Google Now Larger Than Entire US Newspaper Industry

Google Now Larger Than Entire US Newspaper Industry
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These sorts of comparisons always do depend on what it is that you decide to compare: Google certainly doesn’t employ more people than the US newspaper industry and it’s certainly worth much more in terms of corporate value. But a useful and sensible measure could be revenue and on that measure Google is now larger than the entire US newspaper industry:

This would mean that US newspapers are a $34bn (£21.6bn) industry. By contrast, Google alone recorded revenues of $37.9bn (£24.1bn) for 2011.

It’s not an entirely fair comparison, the newspapers’ revenue is almost entirely domestic (believe me, near no one outside the US reads US newspapers) and much of Google’s isn’t.

This, as the Italians would put it, Sorpasso has come about because US newspaper advertising and circulation revenues are declining while Google’s advertising revenues are rising.

However, the thing I think interesting is that it isn’t really Google that has eaten the newspapers’ lunch. It’s certainly the internet, yes, but not specifically Google.

Back in the day, only two decades ago in fact, US newspapers had three sources of revenue. For someone like the New York Times, they were of roughly (do understand, roughly) equal value to the firm. There was subscription revenue, classified advertising and display advertising.

What has gutted the economics of newspaper is not so much falling circulation, nor the falling display advertising revenues that follow that. While these are worrying, while they do spell the ultimate end of the physical newspaper industry at some point in the future, that isn’t really what is causing all the pain at present.

What is causing the pain is the way that the internet has stolen the classifieds. Everything from Craigslist, to Monster.com for job adverts, e-Bay as a way to get rid of the kids’ bikes and prams as they grow out of them, these firms and the myriads like them are what have swallowed one third or so of the newspaper industry’s traditional revenues and that’s why they’re hurting so bad.

It’s interesting to note that the US newspapers are, in economic terms, much more like the local newspapers of my native UK. That reliance on that classified ads income stream: the UK nationals haven’t really dealt with classifieds since they went national a century or so ago. And yes, the UK local newspapers are finding themselves being gutted by exactly the same firms on the ‘net taking that revenue stream. The nationals are doing quite well comparatively.

That the UK nationals are surviving (indeed, some like the Mail are thriving) shows that it is possible to run a newspaper with only the two income sources, subscriptions and display advertising. Which means that there’s quite possibly a fortune to be made in the US newspaper industry: if you can carve out one third of the cost base you should be able to deal with the loss of the classifieds income. Sure, this will only delay the inevitable, as the whole business moves online, but there is a whole lot of money to be made in sweating a business for a couple of decades even as it progresses into irrelevancy.

The big question is though, which one third of the cost base can be eliminated?

Tim Worstall | Forbes

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Preston Waters is a thinker. He's not your traditional philosophical persona, however, as he leaves no topic untouched. Covering all the bases, from business to women, Preston Waters is the ultimate man's man for Gen-Y.

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