Google newspapers, courtesy of Knight Ridder?

The McClatchy Company's announcement to buy Knight Ridder yesterday for $4.5 billion in cash and stock simply demonstrates that the distillation of news we noted yesterday also applies to news businesses. With readerships declining and union contracts in many cases constraining cost containment, the newspaper business must consolidate as it figures out its next move.

This particular deal, however is curious in several aspects. It has some of the flavor of old 1980s Wall Street leveraged buyout, with McClatchy selling off the assets it doesn't want, including such notable names as the San Jose Mercury News and the Philadelphia Inquirer, and keeping only those that are in growing markets such as The Sun Herald in Biloxi, Miss. While McClatchy may think it will recoup some of its purchase price with the sale of the more storied properties, the current market for newspapers probably will disappoint them. Investors nowadays are more likely to invest in a Web site that has no significant revenue than at a newspaper.

But the fact that these newspapers might be sold for firesale prices raises an interesting possibility. Just as AOL snapped up Time Warner at the height of the dot com boom, perhaps we should be looking for a new media surprise. After all, Google has already acquired a radio advertising company, dMarc. And Microsoft wants to create a big ad network and search engine of its own. Imagine what might happen if one of those two big Internet names took over the 12 newspapers McClatchy is selling and decided to turn them into a single, national news organization carrying contextual advertising.

Think about it. Today, if Circuit City today wants to do a national ad promoting DVD players both online and off, it has to strike deals with both a national newspaper media buying agency and an online media network like Google or Overture. But what if it could simply make one call and have its ads appear both online and and in a variety of major newspapers? And, taking it once step further, what if its ads for DVD players could appear right next to articles or reviews that mention DVDs in the newspaper? This type of online/offline ad bundle could have two important results: 1) it attract more national advertising campaigns, particularly if the online/offline bundle provided a discount, and 2) it could drive more national ad dollars to the newspapers, thereby keeping them in business longer.

Online and offline media and advertising models are on a collision course. And while newspapers are fading, they aren't going to die out altogether; every city will have at least one. Someone will wake up someday and notice that companies that advertise want to address both online and offline markets with one phone call. The only question is who sees the opportunity first.

Technorati Tags: Ad networks, Adsense, Advertising, Business, Google, Marketing, Media, Microsoft, New media, News, Newspapers, Publishing, Publishing 2.0, Web, Web 2.0, Web advertising