The Task of Corralling Tech Giants Now Falls To The US Senate
By Gary Symons
TLL Editor in Chief
Canadian news media have filed an antitrust complaint against social media giant Meta over its plan to ban news stories.
News organizations on Tuesday asked Canada’s antitrust regulator to investigate Meta Platforms’ decision, accusing its subsidiaries Facebook and Instagram of abusing its dominant position in the online publishing industry.
“Through its decision to block news content from its digital platforms, Meta seeks to impair Canadian news organizations’ ability to compete effectively in the news publishing and online advertising markets,” news industry groups said in an application with Canada’s Competition Bureau.
The dispute has been primarily described as a licensing issue, with news media and the federal government arguing Facebook, Instagram, Google, and other tech giants are essentially stealing news content by failing to pay for it. However, even though I do think those companies are largely responsible for the massive decline in the news media since 1995, I don’t believe this is so much a licensing issue as it is an issue with a virtual monopoly over the digital advertising sector.
In other words, I’d argue the Canadians are correct in who is responsible, but the strategy is off-base.
THE VIEW FROM CANADIAN MEDIA
The application was filed by industry bodies News Media Canada and the Canadian Association of Broadcasters, along with public broadcaster CBC/Radio-Canada, and asks the Competition Bureau to investigate Meta and stop it from blocking news.
“Meta’s anticompetitive conduct, which has attracted the attention of regulators around the world, will strengthen its already dominant position in advertising and social media distribution and harm Canadian journalism,” the applicants said in a statement.
Meta started blocking news on its Facebook and Instagram platforms for all users in Canada last week in response to a new law, the Canadian Online News Act, requiring internet giants to pay for news articles.
Canada is just one of many countries trying to make large online platforms pay for the news they share online. Australia drafted similar legislation recently, leading the tech giants to instead negotiate their own deals with Australian news organizations. But in Canada it appears Meta has drawn the line, and opposes any idea of imposing regulations on its operations. Among other arguments, Meta says it should not have to pay when its users post news, arguing it actually helps bring more readers to the country’s online news sites.
As Meta refuses to pay licensing fees for the news posted on Facebook and Instagram, it has said the only other way it can comply with the law is to simply ban the posting of any Canadian news to its platform.
In all of this, I believe governments, news organizations, as well as Meta and Google, are all missing the point. The issue is not so much that Meta and Instagram are stealing the IP of news organizations. After all, many of them post their own content to social media in order to attract more eyeballs to their stories.
Instead, rather than accusing Google and Meta of stealing their news or their IP, news organizations globally should be focusing on the real problem, which is that the tech giants are keeping virtually all of the world’s advertising revenue to themselves.
This is also not an issue that affects only the news media, but rather ALL media, from magazines, to blogs, to linear TV, and even to ad-supported streaming networks.
A Meta spokesperson referred to a statement issued last week, in which the company said the Canadian law was based on “the incorrect premise that Meta benefits unfairly from news content shared on our platforms.”
As a long-time journalist who, for full disclosure, worked for CBC News for almost 10 years, I agree with Meta on that point. For better or for worse, it has been judged to be legal that anyone can post a news story on social media, but that’s not really the problem. As someone who has worked in the industry for more than 35 years, I don’t think there’s any doubt that tech giants are causing the news media to crumble, and causing potentially irreparable harm to Western democracies which rely on the scrutiny of journalists to keep voters informed.
So, what is the real problem?
The first issue is that platforms like Google, Facebook, TikTok, Amazon and Instagram all offer advertisers a less expensive advertising product that is also better targeted toward consumers, thanks to social media’s ability to essentially conduct surveillance on our reading and shopping habits.
By 2012 Google and Facebook alone were earning more ad revenue than all of the US print media combined. By 2017 those companies were earning a staggering 61% of all digital online advertising revenue, and 25% of the total global ad revenue. That number has since increased, as has the share of ad revenue for other tech giants like ByteDance or Amazon, for example.
However, in the case of Meta and particularly Google, there’s another issue.
Those companies are not primarily content companies; they are advertising companies, and because governments didn’t understand how their business model essentially took over the entire industry, they were allowed to construct a virtual monopoly on advertising because they essentially own the three critical tools that make the industry work.
Google and Meta have what is known as a ‘full stack’ platform that controls all parts of the advertising process, and since they control so much of the advertising, they can charge users whatever they want.
While everyone thought Google was building a search engine, they were actually building algorithms that surveil consumers to see what they’re interested in, and then deliver advertising to that person through directed digital ads. Those ads don’t just show up on Google or its various subsidiary platforms—they also show up on news media sites.
So, what’s the problem with that?
Well, the issue is the amount of money Google and Meta charge as fees or commission.
According to Corey Doctorow, a journalist and author who has studied the damage inflicted on the global news media by tech giants, media were attracted by the idea that Google and Meta, along with other ‘ad tech’ companies, would drop ads onto their website. The media companies didn’t have to sell those ads; they simply appeared, like algorithmic magic.
“Once, tech platforms promised that “behavioral advertising” would be a bonanza for both media companies and their tech partners,” Doctorow explained in a recent post. “Rather than paying commissioned salespeople to convince firms to place ads based on a publication’s reputation and readership, media companies would run ads placed by the winners of a slew of split-second auctions, each time a user moved from one page to another.
“These auctions would offer up the user, not the content, to an array of bidders representing different advertisers,” Doctorow explains. “What am I bid for the right to show an ad to a depressed, 19-year-old male Kansas City Art Institute sophomore who has recently searched for car loans and also shopped for incontinence pads? In an eyeblink, every ad-slot on the page would be filled with ads purchased at a premium by advertisers anxious to reach that specific user. And that user will like it! They will be grateful for the process and all the “highly relevant” advertisements it dangled under their nose.”
But while the media did fill up their pages with ads, including all of that dreadful click-bait, they weren’t earning much money. In fact, for the most part, they are simply earning more money for the ad tech giants.
Google and Facebook can get away with that because they jointly hold a near monopoly on the ad tech, which essentially has three parts.
The “ad-tech stack” includes:
- A “supply-side platform” (SSP): The SSP acts as the publisher’s broker, bringing each internet user to the ad market and selling their attention on the basis of their “behavioral” traits;
- A “demand-side platform” (DSP): The DSP represents the advertisers, consulting a wish list of specific behavioral traits that each advertiser wants to target;
- A marketplace: The marketplace solicits bids on behalf of the SSP, collects bids from DSPs, and then consummates the transaction by delivering the winning bidder’s ad to the SSP to be beamed into the user’s eyeballs.
“There are many companies that offer one or two of these services, but the two biggest ad-tech companies—Meta and Google—offer all three,” Doctorow explains. “That means that there are millions of transactions every single day in which Google (representing a publisher) tells Google (representing the marketplace) about an ad-slot for sale; whereupon Google (representing many different advertisers) places bids on that ad-slot. Once the sale is consummated, Google earns three different fees: one for serving as the seller’s agent, another for serving as the buyer’s agent, and a third for the use of its marketplace.
What’s more, Google is also a major publisher, offering millions of ad-slots for sale on YouTube and elsewhere. It is also an advertising agency, buying millions of those self-same ad-spots on behalf of its business customers.”
It’s also worth mentioning that, because it owns the ad tech stack, the Google/Meta oligopoly essentially undercuts all the other media sites, because they don’t have to worry about paying fees to themselves.
Unfortunately, because governments and media had little understanding of how digital ad placement worked, no one saw the looming disaster that a virtual monopoly would create.
“There are no parallels for this in the real world,” Doctorow argues. “Imagine if a real estate agent represented both the buyer and the seller, and also owned the listing service, and also bought and sold millions of houses, bidding against its own buyer-customers and competing for sales with its own seller-customers.
“Owning the marketplace lets Google give preference to its own brokers, on both the advertiser and publisher sides. Being on both sides of the transaction lets Google tweak the bids and the acceptances to maximize its own revenue, by rigging the auctions to charge advertisers more and pay publishers less.”
In my own experience in and around media, I’ve seen the same thing. In fact, soon after Google launched, I had interviewed leaders at the company about their plans, and immediately saw the danger to the news outlets I then worked with, part of the Thomson News empire. At that time, the Thomson chain was the largest in the world. Today, it no longer exists.
After much study, I ended up making a pitch to the CEO of Thomson News, arguing we should become an internet service provider, create online news portals as our main source of news, and create our own search engine. Part of the idea was to also give customers the option of getting the physical newspaper, or an ebook that would download our news overnight so it could be read first thing in the morning.
My hope was, if we acted quickly, we could take up much of the space that was later taken over by Google, and thus preserve our network of community newspapers.
The proposal didn’t actually go very far, and I soon found out why. The owners of Thomson also saw the writing on the wall, and shortly thereafter sold ALL of their newspapers, turning Thomson into a purely online and digital information giant.
Other news organizations weren’t so farsighted, and in the past three decades they have languished, laying off thousands of reporters and cutting key coverage areas, like court reporting, local reporting and investigative reporting.
CANADA ALONE CAN’T SAVE JOURNALISM, BUT THE US CAN
Ironically, Americans often accuse Canada of over-regulating the market, but in this case it’s the United States that is leading the way. Rather than putting a bandage on the problem, the bipartisan bill for the AMERICA Act is designed to break up those portions of Google and Meta (among others) that give them an unfair competitive advantage over the companies they claim are their customers.
Both the Republicans and the Democrats agree on the problem, as the bill was introduced by Republican Senator Mike Lee and Democrat Elizabeth Warren. It has broad support on both sides of the aisle.
Under the AMERICA Act, companies like Google and Meta would have to sell off or shut down their demand-side (buyer) platforms and their supply-side (seller) platforms.
The law would apply to any large ad tech company that processes more than $20 billion worth of ads per year, so no company of that size would be allowed to represent the buyers and sellers who used that exchange. Likewise, no buyer-side platform could operate a seller-side platform.
Smaller ad tech companies (under $20 billion annually) could still work both sides of the street, but the AMERICA Act establishes a duty to “act in the best interests of their customers, including by making the best execution for bids on ads,” and to maintain transparent, auditable systems so that buyers and sellers can confirm that this is the case.
As well, companies that represent buyers and sellers would need “firewalls” between the two sides of the business, with large penalties for conflicts of interest. In other words, those two sides of the ad business would have to act separately, as if they were in fact different companies, and would have to act in the best interest of their respective client.
Canada and other countries like Australia who have tried to deal with the issue are, of course, fully aware of the same issues, but they have little or no ability to come up with an AMERICA Act of their own, because Google and Facebook aren’t based under their jurisdiction. For that reason, the baton has been passed to the United States government, which now has the responsibility to restore fairness to the online economy, to help rebuild a robust news media ecosystem, and in the end, to protect one of the central pillars of democracy.