Google begins hosting news on its site

SAN FRANCISCO - Internet search leader Google Inc. on Friday began hosting material produced by The Associated Press and three other news services on its own Web site instead of only sending readers to other destinations.
The change affects hundreds of stories and photographs distributed each day by the AP, Agence France-Presse, The Press Association in the United Kingdom and The Canadian Press. It could diminish Internet traffic to other media sites where those stories and photos are also found — a development that could reduce the online advertising revenue of newspapers and broadcasters.

Google negotiated licensing deals with the AP and French news agency during the past two years after the services raised concerns about whether the search engine had been infringing on their copyrights. The Mountain View-based company also reached licensing agreements with The Press Association and The Canadian Press during the same period.

Financial terms of those deals haven't been disclosed.

The new approach doesn't change the look of Google News or affect the way the section treats material produced by other media..

Although Google already had bought the right to display content produced by all four news services, the search engine's news section had continued to link to other Web sites to read the stories and look at the photographs.

That helped drive more online traffic to newspapers and broadcasters who pay annual fees to help finance the AP, a 161-year-old cooperative owned by news organizations.

Now, Google visitors interested in reading an AP story will remain on Google's Web site unless they click on a link that enables them to read the same story elsewhere. Google doesn't have any immediate plans to run ads alongside the news hosted on its site.

Although the change might not even be noticed by many Google users, the decision to corral the content from the AP and other news services may irritate publishers and broadcasters if the move results in less traffic for them and more for Internet's most powerful company.

A diminished audience would likely translate into less online revenue, compounding the financial headaches of long-established media already scrambling to make up for the money that has been lost as more advertisers shift their spending to the Internet.

Google has been the trend's biggest beneficiary because it runs the Internet's largest advertising network. In the first half of this year, the 9-year-old company earned $1.9 billion on revenue of $7.5 billion.

Despite Google's dominance in search, its news section lags behind several other rivals. In July, Google News attracted 9.6 million visitors compared with Yahoo News' industry-leading audience of 33.8 million, according to comScore Media Metrix.

Yahoo Inc., along with other major Web sites such as Microsoft Corp.'s MSN and Time Warner Inc.'s AOL, have been featuring AP material for years.

Under its new approach, Google reasons readers won't have to pore through search results listing the same story posted on different sites. That should in turn make it easier to discover other news stories at other Web sites that might previously have been buried, said Josh Cohen, the business product manager for Google News.

"This may result in certain publishers losing traffic for their news wire stories, but it will allow more room for their original content," Cohen said.

Vlae Kershner, news director for the San Francisco Chronicle's Web site, backed up that theory, saying Google News mostly refers readers interested in the newspaper's staff-written stories. "This is going to have a very minimal impact on our traffic," he said.

Referrals from Google News accounted for 2.2 percent of the traffic at newspaper Web sites during the week ending Aug. 25, according to the research firm Hitwise.

Caroline Little, chief executive and publisher of Washingtonpost.Newsweek Interactive, said she worries about anything that might erode her site's advertising revenue. "That's how we make money," she said. "We will be watching this carefully."

For its part, the AP intends to work with Google to ensure readers find their way to breaking news stories on its members' Web sites, said Jane Seagrave, the AP's vice president of new media markets.

In recognition of the challenges facing the media, the AP froze its basic rates for member newspapers and broadcasters this year and already has committed to keeping fees at the same level next year.

That concession has intensified the pressure on AP to plumb new revenue channels by selling its content to so-called "commercial" customers on the Web. Those efforts helped the not-for-profit AP boost its revenue by 4 percent last year to $680 million.

"AP relies on its commercial agreements to help pay the enormous costs of covering breaking news around the world, ranging from deadly hurricanes and tsunamis to conflicts like the war in Iraq," Seagrave said.

--By MICHAEL LIEDTKE,
AP Business Writer Fri Aug 31, 5:22 PM ET