There are numerous cases throughout history where people got it wrong. Very wrong. Take for example Michael Dell. At the Gartner Symposium on Oct. 6, 1997, the founder of Dell Inc. was asked what he would do with a struggling Apple Computer. Dell infamously said, “I would shut it down and give the money back to the shareholders.”
Then there’s Elon Musk and his brother, Kimbal. In 1995, they were pitching their startup, Zip2, which made business directory data searchable and mapped it so users could get directions to businesses. “I remember talking to the head of the [company] that owned the Yellow Pages [in Canada],” Kimbal said on the Third Row Tesla podcast. “We said, ‘We want to partner with you. Let’s be one of your partners to put the Yellow Pages online.’ And [the executive] picked up the Yellow Pages — this book, this big, thick book full of ads, this multibillion-dollar risk industry — and threw it at me and said, ‘You ever think you’re going to replace this?’” That response was typical at the time, because most businesses, as Elon Musk pointed out on the same podcast, didn’t know what the Internet was.
Ironically, it was newspaper publishers — including The New York Times, Knight Ridder and Hearst Corp. — who not only partnered with Zip2 but together invested a total of $50 million in the business. In 1999, Elon Musk and Kimbal Musk sold Zip2 to Compaq for roughly $300 million, and Elon Musk used that money on a second start-up, X.com, which later became PayPal. In 2002, eBay purchased PayPal for $1.5 billion, which led to Tesla and SpaceX.
While the Internet was very, very good to Elon Musk, it has not been kind to those very newspaper companies that endowed his now thriving career and led to a personal net worth of more than $36 billion. In fact, that $50 million investment in Zip2 symbolizes the naïveté with which newspaper publishers approached the Internet — and their complete lack of prescience that it would eventually bring them to their knees.
A CASH COW CALLED GOOGLE
I was the lifestyle editor for a startup called LookSmart in the late nineties when our manager asked us to use a new search engine called Google rather than the bloated, inefficient Yahoo. Not only was Google more direct, it was cleaner and easier to navigate — not clogged with messy, misleading ads. Gradually articles from major newspapers made their way to Google’s pages, and the classic, “Why buy the cow when you get the milk for free” mentality about content irreversibly set in. By 2007, our own San Francisco Chronicle was losing a million bucks a week. That summer they laid off 80 reporters, photographers and nearly all their copy editors. Some would argue, including this editor, that the quality of the reporting never recovered.
Other dailies around the country followed suit, laying off staff and playing catchup online. They were able to pay online reporters less money, but you get what you pay for. Online content is often subpar, hurried, less reliable, and rife with typos and grammatical errors, but that hasn’t stopped the print carnage: Between January 2017 and April 2018, 36 percent of the largest newspapers in the United States experienced layoffs.
Then came social media, led by morally challenged behemoth Facebook. Like Google, they had no problem getting the milk for free, but they also allowed an absurd amount of fake news to barge into users’ timelines. A 2017 study from scientists at Princeton and Dartmouth found that one in four Americans visited a fake news website from Oct. 7 to Nov. 14, 2016, and 22 percent were funneled via Facebook. Despite the fact that fake news, privacy problems, and data scandals have plagued the company, money continues to pour in from investors and advertisers. While newspapers were experiencing mass layoffs in 2017, Facebook had profit of $16 billion on nearly $41 billion in revenue.
THE CORONACRISIS EFFECT
When the coronavirus hit and California Gov. Gavin Newsom issued a stay-at-home order, some local tech companies were adversely affected. Yelp, for example, saw its traffic evaporate, and in April they laid off and furloughed a total of 2,100 workers. But Google and Facebook have escaped relatively unscathed with most of their advertising billions intact (and, in fact, Google, along with Apple, is actually hiring).
Newspapers, still reeling from years of lost revenue, weren’t so lucky. Even as media consumption skyrocketed due to the Covid-19 outbreak, publishers were struggling to hold on as advertisers pared back their spending. Hundreds of journalists have been laid off or furloughed, with more bad news expected in the coming months. Poynter.org keeps a running tally and it’s dire: As of mid-April, some 33,000 media workers in the United States were affected by layoffs, furloughs, or pay cuts.
Closer to home, SF Weekly stopped production and the San Francisco Examiner is being produced by a smaller staff with reduced hours. Both publications are owned by San Francisco Media Co., and despite assurances from the company’s editor in chief Deborah Petersen that “The Examiner is being published in print as usual” you would be hard pressed to find a copy. Of course, it’s no secret the Examiner and the Weekly were struggling before Covid-19. Rumors swirled more than a year ago about the Weekly shutting down. The Examiner’s circulation was dwindling when the Hearst Corp. sold it in 2000 and has continued to shrink through four additional ownership changes. Still, at a time when journalism is needed more than ever, this is bad news, not only for furloughed reporters, but for readers looking for reliable, daily coverage of the pandemic.
WHO WILL SAVE NEWSPAPERS?
Now, in perhaps their darkest hour, newspaper publishers need someone to invest in them the way they did in Elon Musk. So where is he to return the favor? Busy sending the wrong ventilators to California hospitals.
Facebook, after facing criticism for the role it played in the demise of print journalism, said it would donate $100 million to support news organizations during the Covid-19 pandemic — an incredibly small amount considering they brought in over $21 billion in revenue last quarter, mostly from advertisers who once put their money into newspapers. Google, with a total net revenue projected to be in the $127 billion range after taking the “hit” from coronavirus-related advertising losses, followed Facebook, saying it will also help but offering no specific amount.
Frankly, Elon Musk should step up, and while Facebook and Google are at least making an effort, it’s the least they can do. Without the work of professional journalists, both companies would see their products descend even further into the cesspool of fake news and bots. While you can’t put all the blame for flailing newsrooms on the advent of the Internet, you can put most of it squarely on the shoulders of Facebook and Google. For years they have disrespected hardworking reporters by pilfering their original work and refusing to pay for it. Just because they made billions getting the milk for free doesn’t mean they shouldn’t make it right now and buy the cow — especially in the face of a pandemic that may finish what they started.
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