It's no secret that the rise of tech platforms has roiled news publishers. Much has been written about what went wrong. Were news publishers a victim of their own inability to innovate? Maybe. Did tech platforms take advantage of rapidly growing user bases and a stagnant regulatory environment to engage in anti-competitive behaviors that effectively cornered the online advertising market, thus creating a wildly uneven playing field for publishers? We're about to find out.
Tech giants Google and Facebook are now, in a big way, in the crosshairs of regulators, state attorneys general, and the Justice Department. The scrutiny now goes well beyond rumblings about Section 230. Now, we're talking about antitrust.
When it comes to monopolies, tech platforms are an interesting beast. The concept of a monopoly is much clearer when we're talking about other goods and services. If a firm is selling steel, for example, it is fairly easy to understand that it is a good thing to have competition. If there is only one firm selling steel, then it can set prices at whatever level it wants, leaving other firms without the ability to gain a foothold in the market. Similarly, if a handful of the largest manufacturers get together and make a deal to fix steel prices, you get the same effect.
So, what exactly are the products that Facebook and Google are selling? The answer to that question is more difficult to define. This lack of understanding—or perhaps a lack of curiosity on the part of regulators over the years—created an environment where tech platforms have been able to avoid serious scrutiny.
Now, it appears law enforcement and regulators are beginning to figure out that Google and Facebook's primary product offering is advertising built on top of vast troves of user data. These agencies are now alleging that tech giants have effectively cornered the entire digital advertising market through collusion and other anti-competitive practices.
To publishers, none of these allegations will probably feel like news. Digital publishers have been contending with the consequences for years. However, the story here isn't that Facebook and Google have cornered the market. It's how they allegedly accomplished it.
Publishers may have been slow to evolve and innovate as more readers moved online, but the big question here is, do they really have a fair shot now? A preliminary analysis indicates the answer is probably no. If a publisher wants to generate revenue through display advertising, it has to compete with giants that have the latest targeting technology and can afford to underprice advertising to absurd levels. If a publisher wishes to pursue programmatic advertising, they can go at it alone, and some do, but many rely on Google's ad exchange or ad exchanges with relationships to big tech companies, to serve ads. The revenue split doesn't favor publishers.
Beyond traditional advertising, Google and Facebook have a firm hold on a ton of traffic. Yes, news sites get exposure through Google and Facebook, but the content is equally valuable to tech platforms. Yet, the platforms get a larger share of the pie and have no expense to generate it.
There have been a variety of proposed solutions. In 2019 several members of Congress introduced the Journalism Competition Preservation Act (JCPA). The JCPA would give publishers a four-year anti-trust exemption to band together and negotiate more favorable deals with platforms on revenue. The problem with this solution is that the premise is deeply flawed. It offers a tacit acceptance of the sheer size and reach of big tech platforms as an unchangeable reality and does very little to restore real competition in the marketplace.
The platforms themselves have also tried to solve the problem by providing grants and funding to help bolster news organizations. While helpful, it really only scratches the surface and most such ventures are not financially successful.
If the goal is to make the world a better place, connect people, and provide access to objective news and information, then regulators, platforms, and the news industry should strive to level the playing field. When publishers innovate and develop quality news products, they should have a shot at capturing market share and revenue. The most effective solutions need to strike a balance. In the next few months, we will see if balance is where we are headed.
Michael Shapiro is publisher and CEO of http://TAPinto.net, a network of 80+ franchised online local news sites in New Jersey, New York and Florida.