David Warsh: An order of battle for the future of print in the Age of Google

The Trump administration having declared war on the media – three of the four most important newspapers, in particular – it is prudent to construct an order of battle for the newsprint press. It’s been 15 years since I worked for a newspaper. I no longer know much about what constitutes common knowledge in their pared-down newsrooms, much less combat readiness in their front offices. But Jack Shafer, who writes the "Fourth Estate Column'' for Politico, is a close and shrewd commentator on the scene.

So I sat upright when Shafer wrote in December, ''Don’t Blame Craigslist for the Decline of Newspapers''.  The conviction that free online for-sale lists – “verticals,” in Web-speak – were a critical factor was widespread, Shafer wrote. For example, The Economist had written in 2006, “Craig Newmark has probably done more than anything to destroy newspapers’ income.”  But blaming the innovative Newmark was unfair and ahistorical, Shafer continued.

"Newspapers themselves deserve a share of it. Where they gained monopoly power, which was in most U.S. cities, daily newspapers gouged their classified customers pitilessly; they lobbied Congress heavily to block the early migration of classifieds to electronic forms. And the big newspaper chains helped destroy their own business by investing in national online classified advertising verticals, which they ultimately sold.''

It was as I feared. Newsrooms still don’t understand what happened to their centuries-old semi-monopoly on advertising. It was search-based advertising, introduced in 2002 by Google, not Craigslist, which sent newspapers into a tailspin from which they haven’t yet fully leveled off. Regaining altitude depends critically on responding effectively to the entry of this new competitor in the market for attention.

Google didn’t invent search advertising.  That honor belong to a serial entrepreneur named Bill Gross, who in February 1998 introduced the idea to an uncomprehending TED audience that a search term was inherently valuable – six months before Google incorporated. A Cal Tech graduate, Gross understood that, because it signaled intent, a search term could be priced and sold at auction to an advertiser. His GoTo.com, later known as Overture, didn’t make it big (unless you think that its eventual $1.63 billion sale to Yahoo was big), but Google did, when it introduced an improved version of the scheme it called AdWords four years later.  At that point newspapers were still expecting a full recovery from the mild recession.

The significance of search advertising to newspapers was news to me when I started writing about it, in 2011, in "A Bare Knuckles Pricing Strategy for The New York Times'' and ''A Momentous Event, Not Yet Widely Understood''.  I cobbled together my understanding from several books, the best of which remains The Search: How Google and Its Rival Rewrote the Rules of Business and Transformed Our Culture (Portfolio, 2005), by John Battelle, a founding editor of Wired. Columbia University professor Tim Wu gives the story a 10-page reprise in ''The Attention Merchants: The Epic Scramble to Get inside Our Heads'' (Knopf, 2016), though far too late in the book to be of much use to newspaper strategists.

I don’t want to go on rewriting old columns.  My point here is that newspapers themselves haven’t covered the story. Among financial sophisticates, search advertising is old news to almost everyone but newspaper readers. Here’s how Bloomberg Businessweek last month described the enormous new market in a cover story on Google’s new CFO:

''Whereas traditional advertising companies had tried to target audiences based on demographic profile, Google’s search ads could be aimed at people already interested in a particular product. Its pioneering pay-for-click pricing scheme, AdWords, meant advertisers paid only for ads that worked.  The result revolutionized media and advertising, and gave Google a revenue stream that seemed almost limitless. Googlers have a name for its ad business: 'the cash machine.'

The magazine cover was simplicity itself:

.                  Google Income Statement:

1. Revenue from online advertising

$76,062,000,000

2. Revenue from Google Glass, venture capital investments, Nest thermostats, smart contact lenses, building-size video screens, seawater-based fuel, broadband internet service, delivery drones, internet balloons, self-driving cars, quadrupedal all-terrain robots, Wi-fi kiosks, energy generating kites, the world’s most sophisticated artificial intelligence software, possible cure for death:

¯\_(ツ)_/¯

Facebook, Google’s closest search-advertising competitor, saw revenues climb to around $25 billion last year. In contrast, the four best papers probably didn’t sell $10 billion worth of advertising between them.  But if deeply reported stories about the invention and significance of search-based advertising have appeared on newspapers’ front pages, I have missed them.

Five developments have been necessary to remove newspapers from the hands of travelers, wherever they happen to be:  browsers, search engines, servers, auction technology and, of course, smart phones. But what about the body (and mind) at rest?  Research is accumulating that a significant market remains for printed newspapers, delivered to homes and offices.  As Jack Shafer wrote last summer, in ''Why Print Still Rules'':

"Print—particularly the newspaper—is an amazingly sophisticated technology for showing you what’s important, and showing you a lot of it. The newspaper has refined its user interface for more than two centuries. Incorporated into your daily newspaper’s architecture are the findings from field research conducted in thousands of newspapers over hundreds of millions of editions. Newspaper designers have created a universal grammar of headline size, typeface, place, letter spacing, white space, sections, photography, and illustration that gives readers subtle clues on what and how to read to satisfy their news needs.

''Web pages can’t convey this metadata because there’s not enough room on the screen to display it all. Even if you have two monitors on your desk, you still don’t have as much reading real estate that an open broadsheet newspaper offers. Computer fonts still lag behind their high-resolution newsprint cousins, and reading them drains mental energy. I’d argue that even the serendipity of reading in newsprint surpasses the serendipity of reading online, which was supposed to be one of the virtues of the digital world.''

And the other week, in ''Print Still Refuses to Surrender,'' Shafer concluded that English readers, at least, had spoken:  “You can pry their newspapers from their cold dead hands.” A new study, by Neil Thurman, of the City University of London, had found that 88.5 percent of the total time readers devoted to 11 national U.K. newspapers was spent on the print edition, Shafer wrote, compared to 7.5 percent on smartphones, and 4 percent on PCs. Another study, by the audit and consulting firm Deloitte, revealed that 88 percent of newspaper revenues in France, Germany, Spain and the UK still come from print editions of newspapers. Everybody knows that printed editions are doing better in Europe than in the US, but here, too, advertisers pay far more for space in newspapers than they do for fleeting online impressions, even as print-advertising revenues continue to drop – last year precipitously, it turns out,.

Here is where the story gets interesting.  Leave aside the FT, a truly global newspaper that was purchased in 2015 by the deep-pocketed Nikkei media group. (The Japanese are the ones who really love newspapers.) The three leading U.S. newspaper appear to be pursuing very different strategies with respect to print.

The New York Times publisher Arthur O. Sulzberger Jr. in 2012 hired as chief executive Mark Thompson, who oversaw the building of a highly successful Web site for the state-subsidized British Broadcasting Company. The Washington Post, is now owned by Jeffrey Bezos, the Amazon founder, who possesses an almost limitless sense of the power of the Web. Bezos’s executive editor, Martin Baron, told Madrid’s El Pais in an interview last month, “Print is not going to be around forever and it’s going to become a smaller and smaller part of what we do. I don’t know whether it’s five or ten years or something longer than that, but I do know it’s not going to be the future of our business… I wouldn’t even use the word newspaper anymore.”

That leaves The Wall Street Journal, privately owned by Rupert Murdoch’s News Corp. since 2007. The WSJ, like The Washington Post, no longer publishes its income statements, so it is hard – or at least expensive – to know how either enterprise is doing.  But of the three, The Journal seems most deeply committed to its paper editions, given Murdoch’s deep, deep roots in print. It could turn out that the NYT and Washington Post become, as did the Christian Science Monitor in 2008, all-digital operations.

Suppose, for the sake of argument, that Shafer is right – that print is in fact a vital aspect of the future of the business. That could leave Murdoch’s WSJ, along with Gannett’s USA Today, with a shared monopoly on the national newspaper business. It’s one more thing to worry about in the time of Trump.

David Warsh is proprietor of economicprincipals.com

David Warsh: Robert Bartley's malign ghost at the GOP convention

There is no point in asking Donald Trump about his economists.  It hasn’t been that been that kind of a campaign.  In May the businessman reached out to Stephen Moore, of the Heritage Foundation, and CNBC television host Lawrence Kudlow, to help cut the $10 trillion cost of the tax cuts that he had proposed. Last week Moore and lawyer-turned-restaurateur Andy Puzder gave Trump a qualified endorsement in The Wall Street Journal: “A Trump Economy Beats Clinton’s.” Mark Skousen made the libertarian case against Trump here last spring.

If there is one man beside Trump himself whose spirit will inhabit the hall in Cleveland, at least metaphorically, it is Robert L. Bartley – not because Bartley himself approved of Trump – who knows if he did? – but because, as editor of the editorial page of The Wall Street  Journal,  Bartley spearheaded the creation of the say-anything, stop-at-nothing rules that ultimately led to Trump’s success in gaining the Republican Party’s nomination.

Bartley died in 2003. After taking over the editorial page in 1972, he became the most influential administrator of the rules of American public debate in the last third of the 20th Century. In that position, Bartley began the populist revolt that has since found its apotheosis in Trump.

Most influential journalistic umpire of an age?  How do you back a claim like that? Mainly by comparison, naturally -- in this case to the career of the most influential journalist of the middle third of the 20th Century, Walter Lippmann. As it happens, thanks to Craufurd Goodwin, of Duke University, dean of U.S. historians of economics we have a first-rate biography of Lippmann that concentrates on his role as a defender of market economics (Walter Lippmann, Public Economist (Harvard, 2014), as opposed to Ronald Steel’s Walter Lippmann and the American Century (1980).

Lippmann was the child of well-to-do German-Jewish parents, attended Harvard College, worked for Woodrow Wilson during World War I, was on friendly terms from then on with Franklin Roosevelt, John Maynard Keynes and Felix Frankfurter.  Bartley was the son of a professor of veterinary medicine, attended Iowa State University, and, as editor of the WSJ (as the editorial page editor was and still is called), became a friend of Robert Mundell, of Columbia University; Albert Wohlstetter, of RAND Corp.; Edward Teller, of the University of California, at Berkeley; and President Ronald Reagan.

Bartley was 34 when he was appointed to the job. He had voted for Lyndon Johnson over Barry Goldwater in 1964, but by the time that he spent a year in Washington, in 1971, he had become conservative, and, according to former WSJ reporter Robert Novak, by then a syndicated columnist, he was ostracized by liberal reporters there as a right-wing “kook.” Upon becoming editor he built a staff that eventually totaled fifty writers and editors, creating a universe of conservative opinion parallel to the news side of the paper.  Among those he hired was Jude Wanniski, a flamboyant reporter for The National Observer, a weekly newspaper published in those days by Dow Jones.

In a level-headed appreciation in Slate, in 2003, Jack Shafer described an experience that was widely shared during the 1970s:

“[W]hat attracted me to the page when I first started reading it in 1973, fishing it out of a trash can each night as I cleaned an office building, was Bartley’s allegiance to the classical liberal values of free markets and free speech. Back then, Bartley was a minority of one among editorial-page editors in hewing to those views, tilting against the neo-Swedish worldview of The Washington Post, New York Times, and Los Angeles Times editorial pages. So if Bartley overstated his case from time to time by shouting until his vocal chords hemorrhaged and his readers lost their hearing, well, that was OK by me.

“As a small-government libertarian, I never subscribed to the Journal edit page’s supply-side orthodoxy as formulated by Jude Wanniski, which didn’t seem to care about the growth of government as long as taxes got cut. Today, nearly everybody recognizes that the marginal tax rate of 70 percent when Ronald Reagan took office was at least twice as high as it should be. Cutting it down to 28 percent proved to be both a utilitarian and an individual boon. As economist Bruce Bartlett notes, the world took notice of the American tax revolution, and many nations followed our example to excellent effect. But back in the ’70s, when Galbraithism and Heilbronerism ruled, Bartley and his scriveners were the true intellectual radicals.

Wanniski introduced Bartley to a pair of refugees from the University of Chicago, Arthur Laffer and Mundell.  By 1975, Mundell was teaching international economics at Columbia. Wanniski described a “Mundell-Laffer hypothesis,” as revolutionary and mysterious as the prescriptions of Keynes 40 years before, all the more so for being confided in a series of restaurant lunches instead of conveyed as formal models in technical papers. The ideas eventually were encoded as WSJ  editorials and dubbed ‘supply-side’ economics: massive tax cuts that would pay for themselves by spurring growth.’’

Reagan won the presidency in 1980, and Bartley won a Pulitzer Prize for editorial writing. The editorial page had become immensely powerful, and has remained so.  Bartley told an interviewer in 1981, about the time Wanniski was fired for train-station-electioneering for a supply-side insurgent candidate, “Jude had a tremendous influence over the tone and direction of the page. He taught me the power of the outrageous.” Wanniski struck out on his own as a political consultant but remained close to the page. By 1982, Vermont Royster,  Bartley’s processor as editor, had joined the critics. Novak later quoted him:   “‘When I was writing editorials,’ said Royster, ‘I was always a little bit conscious of the possibility that I might be wrong. Bartley . . . is not conscious of the possibility that he is wrong.’  Yet Bartley’s page “exerted more influence than Royster’s ever attempted,” wrote Novak.

By the end of the 1980s, Bartley had won. George H. W. Bush had succeeded Reagan as president, but the WSJ  editorial page refused to take yes for an answer.  Bartley vigorously opposed Bush’s decision to seek modest tax increases to pay for war in the Persian Gulf to expel Iraq from Kuwait.  And when Bill Clinton defeated Bush, in 1992, the editorial page began a series of attacks on Clinton and his wife that ultimately sought to overturn election results with an impeachment trial.

I can pinpoint the day the page lost me altogether. It was March 18, 1993, with a famous editorial, whose title, “No Guardrails,” has since become a WSJ battle cry. A physician who performed abortions in Florida had been ambushed and killed by a protester in Florida. The editorialist, Daniel Henninger, wrote:

“[T]here really was a time in the United States when life seemed more settled, when emotions, both private and public, didn’t seem to run so continuously at breakneck speed, splattering one ungodly tragedy after another across the evening news. How did this happen to the United States? How, in T.S. Eliot’s phrase, did so many become undone?

“We think it is possible to identify the date when the U.S., or more precisely when many people within it, began to tip off the emotional tracks. A lot of people won’t like this date, because it makes their political culture culpable for what has happened. The date is August 1968, when the Democratic National Convention found itself sharing Chicago with the street fighters of the anti-Vietnam War movement.

“The real blame here does not lie with the mobs who fought bloody battles with the hysterical Chicago police. The larger responsibility falls on the intellectuals –university professors, politicians and journalistic commentators – who said then that the acts committed by the protesters were justified or explainable. That was the beginning. After Chicago, the justifications never really stopped. America had a new culture, for political action and personal living.

“With great rhetorical firepower, books, magazines, opinion columns and editorials defended each succeeding act of defiance – against the war, against university presidents, against corporate practices, against behavior codes, against dress codes, against virtually all agents of established authority.’’

There was something downright creepy about that editorial – like the moment in The Shining when a leering Jack Nicholson, peering over her shoulder, says to his wife, who has just discovered that his manuscript, on which he has been working obsessively, is repetitive nonsense, “How do you like it so far?”  Any relatively disinterested observer who lived through the 1970s, ’80s, and ’90s knew the extent to which those years had involved a calming down from the ’60s, of the restoration of rules of civility in the political realm, a process of equilibration.

From the short-lived administration of Gerald Ford to the zero-based budgeting and deregulation under Jimmy Carter, from disinflation under Paul Volcker to tax simplification and Social Security stabilization under Ronald Reagan, the signal events of those years constituted a retreat from the excesses of the ‘60s and a celebration of traditional values of order, credibility, ambition, and achievement. The one sphere in which pressure had continued from the Left was expansion of civil rights — of women, minorities, immigrants, gays, and specifically the rights of women to obtain abortions.  Which was, of course, exactly what the writer had in mind.

Shafer described the scorched-earth policies of those years:

“As many of Bartley’s ideas gained ascendancy, his page became shriller, unable to give Clinton proper credit for getting control of spending. There’s a thin line between hard-hitting opinion journalism and character assassination, a line that Bartley frequently erased. Instead of serving as a sophisticated and credible spokespage for classical liberalism—like The Economist—his page descended all too often into the dishonesty and hackery one associates with politicians.’’

By 2001, Bartley was ill.   He stepped down and began writing an occasional column.  The 9/11 destruction of the World Trade Center temporarily forced the WSJ from its offices around the corner. The editorial page soon began a relentless campaign for the invasion of Afghanistan and Iraq. Bartley died in December 2003, a week after receiving the Presidential Medal of Freedom.

I hope that Bartley will find as wise and good-natured a biographer as did Lippmann in Goodwin.  The rise of paleo-conservatives has been the subject of at least one good book, George Nash’s The Conservative Intellectual Movement in America since 1945 (1976), and is soon to have another, a long-awaited biography of William F. Buckley, by Sam Tanenhaus.  Peter Steinfels and Jacob Heilbrunn, have chronicled the rise of the neoconservatives: The Neoconservatives: The Men who are Changing America’s Politics (1979) and They Knew They Were Right: The Rise of the Neocons (2008). Populist conservatives were the subject of Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations (1994), by Paul Krugman.  If paleo-con Buckley’s National Review provided the starting place for the careers of George Will and Garry Wills; if neo-con Irving Kristol’s influence extended to Allan Bloom, Francis Fukuyama, and Dinesh d’Souza (and influenced the views of broadcast journalists such as John McLaughlin, Rush Limbaugh, and Glen Beck); then Bartley can be said to have furthered the careers of Wanniski, Michael Novak, George Gilder and Amity Shlaes. There’s plenty of material to work with there.

Is it fair to blame the chaos surrounding this year’s Republican nomination on Bob Bartley? Clearly I think so. No one in my lifetime systematically removed more of those guardrails, the norms governing good-faith political and economic discourse, than he. Trump is the downside of 40 years of WSJ ed page comment too often just like his: outrageous, sulfurous, and, all too often, half-baked.  Bartley is dead; long live Bartley: in his absence, the page was completely unable to steer the nomination toward a more viable candidate this year. The best that can be said is that its editorialists helped keep it away from Sen. Ted Cruz.

Paul Gigot, who succeeded Bartley in 2001, has steered a steady course, admitting more diverse opinion to its op-ed pages, coping with increasing disunity among the -cons mainly by proliferating columnists. Lee Lescaze, whom the WSJ hired from The Washington Post in 1989 and who founded its Weekend section, laid the foundation for a humane and sophisticated new wing of the paper before he died, in 1996.

Rupert Murdoch bought the paper from Dow Jones heirs in 2007. His sons, James and Lachlan, have their work cut out for them. Sometime in the next few years they must replace Gigot, 61, with an editor capable of restoring credible focus to a page that has become alternately ideological and diffuse. The decision of The New York Times in March to replace Andrew Rosenthal with James Bennett, hired back from The Atlantic, can only increase the pressure.

Two great heroes of the Republican Party in living memory were Dwight Eisenhower and Ronald Reagan. To lionize Reagan is not enough. Until the similarities of roles of both are understood, the Republican Party is not going to regain the White House.

David Warsh is proprietor of economicprincipals.com and a longtime financial journalist and economic historian. He, like the overseer of New England Diary, Robert Whitcomb, worked for The Wall Street Journal in the 1970s.