To further my analysis behind embedding Google search engines within hyperlinks placed throughout newspaper articles, here's some back of the envelope numbers:
In 2008, Google's websites generated $14.4 billion in revenues. It did this by placing advertising on its search results pages through a network of advertisers who pay either on a click-through or impression basis. According to Nielsen Online, Google averaged approx 120 million unique audiences across its websites per month in 2008.
If 120 million unique audiences can garner $1.2 billion in revenue per month, then it may be a metric in which to calculate how much revenue a website like The New York Times can garner.
In December 2008, the New York Times attracted 18.2 million unique audiences, again according to Nielsen Online.
If Google were to embed in each New York Times article a set of hyperlinks (I'd call them AdNews hyperlinks), whereby the reader who clicked the hyperlinked keyword in the article was taken not to another website, but rather to a Google search result page, then Google and the New York Times could split the ad revenues generated from that search result, say on a 50%-50% basis.
Using the simple revenue-per-unique-audience ratio from Google's 2008 sales mentioned above, I calculate (back of the envelope) that a Google AdNews agreement would garner approximately $85 million per month in revenue for The New York Times (assuming The Times gets a 50% share of ad revenue). That's over $1 billion in annual revenue for The New York Times! Do you think the Sulzberger family would be interested in talking to Google about that?
For all of 2008, the New York Times Company posted $2.9 billion in revenue, from which it booked a $40.6 million operating loss. Financially speaking, it is not a healthy company.
What are my assumptions?
The central assumption is that readers who click a hyperlink on a news article are doing the same thing as users who type in a search query on Google's homepage: they are seeking more information. One could be considered passive search: the search query is not typed in but is the hyperlink itself. And one could be considered active search: the search query is manually typed by the person into the Google homepage search box.
Isn't this the same thing? Isn't the user seeking the same thing, namely, more information?
Another key assumption is that readers of a newspaper article would click-through the hyperlinks at roughly the same frequency that they enter search queries on Google's homepage. Again, in both cases, the user's intent is the same: he or she is seeking more information.
If Google and The New York Times could come to such an agreement (again, I'd call it Google AdNews), it could potentially add $1 billion in annual sales to The New York Times. And it could be executed by simply leveraging the same advertisers and platforms that Google uses in its AdWords and AdSense technologies. Google could offer the copy editors at The New York Times simple software tools with which to automatically choose and hyperlink key phrases in each published article.
For Google, it would add a huge new avenue for advertising revenue growth. Google could reach a similar agreement with every major global newspaper chain (to include the Associated Press, Bloomberg, Dow Jones, etc.) and in the process embed itself within every newspaper article published online in the world, every single day.
Talk about scale effect! Per Nielsen, the top 10 newspapers in the USA had 40 million unique audiences in December 2008. That alone would add about 30% to Google's monthly network traffic. And that's just from US newspapers!
Google earnings would skyrocket on this growth platform, all from merely leveraging its existing technology. No need for massive R&D spending here.
In the process, Google AdNews could save the newspaper business. It could save our Fourth Estate.
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