Posted tagged ‘online’

Why Google Should Buy the New York Times

June 23, 2008

Well, it seems like this is one of those persistent rumors, although tracking down an actual source of said rumor is difficult. Even Google’s C.E.O. was questioned about it:

[Question:] The New York Times is under pressure to sell. Blogs are abuzz with the idea that Google ought to buy it, because it’s in your interest to keep the quality of journalism high.

[Answer:] I’m not aware of a proposal for us to buy the New York Times, but I’d never rule anything out. So far, we’ve stayed away from buying content. One of the general rules we’ve had is “Don’t own the content; partner with your content company.” First, it’s not our area of expertise. But the more strategic answer is that we’d be picking winners. We’d be disenfranchising a potential new entrant. Our principle is providing all the world’s information.

(emphasis mine).

Now, a few good points are raised. Clearly, as we all realize, the fate of newspapers is a hot topic for debate, partially (mostly?) because it’s a media meta-issue. But, I would claim, there are reasons such a deal could make sense…

1. Google can begin to take a much more integrated path to advertising. Already Google has begun to integrate offline media into it’s suite of products it gives out to track a site’s effectiveness… Now, if Google had an outlet to cross sell print ads and help an end user optimize advertising campaigns across T.V., the Web, and print media … well, sounds like a game changer, no? After that all that’s left are integrating radio, billboards, and maybe skywriting …

2. The New York Times is currently a content creator that distributes its own content. But does it need to be? First of all, the NY Times owns lots of different properties, so their ability to distribute is beyond one print newspaper. Indeed The New York Times itself seems to have the right thoughts as far as leveraging it’s online presence. This seems to show in their results. For example, from their annual report

The Times Company was the 10th largest presence on the Web, with 48.7 million unique visitors in December 2007, up approximately 10% from December 2006. Last year the Company generated a total of $330 million in digital revenues, up 20%, or 22% excluding the additional week in 2006. Digital revenues now account for more than 10% of our total revenues compared with 8% in 2006.

(emphasis mine).

Think about how many companies are deciding, now, whether to put advertising dollars to work with the New York Times or with Google… eliminate the decision! Now some of the $42 billion in print advertising dollars doesn’t have to lose effectiveness as circulation drops, it merely becomes more mobile. The chunk that is going to the New York Times (which has approximately $3 billion in revenue) now goes to Google (and who wants to bet it also grows in size?). Furthermore, Google can easily take a great brand and content creation machine and de-couple it from its historical outlet, namely, dead trees. Dow Jones distributes its content, the one who shall not be named generates content for distribution, so why couldn’t Google open up distribution of the New York Times’ content? It could–as a matter of fact the New York Times does this already, with the New York Times Syndicate. I could find no evidence of the syndication effort contributing significantly to the bottom line in the NYT SEC filings nor in their annual report–seems like this effort could be strengthened as well.

3. The New York Times’ ability to distribute content is a great complement to what Google already offers. Have you ever read the New York Times’ own Open, a blog dedicated to coding done inside the Times? Clearly the Times has a massive infrastructure dedicated to personalization, pushing news out into the world, and solving a number of other technological hurdles. Could Google, perhaps, add a full suite of online publishing applications to it’s Google Apps product? I bet.

4. Google owning the New York Times is good for news and journalism. When you have a deep-pocketed owner whose content distribution business focuses on turning out a quality product, it’s better than having shareholders who focus on being profitable. The problem with a newspaper is that it’s business is the newspaper business–it’s not the core business of the New York Times to sell it’s content and drive up the circulation of the papers with which it competes for subscriptions. If Google, with it’s massive online businesses, can drive it’s profit up by 10% (for one year), when added to the annual profits of the New York Times itself, the acquisition has paid for itself (assuming no premium to the market price). This certainly seems doable, given Google’s phenominal growth so far–and once the synergies begin accelerating Google’s own growth, why tinker with the paper?

So, for all these reasons, it seems like Google can jump into the content creation business the right way. With acquiring a strong web presence, getting a “hook” into other advertising avenues on a massive scale, and even adding to their core competencies, Google is uniquely positioned to modernize how the market thinks about the value of newspaper companies. Indeed, in doing all of this, Google can even advance it’s “Do no evil” motto by supporting pure journalism. All-in-all, the combination of these things seems to be a good case to be made by Google for purchasing the New York Times.

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Visit Craigslist Much? Well, Now it’ll be $5!

April 9, 2008

Henry Blodget seems to be getting a lot of flack over his valuation of Craiglist. Honestly, he engages in some logical conjecture, but it’s so assumption-laden as to be useless for too much. Let’s see what he says:

Let’s assume that, instead of charging for job ads in only 11 cities, Craigslist charged for all job ads (currently 2 million a month). Let’s assume that it also charged for another 5 million of the 30 million ads on the site each month. Let’s assume that Craigslist users were so horrified by the outrage of being charged even a de minimus listing fee that two thirds of these listers stormed off in a huff so that the 7 million of paid listings dropped to, say, 2.5 million a month. And let’s assume that Craigslist charged its standard $25 job listing fee for all of them.

(emphasis mine)

See the pitfall there? Further handwaving is done for actual valuations, but do you really think that a site like Craigslist would still be, even similiar, to its original spirit and size if you changed it from a 99% free site to a pay site? I don’t. It changes the character of the community overall.

Well, Equity Private doesn’t either. Her thoughts (from a comment she left, after I “kind of” prodded her):

You also have forgotten what CL _IS_. It’s a community in the spirit of file sharing. It has a very anti-capitalist flair. (They hate me there, no one will even buy me a drink anymore). Just look at “missed connections” section if you like. That’s about as French Existentialist as one gets. Charging to read that section but making it free to write for would STILL piss off the mournful contributors enough to cause a mass exodus. (This is a pity, because subscription revenue for the section might actually be worth something). Strip that stuff away and you’ve just got online classifieds. That’s a bust of a business for anyone else who’s tried it.

This is an awesome example of why logical numbers an seemingly severe assmuptions are a slippery slope. EP also mentions Napster. Online community? Check. From free to paid? Check. Completely failed? Check. Now, the impetus for that change was different, but still, not an unrealistic comparable. What falls out of all this? Well, EP delivers the death blow:

[Your valuation] implies a perpetual growth rate in the business of around 14.625%. (And I haven’t accounted at all for the amount of reinvestment required to maintain that growth rate- but it’s really silly to bother, it’s just not sustainable- eventually it is going to fall to about the risk-free rate… 3.5% right now if we use the 10 year treasury).

14.625% implies the already-huge CL would double in 5 years and be three times as large in 10 years! Really? I’ll take the under. Excel is dangerous sometimes…

Oh, and I suppose this is a good a time as any to bring this to people’s attention. Fascinating!