There’s no Silicon Valley in Europe.
Over the pond they take a different approach to technology development. It’s top-down versus bottom-up. Here’s a good example: Years ago the French and German governments saw Google’s astonishing global pick-up rate as a threat to national standing, so in 2005 Presidents Jacques Chirac and Gerhard Schroeder announced the Quaero project, an initiative to build a European rival to Google. Over $2 billion was committed. Hundreds of European engineers were hired. The project was scrapped in 2007, when the new German president, Angela Merkel, realized that by the time the new search engine was launched it would already be far behind in technology and market penetration.
Having failed at using taxpayer funds to build a competitor to Google, French publishers were still not done. In 2009, they persuaded President Nicolas Sarkozy to give teenagers a free one-year subscription to the newspaper of his or her choice upon turning 18. Newspaper circulation in France fell 5% that year – and poor Nick could still not score a positive headline.
At last, in 2012, fully 17 years after the Netscape public offering, Axel Springer, the largest publishing company in Europe and the most powerful in Germany, sent several senior executives to live in Silicon Valley for a year, including their head of sales and marketing and their most senior editor. Those two even had to share a room, ostensibly to get a sense of the entrepreneurial start-up experience. Someone should have told them that sharing a bed ended with Lincoln – and that the American entrepreneurial spirit is derived from our unique and interdependent mix of popular sovereignty, individual liberty and a free market. Most of all, someone should have told them that to learn how to be an entrepreneur, you need to actually become one.
But Axel Springer never did learn how to be an entrepreneur. They never learned how to create new digital products, born on the web. Like newspaper companies everywhere, they continued to hold to the conceit that their news could and should be bottled up in one place forever. So they could never come to terms with the notion of news aggregation.
In the late 90s, the very same editorial conceit killed the NewsWorx product of New Century Network, a consortium of nine of the largest newspaper companies in the United States.That’s what created the aggregation opportunity for Huffington Post, Yahoo!News and GoogleNews in the first place. If newspapers weren’t going to do it, they would.
Google has a 90% share of the search market in Europe but GoogleNews is distinct from the company’s search engine. It uses an algorithm to filter and present news tailored in both language and content to the location of the user. It has become the dominant gateway to European newspaper content. European publishers resent that. They know full well the benefit of monopoly.
So Springer did what monopolies always do. Having failed in the marketplace of ideas, the company appealed to the state for help. It championed a move by the European parliament to consider the break-up of Google. And it petitioned the German courts to try to stop Google from “stealing” its news, fighting for a new, copyright law – the Leistungsschutzrecht – to forbid Google from quoting snippets of news or displaying image thumbnails to link to them. Sure enough, Germany passed new rules permitting publishers to charge sites like Google whenever snippets of their articles are aggregated online.
But most German publishers quickly decided to abstain from the rule. Because user traffic plummeted so steeply once they were delisted, they were happy to allow Google to get back to promoting their content without having to pay. Not so in Spain.
Under a new law that comes into effect at the start of 2015, all online news aggregators will be required to pay Spanish publishers a fee for content they link to – if they don’t, they will be forced to pay a fine of up to €600,000. And in Spain, the mandated royalties cannot be waived.
So Google quickly announced the closure of its Spanish news service. It doesn’t think it’s fair to have to pay publishers to send traffic their way – traffic the publishers then convert into advertising revenue.
Today is the first day in Spain without news.google.es .Traffic to Spanish newspaper websites is already down by 15% – 20% according to one report.
Spanish publishers wanted money for nothing. They lost. They lobbied hard for the law but as a result face a catastrophic collapse in audience traffic, so now they’re trying to stop Google’s closure. The Spanish Association of Daily Newspaper Publishers (AEDE) said today that “the closure of Google News…is not equivalent to the closing of another service, given its dominant position in the market and will undoubtedly have a negative impact on Spanish citizens and businesses.” They appealed to the government and the European Union for help.
“Tener el martillo sin la una,” the Spanish say. “To have the hammer without the nail.” AEDE went to battle without thinking through the consequences. Winning in court is one thing. But publishers also have to win in the marketplace.
Like the little “Hero of Haarlem” who stuck his finger in the hole in the dyke to hold back the North Sea, European publishers keep trying to hold back the economic and market forces driving Google and the Internet. Instead of trying to hold them back, they should perhaps be learning how to ride them. Or is it too late?