Australia’s faceoff with Facebook – control over advertisement revenues

Advertisement Revenue for the Print Media

News publishers have traditionally been raising revenue through advertisements. The shift from print and TV to digital has spelt a lot of uncertainties for news publishers. As per the old revenue model in print media, the newspapers were published based on the known circulation figures and the quality of readership. They would sell advertising space which would then contribute to their revenue stream. These were fair, transparent terms of trade. In this case cost of newspapers was calculated on the known circulation and advertisement revenue, which was all very transparent.

In comparison, digital news publishers, today, are not transparent on how much revenue is coming in from advertisements. Despite the number of views or clicks, advertisements do not seem to be paying enough to the media houses from big platforms like Google and Facebook. The playing field is not level between the publishers and the platforms … each platform has a monopoly, there is no competition and there is no negotiation. As a result, the sustainability of newspapers is becoming increasingly difficult.

Causes of conflict between Australian Government and Facebook

The Australian government has said there is an asymmetry in the power equation, in the market equation between big platforms and the news media — and this is responsible for the destruction of the economics of the news media. News media is being short-changed as a result of the shift of advertising from print and TV to digital, where things are not transparent.

New terms of trade are being introduced. But that debate extends across the globe. There is no regulator of digital media anywhere in the world to examine the opacity of algorithms, the integrity of personal data, the social value of professional journalism, and the dysfunctional digital ad market.

The digital advertising market is growing but most of the money is going to tech giants. For instance, if $100 is being spent on digital advertising in Australia, $53 is going to Google, $28 is going to Facebook and the rest to other platforms. News media organisations are given very little in return.

As per the overall figures, Google and Facebook have 80 per cent of Australia’s digital advertising market. This is a threat to the existence of news media.

Australian legislation and global trends in digital advertisement revenue management

Australia has come up with a law saying that Google and Facebook have to negotiate with every news media organisation in terms of what they will pay them for using their content. The law also talks about arbitration and the arbiter will be the Australian Communication and Media Authority. If a publisher and a platform cannot arrive at a proper deal, the arbitrator will take a call.

Australian Prime Minister Scott Morrison asked his Indian counterpart, Mr Narendra Modi, for help in its fight against the tech giants. Moreover, countries in Europe are also moving towards a model in which the platforms have to negotiate with news publishers. There is a global demand for regulating these platforms particularly vis-à-vis their market or business equation with news media.

The climax of the Conflict

In response to the proposed Australian legislation, Facebook blocked news to Australians while Google had said that they will stop providing their search engine in the country. However, both Facebook and Google are now willing to negotiate to find a workable solution including a mandatory arbitration clause as key to the new law, without this clause the law is toothless.

Digital platforms had become like sovereign superpowers. There is a dire need for someone to level the market. The stage is now set where intervention by sovereign governments and a regulator of sovereign governments will be a new normal in the digital advertising world.