Google Economist Explains Why You Won't Pay For Online News

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More dough that won't be spent on online journalism
Google economist Hal Varian gave a primer on the economists of news last night to a standing-room-only audience at Berkeley's Graduate School of Journalism. A lot of what he talked about has been said before: He showed slides of declining newspaper circulation and charts showing the tiny, 5-percent sliver that online advertising revenue represents in the total newspaper revenue pie.

But the statistics were even grimmer  than you might be expecting : Overall newspaper circulation has  been in decline since 1990, "well before the Internet," Varian noted, while newspaper circulation crossed against the nation's population has been declining since 1960;  and circulation per household has been dropping since -- wait for it -- 1945. You can't blame the Web for that.

Like many other media experts, Varian said he was skeptical that readers would or should be willing to pay for news online. (As of last week, the New York Times is banking you will.) But he provided a novel explanation for why, exactly, people won't spend money on an online product that they were willing to buy in hard copy.

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Hal Varian
Most media pundits blame newspapers for their initial decisions not to charge for content online. Once news was available for free, there was no going back, at least according to popular wisdom. That's why no one is willing to pay for online news, according to the conventional wisdom.

Varian has a more interesting explanation. He presented a slide of Google search data, in which the amount of  Google Web search activity in general was compared with amount of activity on Google news over the course of the week. 

It turns out, that compared with Web search access, Google news access goes up during the day, down in the evening, and way, way down over the weekend. This data is consistent with the results of other studies that indicate Americans still spend much more time with print newspapers than they do with news online -- one Nielsen study found that Internet users spent an average of 38 minutes total per month on newspaper sites.  "What that says to me  is that reading the news online is a worktime activity. ... Most people aren't paid to sit at a computer and read newspapers. They're snatching things throughout the day," Varian said.

Well, duh. But Varian makes a good point: People who click on a news article or a video at work as a distraction from other tasks aren't going to want to pay for it. People are willing to pay for newspapers not because they're used to paying, according to Varian, but because "It's a much nicer experience to sit there with a newspaper and a cup of coffee and have that be your leisure time activity."

To the extent that reading an actual newspaper is an activity in itself, Varian argued, people are willing to pay for it, in a way they aren't willing to pay for a couple minutes of distraction at work. So the challenge for newspapers would be to reinvent a way to make reading news  a leisure-time activity. Then -- and only then -- will readers be willing to pay for content.

This, of course, is the grand hope that motivated the journalistic excitement over the announcement of the iPad this Wednesday. If Steve Jobs could make the way people read news pleasurable enough, journalists hoped, maybe people would be willing to pay for it.

Varian's explanation sharpens this logic and suggests an interesting a work time/leisure time, won't pay/will pay divide that could be useful to mainstream newspapers as they try to save their struggling business.

As for the tension between some news agencies and Google over Google News, Varian painted a very rosy picture of the Google/newspaper interaction, noting that 35 to 40 percent of traffic is coming to news sites through search engines.

Not that ad revenue from clicks has provided the answer for news organizations so far.   


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