The debate over whether Google’s excerpting content on its search result pages is a violation of copyright law, i.e. whether Google is effectively stealing content, overlooks the much more valuable asset that Google is appropriating. Google makes money less by its ability to display that snipet of content and much more by its ability to know that snipet of content is relevant to what the content consumer is looking for — it makes money by its ability to efficiently distribute that content.

Following similar commentary by Nicholas Carr, Scott Karp analyses the economic logic of Google, and why it’s not a friend of other endangered media.

Scott Karp:

“Google isn’t stealing content from newspapers and other media companies. It’s stealing their control over distribution, which has always been the engine of profits in media. Google makes more money than any other media company on the web because it has near monopoly control over content distribution (i.e. like a metro newspaper in the pre web era).

Those who argue that Google is a friend to content owners because it sends them traffic overlook the basic law of supply and demand. The value of “traffic” is entirely relative. The more content there is on the web, the less value that content has — because of the surfeit of ad inventory and abundance of free alternatives to paid content — and thus the less value “traffic” has.

The more content there is on the web, the less money every content creator makes, and the more money Google makes by taking a piece of that transaction.”

And how does it do that: through the links that everybody else graciously provides:

“The greatest irony of the web content economy is that Google by itself doesn’t have a clue what content is good or bad. Google is able to deliver relevant search results only because every site on the web helps them figure it out.

Google’s algorithm is based on reading “links” as votes for content. Every time a website links to another website, Google reads that link as a vote. The brilliance of the Google algorithm is its ability to figure out which votes should count more.

But without those links, without those “votes,” Google has nothing.

What Google “steals” from every website isn’t the content — it’s the links.

It’s the links, stupid. And everyone gives Google their links to read — for free!!

Google doesn’t really need your content, because there’s plenty more where it came from. What Google really needs is your links, i.e. your votes for content — it needs your help separating the wheat from the chaff on the web.”

There is a strategic lesson in there for other media companies:

“If media companies want to compete with Google, they need to look at the source of its power — judging good content, which enables Google to be the most efficient and effective distributor of content. They also need to look at Google’s fundamental limitation — its judgment is dependent on OTHER people expressing their judgment of content in the form of links. Above all, they need to look at sources of content judgment that Google currently can’t access, because they are not yet expressed as links on the web.”

Scott Karp of Publishing 2.0 concludes:

The balance of power on the web can shift — but only by understanding what the real sources of power are.