With the Help of Washington, News Publishers Fight to Recapture Advertising Dollars From Facebook and Google

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Rupert Murdoch, the executive chairman of News Corp and co-chairman of Fox Corp., who built his fortune in the newspaper business, once called the ad-driven profits from his publications “rivers of gold.” By 2005, he lamented, “Sometimes rivers dry up.”

Nearly 15 years later, everyone working in a newsroom is aware of the existential crisis that threatens the future of local journalism. On one hand, the audience for factual reporting and relevant news is larger than it’s ever been, thanks to the proliferation of smartphones and fast internet access. But at the same time, the economics for newsrooms producing high-quality digital journalism is worse than it’s been since mass publishing exploded in the late 19th century.

It’s a head-scratching conundrum for journalists. As revenue from print advertising continues to dry up across the board, you’d expect digital advertising to be on the rise, which it is… just not for news organizations.

Overall digital advertising revenue has tripled since 2011 (the earliest year tracked), according to the Pew Research Center. It grew 23 percent alone in 2018, and now accounts for roughly half of all ad revenue in the U.S., according to eMarketer. Unfortunately, Google and Facebook suck in an estimated 73 percent of all digital advertising in the U.S., including a majority of online display advertising revenue.

Adding to the frustration is that about two-thirds of Americans continue to get a big chunk of their news on social media platforms like Facebook and YouTube. In fact, the news content that flows through their platforms is so important to their users that both Facebook and Google have invested hundreds of millions of dollars (some would call it charity) to help prop up favored newsrooms hit hard by the shifting winds of ad dollars.

Not surprisingly, this shift in online ad dollars has been labeled a “heist” and a “robbery” in more journalism think pieces than I have time to mention here. As a result, news organizations across the country are banding together to finally take on the big tech companies…with the help of some politicians in Washington.

But not only is the legislation far from a sure thing, there are many vocal critics of the approach itself, including from some prominent journalists.

Mr. Journalist Goes to Washington

Back in April, a top House Democrat teamed up with a Republican colleague to introduce the Journalism Competition and Preservation Act, which would provide a 4-year “safe harbor” for publishers to band together to collectively negotiate with the large tech platforms.

“This is not just about their market dominance resulting in some impact on the sale of widgets, but this is really about the ability of citizens of this country to access trustworthy, reliable, local news, and a free and diverse press—particularly a local press—is really essential to the proper functioning of our democracy,” Rep. David Cicilline, a Rhode Island Democrat and vocal critic of what he views as the monopolistic power held by large tech companies, told Washington Monthly in a recent interview.

Despite the interest in the legislation (and the debate it has spawned within the journalism industry), it’s worth noting that Cicilline introduced similar legislation last year that went nowhere. And even if it passed the Democratically-controlled House and the Republican-controlled Senate, it would still need to be signed into law by President Donald Trump, who repeatedly criticizes news outlets and journalists as the “enemy of the people.”

David Chavern, the president and CEO of the News Media Alliance, remains optimistic about the legislation’s chances, and says it would give newsrooms greater negotiating ability with Google and Facebook, who have historically dictated terms to their own advantage. In theory, this newfound leverage would give media companies the ability to discuss everything from the licensing of content to better promoting the brands of legitimate news sources, which other than a small blue checkmark aren’t differentiated at all from biased and fake news sources.

But Chavern also thinks the antitrust exemption would enable news outlets to band together to fight for something arguably more valuable than money—data.

“You always hear the tech guys tell (media companies) we need to have a closer relationship with our readers…But they tend to hoard all the data about our readers,” Chavern told E&P, who notes that both Facebook and Google track readers movements even when they click through to other websites. “They know a lot more about your readers than you do.”

David Chavern

The imbalance doesn’t end there. According to Chavern, Google’s dominance in all aspects of the digital advertising business extends onto news websites themselves, where the tech giant’s ad-serving tools are often used to deliver ads (earning the search engine a nice chunk of every ad buy). Not only that, many newsrooms serve their videos using YouTube, which requires companies to use Google’s products to purchase ads.

“So the idea that, ‘Oh, if only we drove traffic to our own websites the money would be untouched’ is incorrect,” Chavern said.

Then there’s the algorithms deployed by Facebook and Google that news organizations live or die by, suffering from a lack of stability and an absence of any consultation before a tweak sends referral traffic through the basement.

Former Upworthy CEO Eli Pariser once said complaining about Facebook was like griping about the weather after an algorithm tweak intended to promote “meaningful interactions” from family and friends caused the one-time media darling’s referral traffic to plummet. It also led to the shuttering of several digital media companies like Mic, and forced news organization who had pivoted to video at Facebook’s request to pivot once again, this time with layoffs.

“As a longtime news executive, I have been in the room too many times to count with Google, Facebook, YouTube, Snapchat and others as they have lectured us on exactly what we need to do to save our business. Virtually always, it’s to bend our news practices—at our own expense—to their latest algorithm or experimental venture,” Joanne Lipman, the former editor-in-chief of USA Today, wrote in an opinion piece supporting the safe harbor legislation. “Today, journalists have no choice but to spend their days combating, worrying about or suffering the consequences of the financial Armageddon that has whipsawed our profession at the hands of our digital overlords.”

Another Side

There aren’t many journalists left who don’t view Facebook and Google with a distrustful eye. But how to proceed forward and whether to take on the tech giants—who also provide a much-needed pipeline to readers—has become something of a debate within journalism circles.

Longtime media columnist Jack Shafer is among those who have been critical of the legislation. Shafer thinks the antitrust exemption being sought by news publishers is misguided for several reasons, but most notable for falsely blaming Facebook and Google for the decline of the newspaper industry.

“They built a much better product. You don’t have to spray your advertising message, you can target it,” Shafer said, pointing out that it’s not the job of Congress to steer back advertisers to print if they’re spurning newspapers for a better product.

Shafer said journalists want a return to the glory days of 30 percent profit margins from the 1970s through the early 2000s, but forget about the less profitable days of the 1940s and 1950s, when competition from radio and the arrival of television forced the closure of hundreds of newspapers. He also says newspapers are partly to blame for their own fate, pointing out that media companies undermined their own revenue by investing in websites like Cars.com, Autotrader.com and CareerBuilder.com, which all drove advertising revenue away from their core products.

“Everybody imagines this past in which Craigslist stole the classifieds from newspapers… (but) all the big newspaper organizations went into the digital classified business themselves,” Shafer said. “In many ways, the newspaper industry saw the debundling coming. So it’s a selective story the poor, poor, pitiful newspaper crowd likes to tell itself.”

Shafer is far from alone. Emily Bell, director of the Tow Center for Digital Journalism at Columbia, said framing Google and Facebook’s effect on the news industry in terms of dollar amounts is overly simplistic and “not very helpful.” Longtime media writer and innovator Jeff Jarvis blames news companies for their own woes, writing that publishers “aren’t competent at exploiting the full value” of the readers sent their way by Google and Facebook.

“While it’s true that revenue for newspapers has declined sharply over the past two decades, and revenue for Google and Facebook has increased just as dramatically, it’s not accurate to say that one increasing caused the other to drop,” Columbia Journalism Review’s Mathew Ingram wrote. “The ad market changed in a number of ways—many having to do with an expansion of choice—and Google and Facebook took advantage of that.”

What Tech Companies Say

Richard Gingras, the vice president of news at Google, said the tech giant has worked many years to support the news industry, whether through collaboration, offering supportive technology or becoming an advertising partner to help monetize content online.

“Every month Google News and Google Search drive over 24 billion clicks to publishers’ websites, which drive subscriptions and significant ad revenue,” Gingras said in a statement to E&P. “We’ve joined forces with publishers on projects ranging from helping improve their mobile experiences to supporting subscriptions to deep advertising partnerships and last year launched the Google News Initiative, a major company wide effort to help a wide range of quality journalism thrive.”

While Gingras didn’t directly address it, there also has been a good deal of criticism of a claim made by the News Media Alliance—that subsequently made its way into the pages of the New York Times—that Google generates about $4.7 billion worth of revenue from news searches alone.

Slate’s Jordan Weissmann concluded in a lengthy piece that the study—done by the economics consulting firm Keystone Strategy that relied on a 2008 estimate from a former Google executive that Google News brought in $100 million—was incredibly flimsy. Aron Pilhofer, a New York Times alum who is currently the James B. Steele Chair in Journalism Innovation at Temple University, called it “nonsense.” And Jarvis summed up his thoughts about the study and its back-of-the-envelope calculation with just one word: “bulls—.”

In addition, as Google has pointed out in the past, Google News itself has no advertising and earns no money. And both Google Search and Google News drive over 24 billion clicks to publishers’ websites every month, according to the company.

Facebook declined to speak on the record to E&P, but privately, several sources say it’s sometimes overstated how important news is to the average Facebook user’s experience, and that it’s often overlooked that Facebook and Google drive millions of readers to news content free of charge.

How to Deal with Facebook and Google

Cicilline isn’t the only politician attempting to rescue the news industry, whether it’s from the tech giants or themselves.

Vermont Sen. Bernie Sanders, who is once again running for the Democratic presidential nomination, revealed some loose plans to rescue journalism back in August. Not only does Sanders back the Journalism Competition and Preservation Act, his plan would attempt to curtail major media consolidation—like GateHouse’s purchase of Gannett—that tend to shed journalism jobs. He would also consider taxing the types of targeted ads Facebook and Google deploy and use that revenue “to fund nonprofit civic-minded media.”

“More than two centuries after the constitution was signed, we cannot sit by and allow corporations, billionaires, and demagogues to destroy the Fourth Estate, nor can we allow them to replace serious reporting with infotainment and propaganda,” Sanders wrote in an op-ed for Columbia Journalism Review.

Rep. Mark DeSaulnier, D-Calif., has his own bill to help news outlets deal with declining revenues, but does it without impacting the tech giants. Dubbed the Saving Local News Act, DeSaulnier’s bill would make it easier for “written news organizations” to become nonprofits, something that has become increasingly difficult due to the specifics of the tax code.

Outside of Washington, News Corp is reportedly working on Knewz, a news-aggregation service powered by a combination of computer algorithms and human hands that would pull content from hundreds of national sources—including the New York Times, the Wall Street Journal, the Washington Post, and many others.

In essence, Knewz would connect readers directly to original news reports on the publishers’ own websites without taking a cut of the advertising revenue. News Corp also plans to share reader data with those news organizations, according to the Wall Street Journal. But the company has made no official announcement about the product, its potential launch date or whether it would highlight right- and left-leaning content.

In other countries, governments have gone after the tech giants themselves, The European Union has gone after Google several times on antitrust grounds, fining the tech giant more than $9 billion over the last three years over various complains it abused its market share for financial gain. European antitrust regulators are also currently investigating Facebook’s sales platform, how it uses and shares data from apps, and its Libra digital currency project, according to Bloomberg.

Shafer thinks the focus on digital advertising misses the point that news organizations have a great story to tell about circulation revenue, and the fact that the largest source of revenue for many newspapers now comes directly from their readers. Besides, according to Shafer, the days of advertising revenue sustaining large newsrooms appear to be long gone, even if the safe harbor legislation somehow passes through Congress.

“It’s lamentable, but I think it’s kind of unstoppable,” Shafer said.

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