Google is threatening to pull future investments in nonprofit news organizations across the U.S. if California passes a new bill. 

This is the second time Google said it would pause further investments in California newsrooms. The pause would include new partnerships through its news licensing product, Google News Showcase, and plans for the expansion of its $300 million global Google News Initiative (GNI) program, sources told Axios.

A new bill introduced by California Assembly member Buffy Wicks last year would essentially create a tax link — a cost to companies like Google and Microsoft for news content from publishers.

With funding in jeopardy, what better way than to put content behind a paywall, similar to what  publishers do? That would create several challenges for the search engine, which earns revenue from internet traffic and advertising.

In April, the Financial Times reported that Google had considered charging for premium content powered by generative artificial intelligence (GAI). The business model would subsidize content payments to publishers and justify keeping two different types of search engines — one to source news and GAI-based content, and the other to source direction, locations, links to retail stores, flight schedules and more.

The proposed change for Google means a consideration of adding certain AI-powered search features to its premium subscription services, which already offer access to the Gemini AI assistant in Gmail and Docs. The change could also provide better-quality access to AI Overview.

Google told FT is was not working on or considering an ad-free search model, but it would “continue to build new premium capabilities and services to enhance our subscription offerings across Google.” A paywall may fit the model.  

“When Google changed Bard’s name to Gemini and introduced Gemini Advanced in February, the company also rolled out a $20 per month subscription, bundling Gemini Advanced into a new Google One AI Premium Plan with more storage,” Greg Sterling, co-founder at Near Media, wrote in a post.

Sterling believes search-engine optimization professionals would be “pleased” if AI Overview went behind a paywall. He predicted that this might happen at last week’s I/O conference, but I believe it’s too early for that.

State Senator Steve Glazer proposed a different bill (SB-1327) earlier this year that would instill a “data extraction tax” for using links from news sites in search results. The money from the tax would go to fund non-profit publications in the form of tax credits to help them support journalism.

While Google initially intended to only pull news in California, the company now tells partners, according to Axios, that the ad tax proposal will threaten consideration of new grants nationwide by the Google News Initiative that funds hundreds of smaller news outlets.

It would make sense for Google to continue building it’s own team of journalists and use GAI to help them build a news organization. At one point in time I thought the company would acquire a news organization, but that didn’t happen. Perhaps it would become a possibility in the future to avoid the proposed content taxes. But what would all this do to its ad business and how would it effect the traffic it sends publishers from its search engine.

Subscription services could become a new revenue generator for these large tech companies. The Information reports that Meta is considering charging for the use of its chatbots. Charging for Meta AI would mean a $20 per month subscription service, but it’s not clear what the cost would be for a premium service. 

Google is threatening to pull future investments in nonprofit news organizations across the U.S. if California passes a new bill.