Advice for NAA and MPA: monetize Microsoft/Yahoo deal

Microsoft’s acquisition of Yahoo’s search business puts Bing in position to become a legitimate competitor to Google.  Beyond the colossal investment in technology and in acquiring Yahoo’s business, Microsoft is pouring over $90 million in advertising into the second half of the year.  In short, they are willing to spend their way to success in the search business, and newspapers and magazines are positioned to potentially play a pivotal role in this transitional period in the search industry. 

Content licensing: building a better Bing

In order for Bing to really take off, there needs to be a dramatic competitive advantage in the quality of search results.  Magazines and newspapers comprise the lion’s share of the Web’s trusted and reputable content, making them an ideal partner for Microsoft as it attempts to swipe search market share from Google.  In the push for paid content through subscriptions and micropayments, many of these companies have overlooked Bing as a potential paid content stream.

Google and the other search engines have avoided having to pay publishers for their content by leveraging fair use in their linking practices and allowing media companies to remove their content from their index.  This has put media companies in a no-win solution.  Let the engines have your content for free, or exclude your content and lose most of your traffic.  Bing could change all of that.

Here's how: If the Newspaper Association of America (NAA) and the Magazine Publishers of America (MPA) formed a consortium of their members, they could create a pool of must-have content for search engines.  They could then enter into a one-year licensing agreement with Microsoft to provide Bing with exclusive rights to their full-text articles. Google would not be locked out, but they would only be given access to summaries of articles (wall pages) and would need to leverage off-page factors (links, etc.).

What’s in it for Bing?

1. Better search results: By having access to the full content of articles while Google only has abstracts, Bing would be able to return noticeably better results for users' searches.  The problem to date with challenging Google is that competitors have only been able to provide results that were comparable to Google.  No one has come out with a product that was noticeably better.  This would be a game-changer.
2. Weakened competitor: While this deal wouldn’t cripple Google, it would absolutely diminish the quality of its results, making it more vulnerable to market share loss.
3. Affinity from users: As many of these sites are contemplating paid content models, it would be wise to include in the license the opportunity for Bing and Yahoo users to get unfettered access to content coming from Bing’s search engine (first page view only). Bing and Yahoo would be a place that users could come to and find the content they need while Google would take them to a pay wall. Publishers get the traffic from Bing referrers and can still pursue subscriptions and/or micropayments on the second page view.
4. Better metadata: With an agreement in place, media companies could submit more structured data to Bing, allowing it to create better search mashups and improve on news search, giving it a one-year head start on Google’s access to this data.

What’s in it for media companies?

1. Short-term revenue infusion: The deep pockets of Microsoft are much easier to tap into than the shrinking wallets of consumers, and this agreement would allow media companies to pursue both.
2. Long-term revenue diversification: Once the exclusive agreement is over, the consortium could license the content to all of the major search engines, creating growth for the long term as well.
3. A seat at the table: A move like this would catapult traditional media into a powerful position in the world’s fastest-growing advertising segment, search marketing.
4. Parity in search: Nobody likes a monopoly, and getting behind Bing right now creates a formidable No. 2 in the search market. Advertisers, users and media companies all win by having serious competition for the Web’s most used feature, search.

How would it work? 

Fees for new content
Microsoft would pay on a per-article basis for new content within a month, with price breaks at every 500 articles.  Let’s assume a starting price of $50 per article, with a 10% discount for each additional 500 articles.

One-time fee for archived content
Microsoft would pay a one-time fee of $0.50 for every archived article. The discrepancy is because some of this content is outdated while some remains just as good as the day it was created. Anything close to the $50 mark would make the deal unworkable to Microsoft from a cost standpoint.

Operational costs
A company would be needed to manage the content and its submission to Bing. This could be a company like Journalism Online or a search marketing company that specializes in creating XML feeds/sitemaps. They could get a percentage of the revenue or a management fee based on volume.

How much ad revenue would be lost from traffic declines?

For those considering paid content implementations, there would be no ad revenue decline because they’d likely lose traffic by gating the site's content. However, for those that plan on staying free, here’s a back of the napkin look at lost revenue. Let’s assume that Google is generating 40% of that traffic and that those page views are monetized around a $5 RPM (revenue per thousand page views).

How much revenue would it create?

I’ve put together a quick model for the top 50 newspapers (couldn’t find a definitive list for magazines). Here’s a look at the revenues gained from licensing versus the ad revenues lost from traffic. Take a look, and then let me know what you think by posting a comment below!

Source: Traffic data was taken from Compete.com.  Licensing revenue was based on the number of articles in Google News.