Publishers: Stop expecting handouts from Facebook and Google, start innovating

Facebook and Google direct enormous volumes of traffic to news publishers. But instead of paying for the privilege, like other brands do, publishers expect to get paid. Simon Larcey says that instead of the 'last-ditch, half-assed cash grab', media companies need to, unsurprisingly, innovate.

Hey, if you can’t beat them, then just throw a tantrum and demand they pay you a percentage.

In a nutshell, this sums up the ludicrous move by the Australian Competition and Consumer Commission and local news publishers, which have demanded that Facebook and Google cough up cash for any news content that the digital giants share across their platforms. And with Google agreeing to play ball last week, it looks like these demands are being met.

While some might regard this move as a digital giant throwing a lifeline to a drowning local news industry, other, more cynically minded people – myself included – might see this a move as one developed by Google’s PR department to win the hearts and minds of stakeholders. Putting Google’s motives to one side, there’s a risk that this is yet another nail in the coffin, an admission of defeat by local publishers who are no longer able to successfully compete.

At first glance…

… this seems like a positive for the local media industry, which has been plagued by falling advertising and subscription revenues for years, and ravaged mercilessly by the economic monster that is coronavirus. Local media companies are suffering, and Facebook and Google are richer than most sovereign states. One could argue that it makes sense to demand that the behemoths contribute to those struggling local businesses who create the very content that Facebook and Google benefit from so regularly.

The perfectly-tuned digital machines have created such effective advertising channels that they have left brands and marketers very little choice but to allocate significant budgets to them, leaving traditional media in their dust.

In an attempt to compete with these tech platforms, publishers the world over have embraced new technologies and started using programmatic advertising systems that they hoped would give them a competitive edge over the duopoly.

But this tactic merely diluted advertising dollars, provided minimal revenue to the publishers, and generated poor results for brands and marketers. This has only encouraged more usage of the tech platforms and, for 20 years now, publishers’ ad revenues have been declining while Facebook and Google continue to grow.

So, look, I get it. It makes sense that local media should fight back. It makes sense they should fight for a bigger slice of the advertising pie. But is a handout the right way to go about it? Absolutely not.

The problem with handouts

Welcome to 2020, and after years of lobbying, the government has decided that if the news publishers of Australia cannot build a sustainable digital advertising revenue model, the two tech platforms will be strong-armed into footing the bill. (Of course, whether you would call Google’s recent move a capitulation to local media ‘strong-arming’, I’m not so sure.)

It’s like something out of a comedy show.

In 2017, ACCC research into the source of internet traffic to news sites found that 44% of audiences went to the news source directly, while 32% came from Google and 18% came from Facebook.

The numbers from the digital giants are probably even larger today. At least 50% of all news traffic is directed to Australian news sites via third parties. If Australian news providers did not have these two platforms, their traffic would be cut in half, and they would generate half the ad revenue. Any brand or marketer wanting to get that type of traffic to their site would pay Facebook and Google big money – in fact they do – yet Australian publishers think they should be paid for the privilege. It makes no sense.

What’s more, the entire premise of the handout is that Australia’s once vibrant and globally dominant media industry is admitting defeat. The publishers are essentially saying that they are incapable of creating a competitive offer, that they are unable to innovate, and so they are looking to their far more successful competitors to bail them out.

How could this approach ever be sustainable?

To put it bluntly, this is a bad idea, not least because it shifts the focus away from the local innovation, creativity and entrepreneurialism that made Australian media great, once upon a time.

The solution, unsurprisingly, is innovation

Don’t get me wrong. I’m a major advocate of the local media industry. In fact, local media is the bread and butter of my business. Facebook and Google are my competitors. So, shouldn’t I be jumping for joy at the thought of some much-needed cash injections into the Australian mediascape?

Sure, more money into the industry is fantastic. But I would prefer more money flowing into the coffers as a result of a thriving local industry, rather than a last-ditch, half-assed cash grab. I would prefer to be building solutions with publishers in order to build their commercial proposition and develop competitive digital sales strategies.

It’s time for local publishers to get smart, and to get a bit of bulldog into them. Now is the time for publishers to innovate. Now is the time to take on the duopoly and find a solution that actually provides comparable advertising results for brands and marketers, because, at the end of the day, we’re talking about advertising.

The purpose of advertising is to build awareness, drive sales and help create sustainable businesses. If the advertising and marketing solutions that news publishers offer do not provide similar results to the duopoly, why would anyone use them?

Forget the handouts. Now is the time for publishers to take control, take advantage of the radical changes affecting the digital landscape around advertising technology and the demise of the cookie, and launch a system that drives results for advertisers while increasing revenue for publishers.

Simon Larcey is managing director of Viztrade


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