Local News Consumption: The Impact of Aggregators on Traditional Media

By Susan Athey and Markus Mobius

Posted on August 20, 2012


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In public debate about the impact of the internet on the news industry, one particularly contentious issue is the role of news aggregators. These are websites that do not produce much original content, but instead ‘curate’ content created by others using a combination of human editorial judgment and computer algorithms. The results are presented with a few sentences and perhaps photos from the original article: to read the full article, users can click through to the website of the original content creator.
 
‘Pure’ aggregators, such as Google News, generally do not make any payments to the original authors of the news content. Rather, they create their page by ‘crawling’ the web and then using statistical algorithms and editorial judgments to organize and rank the content. Only in a few cases does Google News have a direct commercial relationship with the outlets.
 
In contrast, websites like Yahoo! News and MSN mainly show content from contractual partners. A third kind of aggregator, exemplified by the Huffington Post, uses a hybrid strategy of curating blogs and aggregating news from other sources.
 
Why are these aggregators so controversial? Less than half of users’ views of the Google News home page result in visits to any online newspapers. Thus, users may read their news from Google News without ever generating page views or revenues for any of the content creators. Clearly, this undermines the incentives for newspapers to invest in journalism.
 
In addition, news aggregators can substitute for the home page of an online news outlet such as the New York Times. The aggregator can index not just the content of the newspaper but all other news outlets, giving it an advantage in coverage. It may then take over the ‘curation’ function that gives the New York Times its differentiation and brand advantage over other news outlets.
 
As a result, curation of news may change from being primarily driven by human judgments to being primarily driven by computer algorithms. In addition, since advertising revenues per page are typically much higher than average for the home page of a newspaper, the online newspapers can lose highly valuable page views.
 
These concerns have been articulated by several industry participants, perhaps most colorfully by Rupert Murdoch. In a speech at the Federal Trade Commission in 2009, Ariana Huffington quoted Murdoch’s various speeches referring to aggregators as ‘parasites, content kleptomaniacs, vampires, tech tapeworms in the intestines of the internet, and, of course, thieves who steal all our copyrights.’
 
At the same conference, Murdoch himself called the internet a ‘disruptive technology’, arguing that: ‘When this work is misappropriated without regard to the investment made, it destroys the economics of producing high quality content. The truth is that the ‘aggregators’ need news organizations.  Without content to transmit, all our flat-screen TVs, computers, cell phones, i-Phones and blackberries, would be blank slates... To paraphrase a famous economist – there’s no such thing as a free news story.’
 
But there is a counter-argument: rather than substituting for newspapers, aggregators may complement them. Users spend time and effort searching for news that may interest them. They will compare the expected benefits from visiting a news website to the expected costs of searching. Those costs include becoming aware of the existence of the site and finding out how to navigate it.
 
A typical user may forget about smaller niche websites, such as local news sites, or may decide that the benefits of visiting those sites do not outweigh the costs. Instead, a user may focus on ‘big-name’ sites such as CNN and the New York Times, together with a few personal favorites.
 
In these circumstances, the impact of aggregators would be to reduce the concentration of news browsing, increasing the share of news consumed on smaller outlets and decreasing the share on larger outlets. Aggregators might also allow users to become informed about the quality of a wider range of outlets, leading them to outlets that match their interests more closely. This may, in turn, increase a user’s overall news consumption as well as their consumption of news aggregators.
 
Even if some outlets benefit from an increase in traffic, outlets may also see a change in the composition of the traffic. Outlets may see more ‘casual’ users and fewer ‘loyal’ users. This could have implications for outlets’ ability to target ads (since they have more data on the preferences of loyal users) and for competition in advertising markets.
 
Our research aims to provide empirical evidence on the impact of news aggregators on news consumption. We study the effects of a ‘local news’ feature introduced by Google in France in late 2009. Our dataset is a sample of all browsing by 9.3 million computer users who use a Microsoft toolbar and have opted in to allowing their data to be used for research. Of these users, 18% meet a criteria we call ‘consistent’ users, and 2% of those consistent users use the Google News home page at least twice a month.
 
Users of the local news feature enter their zip code, and on all subsequent visits to the Google News home page, they see news from local outlets prominently featured. We compare the news consumption of users who enable this feature (‘treatment users’) to that of a set of ‘control users’ who are similar in terms of the frequency and intensity of their internet usage, consumption of local news, use of Google News and location.
 
Our first finding is that users who adopt the local news feature almost immediately increase their use of the Google News home page by more than 50%. This could be due to users getting more benefit from a page with more personalized content.
 
The adoption of Google News leads in turn to greater consumption of local news. We see a 13% increase in clicks on local outlets from the Google News home page. We also see a 5% increase in direct navigation to local outlets, bypassing Google News. This is presumably because users learn that they like these outlets and actively choose them in the future.
 
But the increase in local news consumption diminishes over time. Towards the end of our eight-week period of analysis, most of the additional local news consumption derives from increased usage of Google News.
 
Our study looks at the composition of news browsing. We see an increase of more than 12% in the number of local outlets used. In addition, treatment users visit 10% more new local outlets than control users. Thus, the local feature does seem to introduce users to new local news sources, which they continue to visit.
 
Finally, we examine the extent to which the local news feature cuts into the ‘curation’ role of newspapers. We find that the ratio of news outlet home page views to Google News home page views falls by more than 16%. Many of the incremental page views on a typical news outlet originate on Google, with users sent directly to the article, bypassing the newspaper’s profitable home page. Users may subsequently read other articles by following links they see on the same page as the original article, but their browsing may never take them to the outlet’s home page.
 
So even though our results broadly support the hypothesis that news aggregators are complements for local news outlets, it is important to emphasize that the impact is mixed overall. Our results should not be interpreted as providing evidence that news outlets are better off because of the existence of Google News. Some outlets gain more than others, users spread their consumption over a larger number of outlets and the curation role of newspapers is diminished.
 
What’s more, there are a number of longer-term threats to news outlets created by news aggregators. In particular, loss of the curation role affects the brand perception of newspapers as well as their ability to promote news not selected by Google News. The increased switching and tendency to bypass newspapers’ home pages induced by aggregators also creates challenges for generating advertising revenue.
 
In future work, we intend to explore the supply side responses of news outlets to the demand changes induced by aggregators. An understanding of how supply and demand forces interact to determine the news that is created and consumed is crucial to addressing the pressing policy issues facing the news industry.
 
This article summarizes “The Impact of News Aggregators on Internet News Consumption: The Case of Localizationby Susan Athey and Markus Mobius
 
Local News Consumption: The Impact of Aggregators on Traditional Media” is reprinted with permission from the Toulouse Network for Information Technology (TNIT) July 2012 newsletter.

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