- Some highlights from this interview
- The economics of newspapers in the future
- The next generation of online reporters
- The downside of the new online news world
- Where's the Internet revolution headed?
Eric Schmidt, Ph.D. is the chief executive officer of Google. Before being recruited by Google founders Larry Page and Sergei Brin in 2001, Schmidt had spent 20 years at some of the biggest names in hi-tech, including Xerox's Palo Alto Research Center, Sun Microsystems and Novell. This is the edited transcript of an interview conducted on Nov. 20, 2006.
Major newspapers are under stress because of the economic changes related to the Internet, but they're a content provider to you.
We're in fact critically dependent upon the success of these newspapers. We don't write the content. We're not in the content business. ...
If newspapers are in trouble, doesn't that present you with a problem?
There's no question that we depend critically upon reporters reporting new facts, new stories, new ideas. Almost all interesting news seems to start from a reporter on a beat in a country uncovering something or reporting their observations about what they're seeing.
So from our perspective, the question is, how does the newspaper get paid for that? The Google model is a targeted advertising model, so anything that we can do where we can put advertising near or adjacent or somewhere in the area of the news should generate revenue that eventually goes back to that newspaper.
“We will end up seeing a flight to quality. Eventually people will say, 'Enough is enough; too much crap out here.' They'll want to see reputable brands emerge on the Internet.”
One of the things that Google News does is we send a lot of traffic to the Web sites of those papers, so it gives them an opportunity to, what we say, monetize those eyeballs: Literally go and take that viewer and say, "Hey, you were interested in this story on Rwanda; aren't you also interested in this story in England, and wouldn't you like to buy this product here in New Jersey?"
By monetize, you mean make money for?
Make money for it, in the same sense that today a traditional newspaper makes 25 cents from a subscription, and then they also make advertising revenue that they get from large purchases around pages and so forth and so on.
But you also have on Google your own ads and classified ads.
One of the unintended negative consequences of online advertising has been the loss of value in traditional classifieds. It's simply quicker, simply easier for an end user who's online, on a broadband connection, to look things up and to figure out what they want to buy. It's true for many companies. And it's really affected the economics of newspapers. This was a surprise to us. We figured people would use both.
No one has yet figured out a way to fill up all that money with a different source to help pay for the newspapers.
An unintended consequence that's happened to your content provider.
Right. And Google, although we've been part of the problem from their perspective, needs to be part of the solution. We've recently announced a trial with more than 50 newspapers where we're using our ad network to aggregate advertising from all around the country and feed it into their advertising systems so it augments their advertising sales force.
You bought YouTube, and with it an impending lawsuit. You also have a lawsuit from Agence France-Presse. Should you be paying more for the use of content?
In looking at all of these copyright issues, we're now convinced that these lawsuits are really lawsuits in lieu of a business negotiation.
We agree, and everybody else agrees, that copyright material should be subject to proper copyright protections in the countries in which copyright laws exist. The issue is on the margin. We believe fair use does apply to the way we're operating.
So what happens is, in place of a business negotiation, we get sued. Hopefully, in each of these cases, we'll be able to come to proper business terms and a proper license for the use of whatever content we're using.
There's a long history in the United States with something called fair use. And although the precise measurements are not available, most people agree that as long as the use is not a direct copy of the primary use, it's permitted within certain frameworks. Indeed, there's a test in copyright law as to exactly what those exceptions are.
So that allows you to rank things without revealing the whole content in the story?
An example would be that we are producing the world's largest digital library index. Think of it as the world's largest card catalog. In order to do that, we take very small amounts of a book and we use that to create an index of the book. The creation of that index, in our opinion, is a fair use. Others disagree and have sued us.
[Billionaire philanthropist] Eli Broad said he thinks newspapers should charge search companies to use their content.
He is welcome to make that proposal to us. We might find that it's better to use somebody else's content. He might find that the loss of the traffic that we send to him is a bigger cost than whatever revenue he would get by directly charging us. We have an enormous number of people who come through Google every day. We take them right to the content source; we take them right to his newspapers. And we think that's a strong advantage in our partnerships with the newspapers.
Let's talk about the changes that have been happening in the reporting world. It used to be that some major media brands were able to pay good salaries to reporters who could write almost anything and have the luxury of doing it. Unfortunately, because of the changes in the way people are doing reporting, not only has the pressure on reporters increased, but this need for instant distribution, all these new markets, has really made it very complicated for people to develop a business around online news.
The new reporters are not going to follow the traditional path. They're going to find a way to make money -- for example, blogging, which is a very difficult way of doing it. They're going to find ways of finding a new audience. They won't be as tied to the traditional newspapers.
I'm not sure this is good, but it's a fact of life that the democratization of information and publishing, which is what the Internet did, affected the concentration of power, the places that you would go and the places where you could get paid in the newspaper industry.
You said you're not sure it's good. Because?
Well, there are many problems with the emergent online news world. The single most important problem is that one of the things that newspapers always did is they had editors. Those editors were good, and they had a lot of experience, and it kept everybody in check. The brand of the newspaper, the brand of trust that was inspired by many, many years of hard work on the part of the publishers, it is much more difficult to find in the new world, in the new online world. Is this an evanescent thing? Is this going to be here for a year or two? Are they going to be here for 100 years? How important is the institution that's online that's being built? We don't know yet. …
The next stages of Google News and Google evolution are all about artificial intelligence, literally taking the content that's produced by these wonderfully valuable reporters and reading it and understanding it and figuring out how to rank it and how to organize it -- literally understanding at the computer level what you and I understand intuitively just as human beings.
That understanding will allow us to figure out what's likely to be true, what's likely to be a press release, what's likely to be wrong, and it will really make a huge difference in terms of our ability to get the right information when somebody wants to see it.
We just looked today, and Google News includes 21,000 press releases.
As long as a press release is accurately labeled as a press release, I see no problem with intermixing it in with the news, because a smart reader can say, "Hey, this is a press release."
As this explosion of information follows, you will end up seeing a flight to quality and a relatively small number of sites which become the defining sites for information. Eventually people will say, "Enough is enough; there's too much crap out here." They'll want to see reputable brands emerge on the Internet.
The fear in newsrooms is the resources will disappear to do in-depth investigative reporting, take on the larger institutions of society and fulfill the public-interest role. Would you intervene to prevent that?
Rather than purchasing one, we would probably try to figure out a way to do the best possible deal to favor the existence of such groups, because we're critically dependent upon them. It's also true that newsgathering is going through a process of consolidation. There may be fewer investigative teams around the country, and that's not a good thing. But they're not going to go away. It's too fundamental an aspect of our democracy in the United States and worldwide.
The L.A. Times, it seems, is on its way to becoming more regional; one reporter in Baghdad instead of four, etc. Worried about that?
I'm always worried about fewer voices. I don't think we're going to end up with just one voice in each of these areas. The good news is -- and this has not been discussed -- is that many other voices are being heard. While it's true that this tremendous professional-quality work is under attack, and that's not good, remember there are many new voices entering the market, and they need to be heard as well.
Many new voices?
Online reporters, bloggers, man on the street, that sort of thing, and they're now part of the whole news calculation in the world.
But they don't necessarily come with the editor you talked about, the experience, the professional journalists that are involved, and therefore people can't tell the difference, right?
It's actually much worse than that, because all of us grew up in a situation where what we read was true or as close to true as people could figure it out. Now some things that you read are literally false, and furthermore, it's becoming possible for corporations, governments and so forth to manipulate the online news. They can actually pay people to generate all sorts of falsehoods to manipulate the spin, and the spin around marketing around a presidential election can now be deployed everywhere.
We at Google are very worried about this because it leads to a lack of accuracy. It makes our goal, which is to get accuracy out there, harder, because we can't tell what's true. We can just see what's most popular, and if you repeat it often enough, maybe we'll get confused and think something that's false is really true.
So this generation of multiple voices comes with a cost, and one of them is sometimes that voice is a computer. It's somebody who's shooting many, many, many times, trying to manipulate an outcome. You can imagine, even if democracies didn't do this, surely dictatorships in the era of online and Internet access would have it in their interest to use the Internet to manipulate their citizens.
An editor says Google brings you to an article but not the front page, which might surprise you; that the educational aspect is getting lost.
One of the reasons to continue to read traditional newspapers and, for that matter, to watch traditional television news is because there's a real value in putting it all together for you.
The fact of the matter, however, is most people's interests are highly selective, and so they're cherry-picking; they're seeing this and so forth and so on. There is a loss of common knowledge and a common understanding of what's going on.
We can help there by showing as coherent a view of all the voices. You can imagine a set of sites that would eventually emerge, which look a lot like the kind of front pages that we have today, that show if you're interested in the following 12 things, here are all the things that are going on in that world.
The era of small numbers of people making programming decisions is really on its way out, given the future of the Internet. The Internet is really about individuals choosing what they want to see, and the informed end user will know that they want to see everything around it as well. Of course this can also be misused. People who are not informed, who are ideologues, can choose only to see the thing that they [see], and that's a bad thing. But the Internet is really about end-user empowerment, and it empowers both the intelligent and educated end user as well as the polemicist.
Still a difference between holding a newspaper in your hands and watching on the screen. Is Google getting involved in new delivery systems?
Google information is going to be available in essentially all of the handheld and digital devices that are emerging. For you, the most likely device on which you're going to consume information will be your mobile phone. Almost everyone has a mobile phone. People use them all the time. They have them with them. And you'll probably want to see breaking stories on your phone. You won't want to wait overnight.
But will I want to read a long article? The Web tends toward brevity, just as television influenced USA Today.
It's important to state that newspapers don't go away in this. The function of seeing a single view, it's done by some very, very sophisticated professionals, and doing it in a physical form makes a lot of sense. The fact of the matter is that those newspapers will not have as many pages because they won't have as many classifieds, and unfortunately there may be few of them. And I think that's bad.
But you haven't thought of a way to reverse, change or make that go away?
The best that we can do is to take the tremendous number of people who have used Google and send them to our content partners' sites, provide advertising solutions and other subscription services and help them try to monetize all that traffic. We think there's a tremendous growth there. As I mentioned earlier, the most important thing to remember is that a viewer that's online is not a viewer who has any material distribution cost, no printing cost. So although it has different economics, it could ultimately have very profitable economics.
Google invented a product called AdSense for content --
Google has a product which, if you are a Web site owner or a content publisher, you can actually embed our advertising in your content, and one of the things that we've been able to do is get people who are individual authors, people not affiliated with mainline organizations, to actually be paid for the content that they work. In that sense, we've spawned 10,000 Thoreaus or a million Thoreaus, or people who think that they might be a writer as talented as Thoreau.
The important point is that they're doing their passion, their voices can be heard, and they can get a moderate amount of income by virtue of our advertising solution, and in some cases a lot of income. So that's the future: people writing their content, getting advertising solutions, people coming directly to them. And it will sort itself out.
So Google believes more information and eventually more in-depth information will be available to more people?
In the best case, there will be a small number of places that we will go five years, 10 years from now, where tremendous reporting is being done; reporting is reported online -- they probably don't even have a physical presence -- and they are repositories of great investigative reporting, and people will pay for that, because people want to know accurate information. They don't want to be spun; they really want the truth. …
Let me give you some projections. There will be an infinitely overwhelming amount of information that is real news, masqueraded news, false news and just bad news. It will be very hard for people to sort out which part is real and which part [isn't]. We will develop algorithms and better and better ways of putting that all together.
Society will come to understand that just because it's written on the Internet does not mean it's true. New trust mechanisms, new ways of knowing what information is true will emerge: new brands, new leaders, new opportunities for new companies, and old companies as well, as they enter this new market.
The economics of the industry will be changed quite radically. Classifieds are unlikely to recover simply because the online version is so much more easy to use, so much more applicable. All of the auction sites and so forth and so on are just more effective. So that revenue will be replaced by other sources of revenue -- subscriptions, specialized licensing programs, targeted advertising the way Google does.
There will also be a reallocation of resources. There will be relatively fewer really deeply investigative teams, which I view as a bad thing. If you look at the economics, more and more of the reporting will be forced into this quick-action response. There won't be as much money for the high-quality, deep reporting that I think we need.
And how do you answer that?
The great new investigative reporters are probably going to emerge in completely new societies of information -- a MySpace reporter, a Facebook reporter. These kinds of communities have tremendous activity. There's a new forum, very different from what you and I grew up with, and I think we're just beginning to see the power of these communities.
You think these new reporters and in-depth reporting will generate itself out of these Web sites and new things on the Web?
There's a lot of evidence that people in college today spend relatively little time on the traditional broadcast, traditional news kind of information sources. They're spending their time getting their news from comedy, online, from their friends. There's a lot of reasons that news as a phenomenon will change, be much more social, be much more community-driven. An awful lot of that information will be seen, pursued and consumed by people who are on those communities.
[Former editor of the Los Angeles Times] Dean Baquet says he's not worried about news surviving, but in this transition period, we may be losing a whole tradition of reporters, [that it will be] difficult to build that up again. What do we do in the interim to preserve the tradition?
I'm not sure that this is an interregnum. The Internet shifts are typically one way. They typically do not give another opportunity. The change in the way the industry will be structured, the way people will make money, the way new brands will be formed are probably all permanent.
The good news is that a new generation of young reporters in high school and college today have grown up with this medium; they understand how to get their message out; they know how to investigate using the new tools.
If you think about it from an investigative reporter perspective, the tools you had 15 years ago versus the tools you have today are infinitely stronger today in terms of being able to figure out what people are saying, what they really meant. If you think about it, we at Google, over a five- or 10-year period, should be able to take statements and literally determine if they're true or, more likely, a probability if they're true. So you could imagine the first thing you would do as an investigative reporter is take what everybody says and say, "What's the probability of all this being true?"
One of the things we teach is you have to go to the original documents. It's those skills -- and an editor to tell you that's what you have to do -- that might be lost here.
It's crucial that the next generation of online reporters understand that they need to go past the information that they see on the Web. It's too easy for the information that they see on the Web to be wrong or false or manipulated or part of this endless echo chamber that we seem to be generating now over and over again in all of these different communities.
Papers like The New York Times are changing the way they write their articles and headlines to make sure they wind up on your site?
I'm not sure that's so new, because people have always used headlines to grab attention. Now they're trying to get our computer's attention.
But it is changing the way they write.
I'm not sure it's good that they're changing the way [they] write. But the important thing is we're trying to accurately rank this enormous explosion of information and provide real value to end users.
The rush of news organizations of all kinds to go on the Web, to make things more available, that's the wave of the future?
Being online is the future. Many organizations have talked and talked and talked about these changes, but the fact of the matter is the time is now. People who bet against the Internet, who think that somehow this change is just a generational shift, miss that it is a fundamental reorganizing of the power of the end user. The Internet brings tremendous tools to the end user, and that end user is going to use them. They're going to find out new information; they're going to go to every source they possibly can; and they're going to be more informed as a result of it.
Newspaper chains' financial advisers we've talked to are saying newspapers have to go super-local. But that doesn't necessarily result in quality information.
As a result of the globalization of the market, a few newspapers in this case could become global newspapers, and the people who don't quite meet that test get less and less readers, less and less traffic, and they have to specialize. They have to become local or regional or specialized in some market. Indeed in some markets, where there's very competitive newspapers -- I'm thinking of London, for example -- the newspapers have specialized around political parties, and that specialization seems to work.
You could imagine something similar occurring in the United States with respect to news gathering for televisions; that the two political parties could each have news outlets that were primarily specialized in what they were doing.
[Berkshire Hathaway chairman and billionaire investor] Warren Buffett says newspapers are an industry in decline, and he sees no reason to invest in them. They've lost their advertising base.]
I completely disagree with the assessment that the economics of newspapers won't work. The economics are different going forward because so many of the viewers will be online. It's just like people reading the newspapers; in many cases it should be possible to have more readers online than there are in printed form. And remember that the online reader doesn't have to have all those trees killed in order to produce the newspaper.
It should be possible to come up with an economic system using advertising and other forms of subscription that pays newspaper reporters more money over time, because you don't have to also pay for the newspaper, the physical newspaper print and the presses and all of that, and the distribution.
If, say, the L.A. Times is turned into a local paper, doesn't that remove a set of eyeballs looking out for the public interest?
It's true that the business problems of a particular publication could reduce the number of voices and the number of eyeballs, but remember, at the same time, thousands of other people are now looking at the same subjects, especially the ones that are highest priority. All the bloggers, all the people tracking everything, all the people with video cameras following politicians around.
But do they do newsgathering, present new information?
It's perfectly possible an infinitely brilliant single reporter could be their own publisher and editor and build their own brand as long as they could do it within what they can do within a given day.
The fact of the matter is that these newsgathering organizations do, in fact, have value. They actually provide a coherent trust, a coherent brand, a coherent sense that this [information] is probably true. So those structures are incredibly important to the future of news, whether it's Reuters or AP [Associated Press] or the Los Angeles Times or The New York Times or The Wall Street Journal, the Financial Times or any of the publications that you can imagine that are going through these transitions.
It is the newsgathering and the branding and the editing that will ultimately be used by the end users to determine whether they want to believe this or not.
Wall Street is waiting for the stocks of newspapers to really tank so they can take over and present a product that doesn't do as much in-depth reporting, has a lower overhead, presents people with what they "want" but not maybe what's in the public interest.
The people I've talked with who are doing private equity buyouts and so forth in the content industries admire the content industries because they have very stable cash flow and they're relatively out of favor in terms of valuation. But every one of those buyers has to have a strategy for getting growth back, and we believe that one of those strategies will be using these online mechanisms, the advertising that I've been talking about, to get real growth coming.
Mind telling me who these people are?
No, of course not. Yeah, we talk to all these people because they'll call us, ... and it's good to know them.
And these are potential buyers of content like the L.A. Times, the Tribune Company, or any of these things we see going on right now?
Yeah. And the reason that they call us is that they understand that we're part of their future. Remember that a buyout company does not buy an asset to take it to zero. They buy an asset at a low price in order to help restructure it to get to sell it at a higher price, which is how they make their money. And they make a lot of money when they do it.
And you see that going on in the coming years?
There's a lot of evidence that this will be occurring in many parts of the content industries, and I don't think it's a bad thing.
The only real criticism I fear I've heard is that you could become influenced, because you become the distributor.
There are a number of reasons to think that that's not going to happen. One is that it's not consistent with our mission, all right? We're trying to get all the world's information to end users.
The second thing is that the information markets will not end up with just one source, one distributor. We would like to be one of them, but we're certainly not going to be the only one.
So you think competition and access will be there?
Competition will be there, and access will be there, because the Internet is all about open access and competition. Even though Google may do very well, there will always be an alternative to what Google is doing, and people will always have the free choice, ... because there's no way for us to prevent them from exercising that choice.
That is one of the key aspects of why the Internet has been so successful. No technologies can dominate.
But governments can dominate it.
It's very difficult for governments to dominate the Internet because it's so difficult to control. People want to be free. People want to hear multiple voices. They want to make their own decisions. And people who see things will report things. …
What happens when you have a million people with video cameras in a genocide? What happens when you have a million people who are writing blogs about something that an evil government did?
If you were a dictator, and you took over some small country, the first thing you'd do is close the borders, get control of the tanks, shoot down all the television stations and prevent your populace from knowing anything going on. The Internet is completely counter to that. It's impossible, no matter how hard you try, to do a complete shutdown of that information.
Do you see the fear that the Chinese example presents? They can change what you can put online, block certain sites.
Again, without going into all of the details, the average Chinese person has all that information available to them through other mechanisms which are technologically known within China, and so the fact of the matter is that in some sense they're fighting a losing battle.
Former editors of the L.A. Times said the Internet, Google, Yahoo! are great, but how will they stand up to, say, government censorship, such as what you faced with the Chinese government?
In the United States the federal agents asked for information in a very broad subpoena. We used the American legal system and convinced a judge that that subpoena was overbroad. It was a violation of people's privacy, and it was limited to just the right information. That's the American system at work.
When we looked at China, we concluded that China, which does not have this wonderful American system, we had a choice of withholding our service or following their law, because we couldn't go violate their law. We made a decision to engage. We made a decision to spend time there, to trust [that] the individual citizen in China would see that they weren't getting all the information, and eventually they would agitate, eventually they would complain, and that eventually a more proper legal system, which would allow the open expression of information, would flourish in China.
[But] ... someone in China can't see the Tank Man photo [taken at Tiananmen Square].
The important thing to know about Google in China is that 99.9 percent of the information is available in China, and the 0.1 percent which is in fact blocked, we mark that it's blocked. If you've ever met a Chinese person, you know that that's not something that they accept. They view that as a great challenge. I'm sure that that information's getting through to Chinese citizens.
What if the Chinese government says, "We don't like what you've got on Google News or other parts of the world that affect our economy and government"?
We've decided that we will not respond positively to that pressure.