LONDON–In a move that could help improve relations between Google Inc. and the media industry, the Internet search company is offering publishers a way to build more solid "pay walls" around their online stories while still appearing in search results.
In an official blog post Tuesday, Google said it will let publishers limit the number of restricted articles that readers can get for free through its search engine.
The change could remove one significant hurdle publishers face as they contemplate charging readers online. Many newspapers are considering such fees because online advertising on free sites hasn't offset the precipitous decline in print ad revenue that has come with the recession and competition from the Web.
The Wall Street Journal is perhaps the best example of how the new tool could help.
The newspaper charges for access to most articles on its Web site, but its pay wall is "leaky." Readers can grab the first sentence from a preview of the story, punch it in to Google and access the full story in the search results.
The Journal could simply block Google from indexing its stories, but that would cut traffic to its site significantly. Less traffic means less ad revenue.
The problem has infuriated executives at News Corp., which owns the Journal.
News Corp. Chairman Rupert Murdoch told a conference organized by the U.S. Federal Trade Commission on Tuesday that media companies should charge for content and stop news aggregators such as Google from "feeding off the hard-earned efforts and investments of others.''
The change to Google's "First Click Free" program would allow publishers to limit the number of paid articles a reader could access through its search engine to five per day.
That could assuage the anger of media titans like Murdoch, allowing news outlets to stay relevant by appearing in search results while still trying to wring fees from readers.
A News Corp. spokesman declined comment Wednesday.
In Google's blog post, Josh Cohen, senior business product manager, stressed that publishers and Google could coexist.
"After all, whether you're offering your content for free or selling it, it's crucial that people find it." he said. "Google can help with that.''
Cohen said that Google will also begin indexing and treating as “free" any preview pages – usually the headline and first few paragraphs of a story – from subscription Web sites. People using Google would then see the same content that would be shown free to a user of the media site. The stories would be labeled as “subscription" in Google News.
"The ranking of these articles will be subject to the same criteria as all sites in Google, whether paid or free," Cohen said. "Paid content may not do as well as free options, but that is not a decision we make based on whether or not it's free. It's simply based on the popularity of the content with users and other sites that link to it.''
Gulf markets dropped again on Tuesday, taking little comfort from Dubai World’s plan to restructure about $26 billion of debt and despite reassurances on economic resilience from the rulers of Abu Dhabi and Dubai.
Dubai stocks fell a further 5.6 percent and the Abu Dhabi bourse lost 3.6 percent on their second trading day since Dubai last week asked creditors of Dubai World and its property arm Nakheel for a six-month delay on debt repayments. Qatar’s bourse was also more than 8 percent lower.
State-controlled Dubai World, which led the emirate’s transformation into a regional hub for finance, investment and tourism, unveiled details late on Monday of the restructuring and which parts of its empire were affected. The process will focus on $26 billion of debt owed by its main property firms, Nakheel and Limitless.
Dubai World said it had appointed Moelis & Co, the investment bank created by former UBS president Ken Moelis, to advise on the restructuring while Rothschild would continue to be its investment adviser.
Global markets took a pounding when news broke last week that Dubai World was unable to pay its debts, although on Tuesday, Asian and European stocks were up, following the lead from Wall Street overnight as fears of contagion eased.
Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum, who is also the United Arab Emirates’ vice president, prime minister and defense minister, said the global reaction had shown “a lack of understanding.”
“We have the determination and will power to face all challenges, including the ill-intentioned media challenges,” Sheikh Mohammed said, according to a statement from his office.
John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh, said the Dubai ruler’s remarks “although very broad, should be welcomed by global markets at a time when they are thirsty for clarity, reassurance and information.”
Sheikh Khalifa bin Zayed al-Nahayan, president of the UAE and ruler of Abu Dhabi, said the UAE economy was showing signs of gradual growth in the fourth quarter.
Dubai’s troubles could shift political power in the UAE, a seven-emirate federation celebrating 38 years of unity on Wednesday, toward oil-producing Abu Dhabi and away from its exuberant neighbor.
The Dubai World group, whose total liabilities are estimated at nearly $60 billion, said the restructuring would exclude “financially stable” units such as Infinity World Holding, Istithmar World and Ports & Free Zone World, which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone.
Dubai World would look at options for cutting its debt, including asset sales, it added.
But the group may not be able to keep revenue-generating assets such as port operator DP World and Istithmar’s 2.7 percent stake in Standard Chartered, while selling its battered property firms.
“I don’t think they’re in a position to choose,” Khuram Maqsood, managing director of Emirates Capital and a former director at Istithmar.
“Dubai World desperately needs cash. Everything is for sale. I don’t think anything is sacred in the current environment.”
The yen’s surge to a 14-year high and renewed deflation may prompt Japanese Prime Minister Yukio Hatoyama to press the central bank to take further steps to support growth.
Hatoyama, 62, will meet Bank of Japan Governor Masaaki Shirakawa “soon,” Chief Cabinet Secretary Hirofumi Hirano told reporters yesterday. Hirano said the leaders will discuss quantitative easing policies in addition to falling prices and the stronger currency.
The government has stepped up calls on the central bank to prop up growth since it declared the economy was in deflation on Nov. 20. Shirakawa, who yesterday pledged to act “promptly and decisively,” has few options given that the key overnight lending rate is at 0.1 percent and the bank is already purchasing government bonds and corporate debt.
“We’re not in a situation where the BOJ will act just because the government is pressuring it to,” said Junko Nishioka, a chief economist at RBS Securities Japan Ltd. in Tokyo. “There’s an election next year, so the government wants to show how much it has already done.”
Nishioka said she didn’t expect any policies to be announced from the central bank after this week’s meeting with Hatoyama, given that it’s common for policy makers to meet and discuss the economy and financial markets.
Deflation can undermine economic growth by making debt burdens heavier, eroding corporate profit margins and deterring capital investment and consumer spending. Japanese prices excluding fresh food slid 2.2 percent in October from a year earlier, a near record drop, and the government’s declaration of deflation was its first in more than three years.
‘Promptly and Decisively’
“The bank is always prepared to act promptly and decisively if judged necessary to ensure the stability of financial markets,” Shirakawa said yesterday in Nagoya, central Japan. “The bank will do its utmost to overcome deflation both in terms of monetary easing and ensuring the stability of the financial markets.”
Reports yesterday showed Japan’s recovery from its worst postwar recession may be weakening. Industrial output grew at the slowest pace in eight months in October as manufacturers including Toyota Motor Corp. pared production at home. Wages tumbled 1.7 percent, extending their longest losing streak in six years.
Hatoyama championed the Bank of Japan’s independence after he took power in September following his Democratic Party of Japan’s landslide August election victory. Hirano reiterated yesterday that the government respects the bank’s autonomy.
Testing BOJ
Other Cabinet members haven’t been shy in testing the central bank. Deputy Prime Minister Naoto Kan said on TV Asahi last week that he’d “like to see monetary policy work just a little harder” to battle deflation. Financial Services Minister Shizuka Kamei said in October that the bank “sometimes sounds like it’s talking in its sleep.”
“Hatoyama’s Cabinet seems to think that the BOJ isn’t playing a big enough role in fighting deflation,” said Susumu Kato, an economist in Tokyo at Calyon Securities. “The government may ask the BOJ to increase the amount of its government bond purchases” to around 2 trillion yen ($23 billion) a month from 1.8 trillion yen, Kato said.
The government may be looking for monetary policy measures to combat prices and the yen because it has the highest debt burden in the industrialized world, limiting the scope of fiscal policy. Nevertheless, Finance Minister Hirohisa Fujii said yesterday that he is compiling an extra budget of more than 2.7 trillion yen, the amount of money frozen from the previous administration’s budget, to spur growth.
Quantitative Easing
The BOJ introduced quantitative easing steps in March 2001 before suspending those policies in March 2006. Shirakawa has said the policy of flooding the economy with cash had a limited impact on economic growth.
Hatoyama and Shirakawa are also likely to discuss the yen, which rose to a 14-month high of 84.83 to the dollar on Nov. 27, setting off a chorus of complaints from Japanese manufacturers. Canon Chief Executive Officer Fujio Mitarai said Japan is “standing on the edge of a cliff.”
Shirakawa said yesterday the government will decide whether to intervene, adding that the central bank will “closely watch these developments and their effects with great interest.”
Canon Inc. would lose 4.4 billion yen in sales and 2.5 billion yen in operating profit this quarter for every 1 yen drop in the dollar compared with its forecast of 90 yen, the company said on Oct. 27.
Japan last intervened in the currency market in March 2004, when the yen traded around 109 per dollar. The central bank sold 14.8 trillion yen in the first three months of that year.
“We’re paying close attention to whether the BOJ will go along with intervening in the market,” said Shinichi Ichikawa, chief market strategist at Credit Suisse Securities Japan. “Intervention would stop the bleeding for now, so it’s important.”
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