Google To Pay Media Outlets $1B For News Content

Google said that it will pay selected publishers $1 billion – its biggest investment to date – for news content, bowing to regulatory pressure that the search engine giant has been unfairly using content for years.

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Google (GOOGL) said it will pay publishers to create and curate high-quality content on Google News Showcase. The new product, which is made up of branded story panels that will appear initially in Google News on Android, launched on Thursday in Brazil and Germany. It will also be made available soon on Google News on iOS, and will come to Google Discover and Search in the future, the search engine giant said in a statement. The panels will also have links directly connecting to the news publisher’s website.

Google disclosed that 200 leading publications across Germany, Brazil, Argentina, Canada, the U.K. and Australia have already signed up for News Showcase.

“The number of news publications will grow as we work to expand News Showcase to other countries including India, Belgium and the Netherlands,” Google CEO Sundar Pichai said in a blog post. “This approach is distinct from our other news products because it leans on the editorial choices individual publishers make about which stories to show readers and how to present them.”

The move comes as Australia announced in April that it will seek to make search engine and social media platforms firms such as Google and Facebook pay media outlets for news content. The country’s watchdog had argued that it would only be fair that search engines and social media giants pay for the original news content that they use to drive traffic to their sites.

Australia introduced a draft bill including a mandatory code of conduct between media outlets and digital platforms. The proposed mandatory code includes revenue sharing, user data access, news content presentation, and the penalties and sanctions for non-compliance.

Shares in Google have recouped all this year’s earlier losses are now trading 11% higher than at the start of the year. What’s more, the average analyst price target of $1,781.09 indicates shares have room to advance another 20% in the coming 12 months.

Monness analyst Brian White on Thursday reiterated a Buy rating on the stock with a $1,700 price target, while noting that “in recent weeks, media reports have sounded the alarm about Google’s antitrust issues escalating in the coming months.”

“Although we expect Alphabet’s [Google] will continue to grapple with digital ad spending trends and wrestle with antitrust investigations, we remain optimistic about Google Cloud and Google Play, combined with the company’s longer-term position in a world that will become much more digital,” White wrote in a note to investors. “We believe Alphabet should trade at a healthy premium to the market and tech sector.”

However, the analyst believes that due to the COVID-19 impact on the economy and the digital ad spending environment Google’s earnings will be be depressed in the coming quarters and revenue growth will be well below historical trends.

Overall, Wall Street analysts remain bullish on the stock. The Strong Buy analyst consensus boasts 32 Buys versus 2 Holds. (See Alphabet’s stock analysis on TipRanks)