Tearing Down the Murdoch Wall

photo by tinyfroglet

Let me see if I understand this correctly, because this whole business of newspapers charging for their content online kind of makes my brain spin diagonally in my skull. Rupert Murdoch is cutting Google out of the circulation of News Corp. headlines because somehow, he’s become convinced that the search giant is a thief, stealing all of his profits.

WTF?

Amateur math time. Working backward from Jeff Jarvis’ assertion in the video on Six Pixels (link batch below), a web-based news business has a running expenses margin of about 50%. Let’s assume a significant portion of a given newspaper’s revenue online comes from advertisements, we’ll call this amount 50%. This matches up cleanly with the running expenses, so we can assume from this that ad revenue covers everything that keeps the lights on, and the remainder – that 43% of other revenue – is what drives the growth, innovation and renewal of the business.

This means that just having the pages up and accessible is capable of driving a business and keeping it going. For a business run entirely on the web, that’s their entire operating budget, production to dissemination and maintenance. 57% of revenue, actually, which means a sustainable business. Not a growing one, but sustainable, which is more than most entrepreneurial enterprises enjoy.

So what happens when you mess with what is proven, in actual business and in models designed by people who know what they’re doing? You begin to slowly, inevitably fail.

Let’s say you remove Google, as Rupert Murdoch is doing with News Corp. What will happen to his ad revenues? Let’s say that, of the ads a given site has, 5% are impression-based, rather than click-based. Now assume that Google’s referrals account for 25% of your total page views. This alone means that (on even distribution) suddenly 1% of your total business revenues disappears. That may not sound like much, but in a company like News Corp with its current values and performance, that’s a staggering 7.1 million dollars. Just because one percent of your revenues disappeared. And then there are the clicking 8% of internet participants. I can’t even begin to filter those numbers.

Unless I’m missing a beat, it looks like Rupert’s sneezing away 7 million dollars with a few extra lines in a robots.txt file somewhere on a server or eighty. I desperately hope someone corrects me because that is some new breed of stupidity.

Someone tell me my math is way off here, please, because I feel a little ill.

Link Batch:

Side note: As I was writing this, I was watching the presentation on Six Pixels, and TweetDeck popped out a notification with a tweet FROM Jeff Jarvis. Weird, right? Thus Follows:

@IanMRountree: Definition of trippy: Seeing a tweet pop up from @jeffjarvis WHILE watching a presentation of his on @mitchjoel‘s blog! (Sat Dec 05, 22:09)
@jeffjarvis: @ianmrountree I haunt you. (Sat Dec 05, 22:15)

How does this relate? Simple: As Jarvis says in the video, the future of the web is interactivity and contribution. And FREE. The future of the web is the future of society, much as we dislike it sometimes. Let Rupert put that in his pipe and smoke it.

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