Eric Schmidt on Google’s New Plan for the News

The upper crust of Hollywood swirled about the vestibule and dining room of Arianna Huffington’s Brentwood mansion on Friday night at a party for author Kathy Freston, and to kick off this weekend’s L.A. Times Book Festival. (More on this later.) DreamWorks’ Jeffrey Katzenberg was there in his trademark cashmere V-neck; Fox mogul Jim Gianopulos […]

The upper crust of Hollywood swirled about the vestibule and dining room of Arianna Huffington’s Brentwood mansion on Friday night at a party for author Kathy Freston, and to kick off this weekend’s L.A. Times Book Festival. (More on this later.)

DreamWorks’ Jeffrey Katzenberg was there in his trademark cashmere V-neck; Fox mogul Jim Gianopulos strolled down the block from his own house to check out the action; Universal’s Ron Meyer showed up with an entourage of women (including his wife Kelly); and ex-Viacom chief Tom Freston – husband of the feted author of a new diet and health book – rubbed elbows with UTA’s Jim Berkus and a smiling WMA (soon-to-be WME) chairman Jim Wiatt. A single suicide bomber would have ended filmed entertainment for the rest of the decade.

But the most popular guy in the room was most probably Eric Schmidt, the PhD, chairman of the board and CEO of Google, as un-Hollywood as they come, wearing a suit and round, rimless glasses. He’s also the man who rules my personal universe since the founding of TheWrap.

I seized the opportunity to ask him about his role in building the future of the news.

The crumbling world of newspapers is looking to Schmidt in the hopes of convincing him to save the New York Times by buying it, or the Washington Post, before they sink into insolvency. Google has helped destabilize the world of printed information, goes the argument, it should now step in to save it.

Schmidt is distinctly aware of the newsprint meltdown going on in an information world dominated by his company, and that this system only works as long as there is someone to report the news that his system delivers to readers.

I asked if the rumors I’d heard, that Google was changing its mind about getting involved with creating original content, were true.

No, he responded, quite convincingly, they’re not. Google is not a content company, and is not going in that direction, he explained.

But Google does have plans for a solution. In about six months, the company will roll out a system that will bring high-quality news content to users without them actively looking for it.

Under this latest iteration of advanced search, users will be automatically served the kind of news that interests them just by calling up Google’s page. The latest algorithms apply ever more sophisticated filtering – based on search words, user choices, purchases, a whole host of cues – to determine what the reader is looking for without knowing they’re looking for it.

And on this basis, Google believes it will be able to sell premium ads against premium content.

The first two news organizations to get this treatment, Schmidt said, will be the New York Times and the Washington Post.

Does the New York Times make more money from this arrangement, I asked? No, Schmidt confirmed, it won’t. But by targeting the stories that readers will want to read, it will get more hits out of the stories it has, which will drive its traffic and ultimately support higher advertising rates beside the stories.

I salute this attempt to improve the digital revenue stream for newspapers but confess that this does not seem likely to offset the fundamental imbalance between the costs incurred by the Times and the Post in gathering the news versus the revenue they are able to make in online advertising. Online advertising would have to inflate in value by something like 10 times current rates to support a large, profitable news operation.

Why doesn’t Google share the premium ad revenue against this premium content?

Personally, I think the way of the future is more in the direction of what we are trying at TheWrap: small, nimble, cost-conscious news operations oriented toward a single subject area.

I think we will see a lot of these types of organizations popping up in the next year or two; all that lost talent needs somewhere to go.

Schmidt agreed that this made sense, but observed: “Journalists say they’ll do it, but most of them don’t do it.”

He’s right about that. I’ve been approached by many colleagues and peers who say they would like to try their hand at creating a news organization. In almost every case, those inquires have melted away into something less risky — and less ambitious.

But I believe we ultimately have very little to lose by trying something daring. This is an historic period of change that we will not see again in our lifetime. It us a time of rare opportunity. Arianna Huffington, who hosted last night’s event, is there to prove the point by her success.

To my fellow journalists who find the notion daunting, I can only say: Take a single step, followed by another. I predict you will be surprised by how far you can get with that method.

As for the L.A. Times Festival of Books (which no longer has a separate book review section, sigh), we will be talking about this at a panel on Sunday at 2, where I hope you will stop by. The topic is, “Media: Where Do We Go From Here?” My fellow panelists will be Arianna, Marc Cooper and Andrew Donohue; the L.A. Times’ Jim Rainey will moderate.

I’ll also be speaking about the book as journalism at a panel at noon, together with John Powers, Dan Baum and moderator Elizabeth Taylor.

Hope to see you there.