distribution should be uncontrolled. This viewpoint naturally leads to an expansive view of information. This group comprises the open software movement, a few far-sighted computer companies (Google is the best example, but also includes heavyweights such as IBM and Sun), and most consumers.

Naturally, businesses that deal with digital information (e.g. data, music, software, movies, etc) will take the view that information is a commodity. Famous companies in this camps include Microsoft, Apple and as expected, Rupert Murdoch’s News Corp.

On the other side, most who belong there (i.e. those who believe in free information) are not profit maximising businesses- they consist mainly of consumers (of course, who do not like free information, music, movies and software?) and non-profit open-source movement. Very few profit maximising businesses belong to this camp- the big names include IBM, Sun and the 600-pound gorilla, Google.

So, at the very heart of Google‘s business model is the idea that information is free and abundant. Think about it: if information becomes a scarce commodity, Google’s business model will collapse- its ubiquitous search engine will die a natural death as it will not be able to index restricted information. Without its search engine, Google’s monopoly will cease and its revenue will dry up. That’s why Rupert Murdoch’s attack on Google is akin to trying to drive a stake at its heart.

Now, let’s take a look at current reality. It’s true that most information is free (at least for the non-specialised ones that the masses are after). This blog that you are reading now is an example of free information. It is also true that there are too much information available than you can consume. For example, there are millions (okay we made that number up, but you get the drift) of investment blogs that can supply everyone with ideas, news and regurgitation of facts and figures and are vying for everyone’s attention.

So, here comes the crucial point to understand: information (collectively) is free and abundant, but consumers’ attention (for each individual information provider) is scarce. Actually, each feed of one another in a positive feedback loop- to attract the attention of consumers, businesses are forced to give more and more information away, which in turn causes information to be more abundant (collectively), which in turn makes consumers’ attention even more scarce (for each individual businesses), which forces businesses to give yet even more information away.

And here is the beauty of Google‘s business model- it sells access to consumers’ attention. For example, at any Google search results, you will find paid advertisements on the top and at the side. By using Google’s search engine, your attention is captured by Google. Then as you click one of the search results, you may stumble into say, this blog site. Here, we have captured your attention that we sell to advertisers, either directly or through Google. So, why is Google giving away so many free services (many of which are integrated with each other), so much so that you can even organise your life around it? The short answer is that it is trying to monopolise more and more of your attention within its domain.

Now, let’s look back at Rupert Murdoch’s plan of bringing paid content into his agenda. Will his plan work? By introducing paid content, News Corp will lose the attention of millions of consumers who are not willing to pay. Not only that, the Google search engine will no longer be able to index and analyse News Corp’s information. That means it will lose even more consumers’ attention through the loss of search engine traffic.

In a world where information is free and abundant and attention is scarce, that attention vacuum vacated by News Corp will be filled quickly by other information providers. In fact, this will be windfall for them and a mortal blow for News Corp. If News Corp attempts to make up its loss of attention by improving the quality of its information tremendously, no one will know about it because Google will likely to retaliate by imposing an information blackout on News Corp.