Rupert Murdoch has been grumbling Google’s usage of the Wall Street Journal’s content for its Google News product and threatening to dis-allow Google spiders on WSJ properties.  In the first few minutes of the interview above, he gives his opinion on Google and the state of his internet businesses.  It is worth a watch.

Much has been made of the traffic, and revenue losses that the Journal would incur if it voluntarily de-listed itself from Google and/or Google News.  I think that all of the analysis that I have been reading in the past week is missing the subtext of his posturing.  Murdoch’s frustration with Google goes way beyond their re-purposing of WSJ content.

First, some context: News Corporation, the parent company of the Wall Street Journal, is one of the largest media conglomerates in the world. The company’s market cap is currently about $35 billion USD. In addition to numerous newspapers, magazines, book publishers, film and TV studios and distributors, and other companies under the New Corp. umbrella, the company also runs some of the largest web sites in the world, that combine to generate tens of millions of site visits every day.

News Corp Sites in U.S. Top 100 (Alexa):
MySpace (5)
PhotoBucket (24)
Hulu (29)
Fox News (39)
Wall Street Journal (88)
IGN (93)

Of these, only Hulu (which is 45% owned by News Corp.) and Fox News do not currently participate in Google’s AdSense program to help them monetize their unsold ad inventory on their sites.  The enormous amount of ad inventory available on these sites through Google AdWords (the buy side of AdSense) implies that they lean heavily on AdSense as a revenue-generating device.  Looking at the cost of MySpace, Photobucket, and the WSJ through AdWords and subsequent revenue split with Google, News Corp. cannot be happy with with the revenue produced by Google’s platform compared with the amount of traffic that they get.

I am by no means implying that the pricing for this inventory is unfair; Google runs a continuous auction-based system to determine advertiser placement.  My point is that Murdoch is feuding with Google because AdSense isn’t able to generate the incremental revenue that News Corp. expects from these properties based on the amount of traffic that they receive.

Here is a solution for News Corp:  MySpace has a self-service advertising program called MySpace Ads.  Spend a few million making the system easier for advertisers to target their desired audiences and roll out the platform across all News Corp. properties.  That way, News Corp. has the ability to keep 100% of these ad revenues as well as cross-sell their inventory.  After a couple of years of development, they could even be in a position to offer their platform to other publishers and directly compete with AdSense.  That would make News Corp. a serious player in the internet advertising business.