The Study Claiming Google Made $4.7 Billion From News Is Incredibly Flimsy

In the eyes of a lot of journalists and media executives, Google and Facebook are essentially two large and profitable parasites, feeding off the hard, much less profitable work of the news industry. Both companies send a large amount of readers to sites like, say, Slate, but don’t have to pay for the journalism that draws those readers in to begin with. More importantly, Facebook and Google have devoured most of the digital advertising market—combined, they control 59 percent of it—starving a lot of outlets in the process. Because companies can buy targeted ads on a Google search page, they have much less incentive to pay for banner ads on the websites of mid-size metro papers.

The News Industry Alliance, a lobbying group, has an idea for addressing this market imbalance. It is urging Congress to give media companies an antitrust exemption that would let them band together and collectively bargain with the tech giants for a share of their news-driven profits. To back this idea, it produced a study, which was covered by the New York Times this weekend, claiming that Google alone generates about $4.7 billion worth of revenue from news searches alone.

It’s a stunningly flimsy conclusion. The group arrives at its headline figure with little more than a back-of-the-envelope scribble based mostly on a number one-time Google exec Marissa Mayer mentioned offhandedly during a lunch in 2008. As much as I, a journalist who cares about journalism, want the big tech problem addressed, this effort is so amateurish that I’m guessing it will probably do more harm than good for the industry’s cause.

At its heart, Google’s main business model is pretty simple: When people use Google to search for something, the company serves them ads related to that topic. If people click said ads, Google gets paid. The more ads people click, the more money it makes.

Google does not actually run any ads against its Google News app, which means they don’t directly monetize it, and if you use its regular search bar to look up the news of the day, there’s a good chance you won’t get much if any advertising either. A search for “Elizabeth Warren” on Monday only brought up one ad, directing me to her official campaign website; a search for “Robert Mueller” brought up zilch (no, not even a single “It’s Mueller Time” T-shirt). When I searched for “computer science degree,” on the other hand, I got four ads for various boot camps and online degrees. This all illustrates a pretty basic reality of Google’s business, which is that it tends to earn money when people use it to search for things advertisers are selling.

Still, all of those news readers are presumably worth something to the company. Back in 2008, Mayer, who was then a Google vice president, told a lunch crowd attending a Fortune conference that Google News was worth about $100 million to the company, basically because it got more people to use the company’s main search engine instead of, you know, Yahoo’s. Here’s how Fortune described her comments:

Google vice president Marissa Mayer, who heads search products and user experience, threw out during a Tuesday lunch session at Fortune’s Brainstorm Tech conference in Half Moon Bay, Calif. How does she put a value on a product that doesn’t directly make money? The online giant figures that Google News funnels readers over to the main Google search engine, where they do searches that do produce ads. And that’s a nice business. Think of Google News as a $100 million search referral machine.

Based on Fortune’s reporting, it is unclear whether there was anything behind this number, other than Google executives’ pure gut intuition. Nonetheless, the News Industry Alliance uses it as almost the entire basis of its analysis.

Here’s how the Alliance does the math:

• First, they note that $100 million amounted to about 0.7 percent of Google’s total revenue in 2008. They then assume, without much evidence,¹ that it is responsible for an equal share of the company’s revenue today.

•Second, they attempt to estimate how much revenue Google gets from news-related searches on its main site. They do so by multiplying 0.7, a number they functionally pulled from nowhere, by six. Why six? Because publishers say they get six times more traffic referrals from normal Google searches than from the news app. This leads them to conclude that people typing “Mueller report” and such into the Google search bar is worth 4.2 percent of the company’s revenue.

•Third, they do some addition: 4.2% + 0.7% = 4.9%. Multiply that by $96 billion in revenue, and you get a grand total $4.7 billion.

Not one bit of this is remotely credible. The fact that Marissa Mayer said during a lunch more than 10 years ago that Google News was worth roughly 0.7 percent of the company’s revenue does not have much bearing on what it is worth to Google today. The fact that publishers get six times more traffic from regular Google search than from the news app does not have much bearing on how valuable that traffic is to Google.

What’s a bit infuriating about all of this is that Google probably does benefit in significant ways from being a major news destination, and at this point, there’s an argument to be made for making it share some of those rewards with media organizations. It just may not be possible to quantify that benefit right now, at least without a lot of internal data from the company. Trying to paper over that reality by pushing out an easily debunkable stat makes it look like the news industry is grasping at straws in its argument. It makes its very real concerns about Silicon Valley less credible and easier to dismiss.