• Fortune , Thursday, January 8, 2009 11:15 AM

With products that make it easier to find stories from any news outlet across the Web, it's not obvious that Google, which seems to rake in advertising dollars at the industry's expense, would be so interested in saving newspapers, but that's exactly what CEO Eric Schmidt tells Fortune's Adam Lashinsky. While the answer to the industry's woes isn't obvious, either, Schmidt reveals that Google would like to lend a helping hand.

"Google can't make the cost of newsprint go down," Schmidt said. "We also can't materially change the way consumers behave, and consumers are in fact moving their lives online. We have been able to send clicks to their Web sites, which they can monetize. So that provides some revenue. The problem is that doesn't provide enough revenue to offset the loss of the other revenue."

So what's a newspaper company to do? The problem, Schmidt says, isn't news demand--because that's here to stay--rather, the problem is with advertising, classifieds and the cost of printing and delivering newspapers. Then there's also the problem "that information wants to be free," he says. "We've tried to get newspapers to have more tightly integrated products with ours. We'd like to help them better monetize their customer base. We have tools that make that easier." So why doesn't Google just buy a bunch of newspapers? "We have the cash," Schmidt says, "But I don't think our purchasing a newspaper would solve the business problems. Until we can answer that question we're in this uncomfortable conversation."

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