On 16 February 2021, Google signed a deal worth AU$30 million (approx £16,751) with Australian media company Nine Entertainment. It comes mere weeks after the company announced it was launching a paid platform – Google News Showcase – for news publishers in the UK. The road to this point has been long and hard, and represents a step forward for publishers in their fight against internet giants.
Google’s platform News Showcase has currently launched in Australia, Germany, Brazil, Canada, France, Japan, and Argentina. Other nations could be added soon. This is a significant announcement as it changes the way news fits in the business model. It also marks a huge shift in how giants like Google and Facebook are viewed.
How we got here is a story of the shift to the information and attention economy from the traditional subscription model that has defined media outlets for well over a century.
The Business of the Internet
The internet as we know it today is built on two key factors – information and attention. Companies like Facebook, Google, Twitter and Snapchat use these two factors to make money. Because their service is free, they make money by keeping users on their platform (attention), and showing them relevant content (information) such as advertisements.
A significant part of that content is news. Because the internet is instant, fast and cheap to access, it has quickly become an important medium for news. A Pew Research Centre study found that 18% of US adults get their news primarily from social media. 25% of adults use news websites or apps moving to digital content as opposed to analogue print. Thanks to the internet, traditional models of news such as cable TV, newspapers and radio are in decline. They did enjoy a brief increase in popularity due to Trump’s chaotic presidency, but the long term trend is downwards.
Platforms like Google and Facebook need news publishers just as much as publishers need them. Since these platforms today are the gateway to the internet, publishers have no choice but to use these platforms to distribute their content. After all, it is far more likely someone would see an article (such as this one) by Googling for a topic or coming across it on their newsfeed rather than heading to a website directly. That is in-line with research from Pew, which found that direct traffic to news sites has plateaued since 2016.
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Social platforms also need news publishers since news and information content drives user engagement. If people didn’t share, talk or search for news stories, platforms like Google and Facebook would just not be as useful as they are today.
Not only do these platforms control the information people see, but control the revenue generated by this information. In 2020, research firm eMarketer estimated the digital ad market was worth $614.73 billion worldwide. Amazon, Google and Facebook are estimated to control nearly 90% of that. That means news publishers have little choice but to use these platforms, which has caused massive repercussions in newsrooms.
The Fate of Digital Newsrooms
For newsrooms, the shift to digital has come with a rapid decline in revenue. Without direct advertising revenue, newsrooms are increasingly forced to rely on income from ads placed with networks operated by giants like Facebook and Google. Research found that between 2008 and 2018, print revenues at U.S. papers plummeted by 62%, as US$23.5 billion of advertising revenue migrated to digital platforms. Going digital though hasn’t proven to be completely beneficial.
Google claims it takes 30% of the money spent on each ad placed with its service, but studies have shown that the figure is misleading. Due to the complex and opaque nature of digital advertising, it is hard to estimate just how much money a publisher can make. For every dollar spent on advertising on these platforms, British advertising group ISBA estimated that publishers make only 51 cents, i.e. they only earn back 51% of what they spend. That means, on average, publishers don’t even meet the cost of ads with the revenue generated.
To make matters worse, PwC estimated that 15 cents out of every dollar could not be accounted for. That means, for each dollar spent, 15% of the money could not be traced. There’s just no exact way to know where the money publishers spend goes.
Essentially, the numbers point to a simple fact – newsrooms are unable to make money from digital advertising alone. Without other forms of income, that means newsrooms are falling more into debt. Since 2008, newsrooms have shed approximately half of their employees according to Pew. That has been offset by an increase in hiring at digital publications, but there is still an overall decline as publishers struggle to stay afloat.
That’s why subscriptions matter for newsrooms. It allows them to make money without a third party. But after decades of people getting the news for free on platforms like Google and Facebook, news organisations are finding it an uphill task to get people to buy subscriptions.
In some cases though, newsrooms have managed to prove that subscriptions can work. The New York Times first introduced a “paywall” in 2011. By 2020, it had 6 million paid subscribers. Paywalls are increasingly becoming a popular option for newsrooms with 76% of American publishers adopting them in 2019.
However, this model also has a few downsides. For one, there is a relation between paywalls and ad revenues generated from subscribers. NiemanLab reported that NYT saw a 50-55% drop in digital ad revenues in Q1 2020. That is because of the second downside – limited access. If people can’t view an article for free, they are less likely to click on it if a subscriber chooses to share it with them. Third, the high cost of some subscriptions can limit the number of sources an individual will choose to pay for.
This has a direct knock-on effect on the industry as a whole. If people are forced to buy subscriptions or pay for access to content, it is likely that they will spend money on larger publications rather than smaller or local ones. As Mark Hill noted for Wired – “Unless readers are willing to spend a lot of money it simply won’t be financially viable for them to consume a lot of internet content. Not coincidentally, a lot of internet content won’t be financially viable, either.”
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It goes to show that going digital hasn’t really benefited many newsrooms. As they are making less and less money, they need to find more sources of income. Selling ads or subscriptions alone won’t work, at least for a majority of publishers. It’s a problem some governments have recognised, thanks to increased lobbying which is what led to Google’s News Showcase.
Google News Showcase and the Promise of Income
Governments around the world have been engaging in a battle with Google and Facebook to ensure newsrooms get paid their fair share. A good example of this is Australia, where the government has been involved in a long battle over the proposed news media bargaining code. The bill would force platforms like Google and Facebook to pay publishers either individually, or collectively. The bill would give both sides 3 months to reach an agreement, failing which an arbitrator would be appointed.
In response to the proposed bill, initially, both Google and Facebook threatened to restrict their services in the country, but the government refused to back down. This has resulted in two different outcomes. Despite its initial hostility to the idea, Google has developed News Showcase. The product allows publishers that opt-in to derive a licensing fee for content that appears in Google News.
Facebook on the other hand, has dug its heels in and used its power to ban news publishers from appearing in its news feeds in Australia. The outright ban has stopped news stories from being viewed or shared in the country. Since negotiations with the government are ongoing, it is likely that the ban is a tactic by Facebook to bully Australia to cave in to its demands.
Despite News Showcase being presented by Google as a win for news publishers, the question remains – just how beneficial is News Showcase for publishers? Right now it is unclear. Nobody seems to know how Google arrived at the exact figures it has agreed to pay publishers, and there is no indication on whether those payments will increase/decrease over time. It is also unclear how smaller publishers will benefit from such deals. On February 8, before Showcase launched in Australia, a spokesperson for Australia’s media house Nine said – “This is what monopolies do, they put an offer, in the form of Google Showcase, but not offer to negotiate.”
It is important to note that Showcase does not cover Google Search. That’s because Google has a monopoly on search, and thus is responsible for a large percentage of news discovered. Showcase will only pay publishers for content on Google News and the Discover feature. As reported by The Guardian – “this may be because they are concerned this could set a global precedent, resulting in similar legislation and larger payments in other countries.” Adding Showcase to Google Search would be immensely expensive for Google, and require them to work with more publishers. It would also challenge Google’s algorithm, as many smaller publishers struggle to break into page 1 of the results.
An Incomplete Solution
News Showcase seems to be Google’s attempt to control the narrative. By having unilaterally created a system where it pays publishers on its terms, the company can argue against legislation, while controlling the amount it pays. In the short term, it can help Google avoid running into trouble, but as with all other tech-based solutions, the long-term impacts are yet to be assessed.
In 2020, CEO Sundar Pichai promised to pay publishers $1 billion over three years. That number sounds large, but when you consider that the global newspaper industry alone is worth around $80.5 billion, it seems insufficient, especially if you note that many publications that have signed up are large corporations. Smaller publishers, local newsrooms and independent organisations are unlikely to benefit, which could be a huge problem for public-interest journalism.
There is only so much money Google, Facebook and others can give publishers. After all, they too are businesses who need to put their shareholders and profitability first. After a point, it will become unsustainable for them to support newsrooms. The big question is what happens then? Who takes up the responsibility for ensuring publishers are compensated fairly?
As the Facebook ban on news content in Australia has shown, it is also unsustainable for newsrooms to continue to be reliant on these platforms. Giving platforms the power to control the news and its viewability is not just bad for journalism, but for society too. But, if that’s where the readers are, that is where the newsrooms will have to be. It is clear that these platforms are here to stay, which is why the focus should be on ensuring a sustainable business model.
Solving the Issue
Solving the problem will require input from a number of different stakeholders.
Governments, along with inputs from non-profits and think tanks need to focus on long-term solutions to save valuable organisations from going under. That could include more funding and grants for public broadcasters, working with educational institutions to house journalism labs and more incentives for philanthropic funding.
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But the real onus is on consumers. If newsrooms cannot rely on revenue from selling digital ads and don’t want to be dependent on handouts from the likes of Google and Facebook, then they need to rely on consumers to ensure that newsrooms are directly funded. The simplest way is for individuals to pay for a subscription.
While it is more expensive, it ensures that newsrooms benefit from direct incomes without a third-party like Google in between. It also won’t be enough if only a few people do, for local publishers to stay afloat they will need a very large number of subscribers. There’s no guarantee it will work, but it is right now the simplest and quickest way to support newsrooms. In the end, it seems like Darwin’s theory of evolution will apply – only the most well-funded newsrooms will survive and this will have wider consequences for society.
Google News Showcase is a good step from the internet giant, but it is not a long-term solution to the wider crisis. As Facebook has shown, it is very easy for big tech to not be so generous, which could have a big impact on journalism and news. If the media is to survive the coming decade, we need to rapidly rethink existing business models. After all, if the press should be free from government interference, isn’t it just as important that the press not be dependent on powerful private companies?
Sources: CNBC, IBIS World, NiemanLab, MuMbrella, Pew Research Centre, Politico, The Conversation, The Verge,
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