Yesterday, the American University economics department hosted a presentation by Joan Calzada of his working paper with Richard Gil, What Do News Aggregators Do? Evidence from Google News in Spain and Germany. The paper studies the role of news aggregation, in which snippets from copyrighted news stories are reproduced on an aggregator’s website, which then provides a link to each full story on the copyright-holding newspapers’ own websites. Calzada and Gils analyzed web traffic data for newspapers’ websites in Spain before and after Google News dropped out of the country following the imposition of a link fee.
Calzada and Gils hypothesized there are two different effects a news-aggregator could have on online newspaper readership. The market expansion effect is when the aggregator directs people to the full story on the newspaper’s website who otherwise would not have navigated to the page. The substitution effect is when people who, in the absence of aggregation, would visit the newspapers’ websites to obtain news, instead obtain news by reading the headlines and snippets on the aggregator’s page. Under the substitution effect they no longer visit the newspapers’ sites.
To test for the existence of a market expansion effect, the authors used data on overall daily visits to newspaper websites in Spain. They used the same data for French and German newspaper websites as a control. Their dataset was daily traffic between June 1, 2014 and May 31, 2015, a period containing many observations before and after the December 16, 2014 shutdown of Google News in Spain. They controlled for website and time fixed effects. Calzada and Gils found a statistically significant fall in overall visits to Spain’s daily newspapers’ websites after Google News shut down. There was no significant change in the control group of French newspapers. This supports the hypothesis that news aggregators have a market-expanding effect on the digital newspaper market.
To test the substitution effect hypothesis, they analyzed data from the same time period on the sources of web traffic; including direct visits (those not referred by a search engine or through social media). If News Aggregators are acting as substitutes for news websites, than one would expect an increase in direct visits following the exit of Google News from the market. However, Calzada and Gils observe a decrease in direct visits to the newspaper websites after Google News’ exit. This finding provides no support for the hypothesis that news aggregators serve as substitutes for newspapers’ own websites.
Calzada and Gils’ full working paper – which also includes a section on the effect of Google Germany’s ‘opt-in’ policy it adopted after a lawsuit brought on by newspapers – is available here: https://ssrn.com/abstract=2837553