Google and the newspaper industry truly have a love / hate relationship. Google loves the hard news generated by traditional media outlets but hates that the newspaper industry paints them as freeloaders. The newspapers love the traffic that Google sends to them but hates that they are doing it for free. This tug of war has been going on for some time but the inevitable “winner” in any tug of war is the side with the strength and the stamina to pull the team over the line. Right now Google has plenty of strength and stamina while the newspaper industry is in a tailspin.

So when Google’s CEO Eric Schmidt addressed the ASNE (American Society of News Editors) meeting last night there was some interest in just how he would handle this situation. His overall tone was to let the newspaper people know that things would get better. Politico reports

And Google CEO Eric Schmidt told a group of newspaper executives Sunday evening that his growing company will be an integral part of those changes.

Newspapers will make money once again, he said, but it will be from online advertisements and an altered subscription model. Schmidt said his firm is working on new ways to tailor advertisements and content for consumers, based on what stories they read.

“We have a business model problem, we don’t have a news problem,” Schmidt said.

He also took the time to throw a nice barb at bloggers by noting that quality journalism is an art and making that implication that blogging is, well, less of one. Fortunately, I have never claimed to be a journalist so this doesn’t really bug me but I suspect that more than a few bloggers would find Mr. Schmidt’s words offensive.

So how will the newspaper industry heal itself in the world according to Schmidt?

Organizations should refocus their attention on personalizing content and disseminating news through mobile devices – businesses in which Google is heavily involved.

Schmidt told the mostly full ballroom that “new forms of making money will develop,” and that Google is working on those forms. But he declined to divulge many details about that work.

Isn’t it great when a guy blasts a group of people for being less than professional (bloggers) then he just drops a statement to placate a group with no backing to it whatsoever? Maybe Mr. Schmidt is readying himself for political office since it appears that he has plenty of answers but no real details.

Much of Schmidt’s advice seemed to point to changes that might emerge from forms of technology that Google is developing, has developed or could foreseeably develop. Some of those advances in technology, he said, could create new revenue streams for news organizations.

News sites should use technology to predict what a user wants to read by what they have already read, he said – technology his company has. Schmidt said he doesn’t want “to be treated as a stranger” when reading news online. He also said he wants to be challenged through technology that directs readers to a story with an opposing view. Google, he said, can uncover why a news organization doesn’t have readers in specific areas.

Schmidt essentially knows he has this industry over a barrel. Without Google many news sites would see traffic numbers plummet along with the site’s ability to charge for advertising. If you are the newspapers you may be hearing Rupert Murdoch’s cry for paywalls and calling Google on copyright issues but most smart newspaper people are taking the stance of The Boston Globe

Boston Globe Editor Martin Baron told POLITICO after Schmidt’s speech that Google is “already a big part of our presence”: “The reality is all newspaper Web sites get a lot of traffic with Google.”

Baron, whose newspaper has been hit particularly hard in recent years, said Google is having a “dramatic impact” on the news industry, which he said needs to “adapt quickly” to the fast-changing media environment.

Newspaper folks realize they are in trouble and maybe they are also seeing that being cooperative with Google vs. adversarial may help them eventually. Until that time they need to take this very direct and pointed suggestion from Google’s Schmidt.

It’s an equation that’s not easily solved, Schmidt said.

“The fact of the matter is there are not simple answers to any of these questions. And in order to really find them, you’re going to have to run some experiments.”

Boy, I sure hope these newspapers’ editors didn’t pay much to get that advice. Even a silly blogger could have come up with that one.