Online advertising still king for newspapers - Google's Schmidt

Google CEO Eric Schmidt (pictured) has told newspaper bosses they should continue to rely on advertising but needed to embraced new technology to support more profitable business models, and insisted Google was there to help, not harm.

Speaking at the Newspapers Association of America convention in San Diego yesterday, Schmidt assured newspapers that advertising is still king on the internet, and subscription-based models or micropayment schemes can only account for a small amount of revenue.

However, he said these models were on their way. "I think you're going to end up with all three," he said.
Schmidt's speech came days after News Corp CEO Rupert Murdoch said newspapers must begin charging for content in order to survive.

His words also followed warnings from the Associated Press that it plans to police the web and is developing a system to track content distributed online to determine if it is being legally used.

Dean Singleton, AP chairman, said AP would actively pursue legal and legislative actions against those who were found breaching copyrights - hinting at news aggregator websites and blogs, such as the Huffington Post, and search engines like Google, which host headlines and snippets of many news articles, including AP, under terms of "fair use".

Although Google and AP signed a distribution agreement in 2007, the search engine giant has recently come under fire in the media, branded as the bane of the newspaper industry for hauling in profits from its ad-funded search results, which link to newspaper websites.

Yesterday, Schmidt called on newspapers to work together with Google to create content that would entice readers and engage web users in a deeper online experience.

Schmidt sees the future of the industry as more than just news online, but rather in user-generated and edited environments, much like Wikipedia, with real-time updates from services like Twitter, connected to users' mobile phones.

Further down the road, Schmidt sees the newspaper industry coming to resemble the television industry, with a majority of free content, balanced out with some pay-per-view content.

However, he said the environment must remain ad-funded because subscriptions and micropayment models work on scarcity, adding "the internet distribution model doesn't work on scarcity, it works on ubiquity".