Opposition To Google (GOOG) News Likely To Badly Hurt Media Companies

News Corp (NYSE:NWS) has made a great deal of the fact that Google (NASDAQ:GOOG) News gets a major benefit by running headlines from News Corp properties including The Wall Street Journal and Fox. Google does not sell advertising on its Google News pages and links on they service send millions of visitors to media outlets everyday, so it is hard to figure the News Corp objection. Rupert Murdoch, head of News Corp, wants to charge for all the content at his company’s websites, but in the meantime the Google traffic would seem to be valuable.

News Corp is working on a partnership with Microsoft (NASDAQ:MSFT) to have News Corp content indexed at its Bing search engine. Microsoft may even pay for this content, although the FT story which first brought up the potential transaction does not make that clear.

Microsoft is also apparently in discussions with other large media companies to create deals similar to the one it is discussing with News Corp.

Microsoft will have to pay content providers a substantial sum to block Google’s access to indexing and displaying their headlines. Google News is by far the largest news aggregation site on the internet and some online content sites get more than 25% of their traffic from the service. Content firms may be able to block Google’s access to their stories, but it is not clear at all that Microsoft can pay them for the lost traffic.

Any system set up by Microsoft to give a traffic platform for publishers is bound to be extremely complex. It is not at all clear how it would pay content providers and whether compensation would be based on traffic or come metric of content quality. Bing has a 9% share of the search market in the US and Google has 65%. The difference makes it impossible for Microsoft to match Google’s news traffic flow.

Many publishers are not willing to give up their Google News traffic. That may give a content company like The New York Times (NYSE:NYT) an advantage over The Wall Street Journal, if the Times keeps its relationship with Google and the traffic that comes with it and WSJ.com does not.

Google still holds the key to the online content kingdom. No content company can thrive without traffic, and the more the better.

Douglas A. McIntyre