A Clash Across Europe Over the Value of a Click

The following is an excerpt from an article in:


The New York Times
Wednesday, October 31, 2012

A Clash Across Europe Over the Value of a Click

By ERIC PFANNER

PARIS — Google got rich by selling a simple proposition: The links it provides to other Web sites are worth a lot of money, so much that millions of advertisers are willing to pay the company billions of dollars for them.

Now some European newspaper and magazine publishers, frustrated by their inability to make more of their own money from the Web, want to reverse the equation. Google, they say, should pay them for links, because they provide the material on which the Web giant is generating all that revenue.

In several of the biggest European countries, they are close to getting their way.

A bill working its way through the German Parliament would enable publishers to collect a fee from Google and other search engines and news “aggregators” when they display excerpts from news articles alongside links to newspaper and magazine Web sites.

This week, President François Hollande of France threatened Google with similar legislation unless it came up with a way to compensate news sites by the end of the year. Last week, publishers in Italy said they would also lobby for such a law.

But Google so far is standing its ground. Already facing possible sanctions from European antitrust and privacy regulators, Google says that having to pay for links could threaten its “very existence.”

And it warned that the demand for money could backfire. If Google had to pay up, it “would consequently be forced to stop indexing the French sites,” Google wrote in a “position paper” it sent to the French government. Because 30 percent to 40 percent of the traffic on French news sites comes from Google’s links, the company’s threat is not an idle one.

Google said such laws would undermine its commitment to an open Internet and the free flow of information. It would also invert the company’s main business model. A majority of the company’s $38 billion in annual revenue comes from the sale of “sponsored links,” which appear alongside free search results. Google also sells advertisements on behalf of outside partners, including news sites, and shares revenue with them.

European publishers say their existence is even more precarious, unless they can start to generate more money from their Web sites and other digital products, like mobile applications. While advertising revenue continues to rise at Google, it has flattened out or is even falling at many European online publications.

“We effectively feed the search engine and the algorithm, constantly giving them fresh content, content that you can rely on, because it’s checked and it’s accurate,” said Nathalie Collin, the head of the I.P.G., an organization of French newspaper and magazine publishers. “This is why they can sell advertising.”

Mr. Hollande appears to agree with them. In a meeting with Eric E. Schmidt, the executive chairman of Google, at the Élysée Palace this week, the president “expressed his desire that negotiations between Google and news publishers begin rapidly and conclude by the end of the year,” his office said in a statement.

Mr. Hollande “stressed that dialogue and negotiation between partners appeared to him to be the better option, but that if necessary, a law could be implemented on this question, following the example of Germany.”