Can Australia save local journalism by forcing Google and Facebook to share out ad revenue?

Advertising accounted for 70% of revenue at these papers and, in the face of a Covid-19-based economic downturn, sales have evaporated almost overnight, leading to an increased number of local media owners shuttering operations.

Now, the Australian government has decided to take steps to ensure these businesses remain viable. On Sunday, the country’s treasurer Josh Frydenberg instructed the competition watchdog Australian Competition and Consumer Commission (ACCC) to develop a mandatory code of conduct for Facebook and Google.

Originally due to be finalised by November 2020, the code was to require the digital ad giants to negotiate in good faith on how to pay news media for use of their content, to advise news media in advance of algorithm changes that would affect content rankings, to favour original source news content in search page results and to share data with media companies. The draft code will now be finalised by the end of July, with the government indicating the final text would be settled on soon after.

Luke Taylor, who is the founder and chief operating officer of ad fraud prevention company TrafficGuard, points out that without the code and without intervention from government, it is unlikely Google and Facebook would voluntarily agree to fairly pay for the content.

“The importance of independent journalism is paramount,“ he tells The Drum, adding that the recent ruling in France (on 9 April, the competition watchdog there ruled that Google must pay French publishers alongside news agencies for re-using their contents) “likely played some role in strategic timing“.

“I’d speculate that the hope here is to ensure that the remedy applied to Europe is also afforded to Australian media. Piggybacking off of the European effort adds strength to both their and our plight.”

Victor Condogeorges, the director of data and insights at Australian digital shop Orchard, suggests Facebook and Google may rebut the introduction of this code with statistics on how they are voluntarily supporting 20 small players or independent publishers. However, he says the key issue here is that even if Google and Facebook support some and not others, they will not be meeting the standards as 99% is not the same as 100% when something is mandatory.

“It is also necessary because of the way the pandemic is affecting news coverage. News stories and articles have become over-seasoned with terms such as ’pandemic’, ’infections’ and ’deaths’. It’s no wonder the overzealous, brand-safety conscious traders have done significant damage to revenue streams for publishers.”

Condogeorges adds: “News publishers, I would imagine, are being heavily affected by the cutting of budgets in placements perceived to be less desirable or valuable because they are focused on covering the pandemic. If there were any lessons to be learned here, it would be how over-reliant we have been on these platforms for news and their ability to deliver only short-term results.”

What will the code change?

Implementing the code will certainly provide some new revenue opportunities for publishers who create high quality and trusted news content in the age of fast-paced and easily accessible content, where clickbait and fake news have become all too common.

Mitchell Greenway, the director of publisher development for Australia and New Zealand at programmatic ad exchange OpenX, feels the code could spark a shift in how platforms define ‘good content’, leading to better journalism rising up over clickbait and resulting in news publishers earning more of the revenue they deserve. “Doing so could also allow publishers to pull back on some of their other costs, like content extension, and allow them to focus on producing more quality content,“ he explains. “Ultimately, steps like these are helping to ensure a sustainable ecosystem for publishers across the open web.”

Condogeorges agrees and says that, in an ideal world, this increase in revenue will trickle down to journalism and journalists. “If I could wave a magic wand and use this increase in revenue to help support other businesses in the arena, I would also splash some cash on keeping AAP (Australian Associated Press) and regional news coverage alive – many other areas are also in desperate need of funding, but I just have a soft spot for these quiet achievers,” he says.

“It is important to remember that platforms such as Facebook are not creators but ’distributors’, in Mark Zuckerberg’s own words. When you think about a normal distribution system, costs and risks are passed on to the distributor, but when it comes to content published on these tech platforms, the content isn’t bought and distributed, it is simply ’distributed’.”

He adds it will be novel that the advertising and revenue extraction process is managed on content that is not produced by these platforms, especially when many people rely on these platforms for their news. For instance, people may head to Facebook and Google for news, yet news publishers believe they are reliant on Facebook and Google for the audience.

“Take away the news from these tech giants and people will find it elsewhere. So the question is, who is set to lose the most here? Is it the publishers that use the social channel to attract people to their website, or the social distributors that use the news to attract people to their platform?”

Pointing out that genuine quality journalism is squashed by a lack of ad revenue due to those same companies in some cases taking nearly 80% of mobile ad revenues, Paul Coggins, the chief executive of tech company Adludio, says that while the Australian government should be applauded for this decision, the industry needs to go further. “In theory, the tech giants act as a middleman between the consumer and the content provider. In the long term, should this duopoly be allowed to continue without being broken up?“

He adds: “Perhaps this pandemic is the impetus needed for governments around the world to start to address these issues. It would be interesting to see what measures other countries will take, whether or not they will follow the Australian government’s lead and how this new code will ultimately benefit media companies in the long run.“

Meanwhile, Darren Woolley, the founder and global chief executive of marketing consultancy TrinityP3, is worried that beyond the major media groups of News Corp and Nine Entertainment and other national TV networks like Ten and Seven, hundreds of smaller and local media that support local and regional communities with local news might not benefit from the code. He says it could end being a compensation for the larger local players that doesn't trickle down to the smaller companies.

Instead, he suggests initiatives, like adtech firm Viztrade’s Local Media Fund that’s designed to encourage advertisers to support local media directly, is perhaps more sustainable for the local Australian media. The aim of the fund is to direct funding into independent businesses so they can improve and create new digital services, helping local publishing to better compete against Facebook and Google.

At the end of the day, says Stuart McLennan, the senior vice-president for APAC at Rakuten Advertising, the “war“ on these larger tech giants has been disguised in many different ways in the past, but the action and influence driven by these enforcements have had little impact on the digital giants themselves in terms of user consumption.

“The new code should therefore not reduce the need for news and media sites to continue to look at diversifying revenue streams. It has long been a focus of Rakuten Advertising to give content producers the ability to monetise their content in different ways. I hope that more scrutiny and focus on this issue will fast-track further developments here and that we’ll see movements in Australia in this area similar to what we’ve seen with the integration of content commerce in other markets such as the US and UK.“

What impact will the code have on major digital media players?

In July 2019, the ACCC released its final digital platforms inquiry report calling on the government to act against the tech giants. The 600-page report recommended a code of practice for Facebook and Google that would give Australians greater transparency and control over how their personal data is collected, used and disclosed, as well as stop Google’s Chrome browser from being installed as a default browser on mobile, tablet and computer devices.

At the time, Facebook stated the ACCC’s “unprecedented proposals” will restrict Australian users’ access to online services, accusing the ACCC of protecting the interests of a few small media companies instead of the elements of journalism. With the additional new code, Condogeorges says that, in the short term, this will create a gap in revenue and there will be a battle between the two parties involved – content producers and content distributors.

“The content distributors, in this example, have a goal of keeping people on their platform for longer, thus claiming a longer share of attention which directly conflicts with news publishers wanting traffic to their websites,” he explains. “The difference is that one pays journalists, while the other simply acts as a funnel for consumers’ attention in this scenario.”

Peter Barry, regional director for Australia and New Zealand at adtech company PubMatic, says the impact would be significant for all of the platforms involved. However, he notes the reality is that Australia is a tiny market when compared to the rest of their businesses, so it will be interesting to see what they do to counter the measures in order to reduce the risk of a precedent being set that would affect their wider organisations. “They have form when it comes to strong countermeasures – Google closed Google News in Spain when a comparable framework was drawn up there, although the negative impact on publishers appears to have been small and temporary.”

Simon Larcey, the managing director of Viztrade, feels it will depend on the level of content the news publishers distribute. He suggests it will be a substantial revenue boost for the publishers that do use Facebook and Google as a distribution outlet. “I don’t think it will impact Facebook or Google too much,“ he says. “If you could get a comparison of news versus user-generated content, I think you could make an assumption from that. My opinion is that, while it will reduce their bottom line, if more publishers get on board it might balance out.”

However, Larcey predicts Facebook and Google have no option but to go along with it or ban news content. One idea, he suggests, could be they purchase AAP, have their own journalists and source their own news. “They could definitely afford it and they then wouldn't have to pay third party news providers. Google and Facebook could do it as a joint venture. However, this would surely be blocked by the ACCC?”

Condogeorges notes after the French government’s ruling, Google’s response was to remove the listings as they were not willing to pay for content and would only display it if it were free. “Given that approximately 98% of searches are being done through Google in Australia, the monopolistic nature of the giant has revealed how they may respond here as well, holding website traffic ransom as a form of attrition. If you squint, this illustrates the intention of its business: to capture all the revenue possible in the advertising sphere regardless of the implications upstream.”

To their credit, the digital ad giants are trying to help save smaller media companies globally that are covering the Covid-19 pandemic, as the larger newsrooms have the ability to innovate during this crisis. Google has created a journalism emergency relief fund to provide support for local and small newsrooms as it believes local news is a vital resource for keeping people and communities connected in the best of times as it plays an even greater function in reporting on local lockdowns or shelter at home orders, school and park closures and data about how Covid-19 is affecting daily life. It will also waive ad serving fees for news publishers globally on its Ad Manager for five months.

However, it remains to be seen if these measures will help the likes of the Sunraysia Daily and the Yarram Standard survive beyond the pandemic. For now, they have the code to look forward to.