New evidence has emerged to underscore that Google’s original unofficial motto of “Don’t be evil” was never really their true North Star. Instead, it is a smokescreen for big tech’s naked ambitions. Meta’s early motto—“Move fast and break things”—may have been more honest, but the honesty makes it even more damning. As it turns out, the broken things weren’t just outdated norms or sluggish competitors. They were the foundations of fair competition, user privacy, democratic discourse, and now, copyright law. The damage isn’t merely collateral; it is strategic.

Big tech’s anticompetitive behavior enters its AI era

Now we’re seeing a similar pattern unfold with generative AI. In Kadrey v. Meta, evidence unsealed early this year suggests Meta execs, including Mark Zuckerberg, chose to pirate copyrighted content to train its LLaMA AI model. It was revealed that Meta initially explored licensing but opted instead to download pirated content via BitTorrent from LibGen under the reasoning that doing things the legal way would take too much time.

Worse, the company allegedly stripped copyright management info from the files to cover its tracks. Clearly, they’re following the motto of moving fast and breaking things. This time around, they seem intent on breaking copyright law. Given Meta’s long track record, I’m not sure what is most surprising: the planning of such a sophisticated heist or the ham-handed cover up. Either way, they graciously documented it all in email.

Meanwhile, over in Mountain View, Google has once again leveraged its search dominance to take traffic and revenue from publishers. In May, Google launched AI Mode, which scrapes and summarizes publishers’ original content to give users the answer without needing to click through thereby extracting out all of the incentives for the publisher.

In a bit of stunning bravado, Google rolled out AI Mode just 48 hours before closing arguments in the remedies phase of the Google Search trial, where the evidence clearly shows that Google abused its market power in search to maintain its significant advantages in crawling, clicks and query data which are paramount to the AI era. Google claims publishers can opt out. However, they can only do so by removing themselves from search entirely–which is no choice at all when it involves a company with more than 95% of the mobile queries. Google’s unauthorized use of copyrighted content to create a substitutive product has, to no one’s surprise, led to a massive downturn in traffic to publisher sites. Simultaneously, Google announced that Gemini will soon be on by default for consumers, collecting data about their activities. This is an oft-used strategy by Google. They tune the defaults to maximum data collection, knowing full well that consumers won’t know or take the time to shut them off.

The courts push back

However, despite big tech’s brazen and predictable pattern of brutish behavior, the legal system may be starting to catch up with the platforms’ anticompetitive tactics. Google has been found guilty of violating antitrust law in both the search and ad tech markets. And at least in the search case, the Court has been very focused on ensuring AI is a competitive marketplace rather than the fruit of more Google abuses. In addition, we’re starting to get additional clarity on how copyright law applies in this new digital age of AI.

In Thomson Reuters v. Ross Intelligence, U.S. District Court Judge Stephanos Bibas ruled that Ross infringed copyright by using Westlaw’s headnotes to train an AI competitor, despite Ross’ claims of fair use. Initially, Ross reached out to Thomson Reuters to license the content but ultimately opted to acquire the Westlaw content from a third party, LegalEase (which sounds eerily similar to Kadrey v Meta).

Judge Bibas rejected all of Ross’ defenses, stating that innocent infringement, copyright misuse, merger defense, scenes à faire defense, and fair use did not apply. On fair use, Judge Bibas eloquently analyzed the four established factors: the use’s purpose and character; the copyrighted work’s nature; how much of the work was used and how substantial a part it was relative to the copyrighted work’s whole; and how Ross’s use affected the copyrighted work’s value or potential market.

On the fourth factor, Judge Bibas found that Ross “meant to compete with Westlaw by developing a market substitute.” He wrote that this factor is “undoubtedly the single most important element of fair use.” That seems like an important ruling in light of the way Google’s AI Mode trains on and serves as a substitute for publisher’s original content.

In April, U.S. District Court Judge Sidney Stein rejected OpenAI and Microsoft’s motion to dismiss, thereby allowing all of the copyright and trademark dilution clams from The New York Times’ suit to proceed. While the bar is admittedly lower for a motion to dismiss, Judge Stein noted “that plaintiffs have plausibly alleged the existence of third-party end-user infringement and that defendants knew or had reason to know of that infringement.”

Then, in May, the U.S. Copyright Office released a report on AI training and fair use. It concluded that using massive troves of copyrighted content to generate commercial AI outputs likely fails fair use, especially when done through illegal means. The report also notes that “effective licensing options can ensure that innovation continues to advance without undermining intellectual property rights.” The Copyright Office rightly recognized that creative works are not mere “data” to be harvested, but expressions of human authorship protected by the Constitution and enshrined in U.S. copyright law.

From slogans to standards

So, what does this mean? For one, courts are rejecting the Silicon Valley myth that fair use lets AI companies take whatever they want. Licensing isn’t just viable, it’s required. Congress should pay attention.

Although there will inevitably be bumps along the road as fair use analysis is unique to each case, these rulings act as a compass to where things are headed. They send important signals to big tech companies with a history of anticompetitive behavior: don’t be evil or you may be held liable. The old playbook—take first, ask questions never—isn’t going to work in this new AI era. It’s time for a better North Star: accountability, transparency, and fair competition.

The post Time’s up for platform privilege appeared first on Digital Content Next.

Open Markets Institute and the Center for Journalism and Liberty’s new report, AI in the Public Interest: Confronting the Monopoly Threat, looks at some of the major concerns around the development and applications of AI. It also examines the potential monopolistic influence of the Tech giants, (Google, Amazon, Microsoft, Meta, and Apple) on the evolution of AI. As the authors posit, “How AI is developed and the impact it has on our democracies and societies will depend on who is allowed to manage, develop, and deploy these technologies, and how exactly they put them to use.”

Authors Barry Lynn, Max von Thun, and Karina Montoya highlight government responses to concerns in early-stage regulations. Actions in Europe include the EU’s Artificial Intelligence Act, while the UK’s competition authority delves into the competition landscape of foundation models. In the US, the Biden Administration outlined a Blueprint for an AI Bill of Rights and issued a comprehensive Executive Order targeting AI-related harms.

The dangers of monopolist AI development

The report examines the tech giants’ structures and the behaviors of controlling foundational AI technologies. The influence of major tech corporations extends to the entire spectrum of innovation within the Internet tech stack, allowing them to (broadly) control the direction, speed, and nature of innovation. The authors suggest that these companies’ stronghold over “upstream” infrastructure empowers them, for example, to identify and suppress potential rivals through various means, directing the entire “downstream” ecosystem to serve their interests.

The authors call out several harms that can result from this dominant role in the evolution of AI:

1. Suppression of trustworthy information: Restructuring communication and commercial systems can hamper individuals’ ability to access, report, verify, and share reliable information.
2. Spread of propaganda and misinformation: AI can enable personalized manipulation of propaganda and misinformation (at scale), intensifying their political, social, and psychological impact. The reach and power of tech giants, combined with generative AI capabilities, elevate the effectiveness of state-level and private actors in manipulating public opinion.
3. Addiction to online services: The rise of social media, gaming, and other online services has been linked to addiction and mental health issues, particularly among minors. Monopolistic platforms, prioritizing screen time and viral content, can exploit generative AI’s ability to customize and target content, intensifying harmful effects.
4. Employee surveillance: Tech corporations may utilize surveillance and AI to monitor employees, which would impact privacy and fair employment practices.
5. Monopolistic extortion: Through control of ecommerce platforms, app stores, and other gateways, corporations can extract fees from sellers and dictate business terms.
6. Reduce security and resilience: Concentration in the core infrastructure poses security risks as businesses and governments increasingly incorporate AI.
7. Degrading essential services: Generative AI can reduce quality by producing large volumes of inaccurate content.

Applying competitive legal measures

History reveals that competition laws, antitrust measures, and regulations are vital to prevent powerful corporations from exploiting groundbreaking technologies. The authors advocate for effective oversight and control mechanisms. Applying tools to regulate corporate behavior and industry governance empowers the public, ensuring consumers benefit from these technological advances. This approach facilitates the protection of individual and public interests through regulatory practices.

Recommendations for immediate action:

• Stop large tech companies from controlling AI: Make big tech companies change their plans when they try to control the development of AI through deals and partnerships.
• Share large tech company data with everyone: Agree that the information big companies collect should be shared with everyone and make rules about who can use this data to benefit the public.
• Protect artists’ and writers’ work: Make sure the big companies can’t steal or misuse the work of artists, writers, and other creative people.
• Check if large tech companies are a security risk: Look closely at how big companies might risk the country’s safety and ensure they can’t control everything and make it safer.
• Protect people from digital tricks: Make strong rules to stop big tech companies from tricking and exploiting workers and contractors online.
• Stop unfair treatment by large tech companies: Make it illegal for powerful tech companies to treat people and businesses unfairly when providing important services.
• Acknowledge the importance of cloud computing: Make sure the big tech companies don’t have too much control over it by treating it like a regulated utility.
• Make laws work together: Make sure the people enforcing laws about fair competition and privacy work together closely.

Fair market

The authors suggest market structures ensure AI serves the public interest and remains subject to democratic control by citizens, not corporations. The Biden White House is adopting a “whole-of-government” strategy including privacy, consumer protection, corporate governance, copyright law, trade policy, labor law, and industrial policy to deal with the AI trajectory. 

The report concludes the more seamlessly these regulatory frameworks are integrated in the United States and globally, the more effective the process. By leveraging the collective power of diverse regulatory mechanisms, AI can become a force for the common good, guided by democratic principles and serving the welfare of the people.

The post Allowing big tech to monopolize AI is risky business appeared first on Digital Content Next.

“This is now a global phenomenon and big tech platforms like Meta and Google can’t keep using bullying scare tactics. They have to show up and be prepared to negotiate meaningfully,” according to Jordan Guiao, research fellow at The Australia Institute’s Center for Responsible Technology.

Lawmakers in many different jurisdictions have begun to respond to the critical damage big tech platforms have inflicted on the funding model of the world’s media business. Those steps include the News Media Bargaining Code in Australia, the Online News Act in Canada and the proposed Journalism Competitive and Preservative Act in the U.S. (which Digital Content Next has endorsed). These laws are designed to mandate these tech companies to compensate publishers for the inclusion of the news content that is shared, or found their platforms. 

To bolster its position, Meta points to a study it commissioned from NERA economic consulting group which concluded that having platforms pay for news content wasn’t justified. However, advocates for the media industry dispute the accuracy of the findings. 

“People who consume news tend to spend a lot of time on a platform,” said Paul Deegan, chief executive of Canadian trade association News Media Canada. “They go there for news. They come back for more. They’re an attractive demographic in terms of skewing higher on educational attainment and income.” 

“Just in terms of value, [big tech platforms] get tremendous value from news,” he said.

Devaluing the news

However, according to Instagram chief Adam Mosseri: “[F]rom a platform’s perspective, any incremental engagement or revenue they might drive is not at all worth the scrutiny, negativity (let’s be honest), or integrity risks that come along with them.”

So, in response to increasing pressure to compensate publishers for news, and their own research findings that it doesn’t provide sufficient value to them, platforms have pulled back on including news content on their services. 

In February of 2022, Facebook dropped the word news from users’ “news feed.” And in June this year, publishers noted a significant drop-off in traffic from the site, suggesting an algorithmic adjustment to devalue news. And, after the launch of Threads earlier this month, Mosseri said that the platform would not take any steps to “encourage [politics and hard news] verticals.”

Tit-for-tat

In a direct response to policy efforts platforms have gone so far as to block news content altogether. In 2021, Meta not only blocked users in Australia from seeing news content on Facebook but prevented them from posting links to any news stories, regardless of where they were published. In less than a month, the company relented and has since signed licensing deals with publishers in Australia. Job postings in the country’s media sector are up 46% as of April this year.

However, with the passage of the Online News Act in June, Meta and Google have taken a harder tack against these regulatory efforts. Already the platforms have canceled previously struck deals with Canadian publishers and have started to block news in the country. 

Reprinted with the permission of Luke LeBrun (@_llebrun) Editor, PressProgress

In February, Google conducted a test to assess the impact of blocking news access for Canadians altogether as it evaluated possible responses to the Act. The company is reportedly holding off on fully implementing its response until the regulations are made by the Canadian Radio-television and Telecommunications Commission. Since the passage of the Act last month, Meta has started to intermittently block Canadian news sources on its various services. 

According to Canadian Prime Minister Justin Trudeau, Canada has no plans to back down. In fact, they’ve taken the fight to a familiar battlefield on this issue: advertising. Publishers and the federal government in Canada have pulled their advertising from Meta’s services. Per regulatory filings, Canada accounts for $3 billion of Meta’s $117 billion in annual revenues. “The company is running the very real risk of losing more in revenue than they would pay news businesses under the Online News Act,” Deegan told the Financial Times.

The battle has escalated to news publishers rejecting Meta’s ads on their sites, which were purportedly intended to inform Canadian audiences about the news blocking initiated by the big tech platforms in Canada. 

Next steps?

Navigating what comes next will be the challenge facing both regulators and publishers. 

As of now, a version of the JCPA in California passed the state assembly in a 55-6 vote in June. Despite this, the bill has been put on hold for two years, with an initial state senate hearing scheduled for July 11 this year pushed back to 2024.

Other commentators in Canada view the contentious moves in response to early attempts to regulate the big platforms as an opportunity to further address the wider problems caused by the big tech companies.

“While the government of Canada certainly does not have the power to go back in time and block the consolidation that has occurred in the digital ad market, it is able to empower our competition and privacy commissioners to conduct an investigation into how Big Tech operates in the Canadian ad tech market,” wrote Taylor Owen, Beaverbrook Chair in media, ethics and communications, and Supriya Dwivedi, director of policy and engagement at the Centre for Media, Technology and Democracy.

As well, there’s skepticism that Meta and Google can survive the reputational risks of continuing to block legitimate news sources on their platforms.

“Essentially, I don’t see blocking of news as a viable action for Meta and Google. From the Australian perspective, the news block was a bluff, and we called them out on it. In Canada I believe this will be much the same. And if they prolong it in any way, their reputation as a platform for misinformation will only be validated,” said the Australia Institute’s Guiao. “Meta and Google need news content to legitimize the accuracy, dependability and truthfulness of the information in their platforms.” 

The post Publishers and platforms face off over the value of news appeared first on Digital Content Next.

In the words of Canadian Prime Minister Justin Trudeau, “This is not just a dispute over advertising, it is also dispute over democracy. It’s a question of recognizing the role internet giants—like Facebook Meta, Google and others—have in our lives and therefore the responsibility they also wield.  …this goes to the core of a free and informed society that is able to take responsible decisions in a democracy citizens need to have access to quality journalism that is properly paid.

The fact that Facebook doesn’t want to recognize the hard work of professional journalists is something that undermines the very fabric of democracy. So, Canada—and allies around the world—are going to stand strong and demonstrate that we will not flinch in our defense of fundamental foundational principles of democracy like a free, quality, informed press.”

Read the full joint statement here.

The post DCN stands with global media community as Google and Meta threaten to take down news in Canada appeared first on Digital Content Next.

With the exception of non-profits, most news organizations employ a commercial model. In the simplest terms, advertising is used to drive revenue to support the news organization. However, intermediaries – notably Google and Facebook – now stand between the publisher and the advertiser. Since search and social media are key ways in which people discover and consume news online, these platforms benefit from the user traffic derived from publishers’ content. They collect personal data on users and group people into demographic and special-interest categories to target advertising to them on their platforms.

Radsch’s research examines how policymakers are working to redirect revenue to compensate news outlets more equitably.

Her report classifies the different policies into three distinct groups:

1. Digital taxation,
2. Competition policy (or antitrust), and
3. Intellectual property.

Taxation

In recent years, taxing digital advertising has gained interest. In 2019, the U.S.-based Free Press proposes a small tax on revenues generated from targeted advertising. This policy was established with Google and Facebook in mind. The taxed revenue would be used to fund public interest media systems.

Radsch notes it’s problematic that the policy does not identify who will monitor and implement a payment distribution system for the news media companies. 

While not covered in this report, in 2021, Connecticut, Indiana, New York, Oregon, and Washington introduced state proposals for a new tax on revenues from digital advertising or to expand the state sales tax to digital advertising sales. Interestingly, none of these proposals allocate the tax revenue to news organizations. Connecticut plan suggested the revenue from the tax be dedicated, in part, to funding online bullying prevention efforts and training for social isolation and suicide prevention.

Maryland became the first state to enact such a tax in February 2021. However, these state tax laws face court battles since they likely run afoul of the Constitution’s Commerce clause. This clause restricts the ability of states to regulate commercial activity across state lines, and the Internet Tax Freedom Act prohibits states from levying taxes solely on digital goods or services.

Bargaining power

Other policies are exploring making platforms pay for the news they use, headlines, photos, and snippets. This type of policy forces the platforms to negotiate directly with publishers rather than the government. Australia made headlines in 2021 when it passed this type of legislation requiring Facebook and Google to share algorithmic information with and pay licensing fees to news organizations. The code states that news media companies can bargain individually or collectively for payment from platforms to use their content.

As a result, Google and Facebook threatened to pull their services from the Australian market. Facebook did shut down its service for one week. Both companies ultimately acquiesced and signed deals with Australian publishers.

Intellectual property rights

Many question whether the “fair use” exception in copyright law, the use of a small amount of copyrighted material without prior permission, applies to Google and Facebook.

The 2021 EU Digital Copyright Directive created a right for press publishers, not just authors, to claim copyright, including for snippets of news. In addition to individual publishers being able to strike deals with the various platforms, the Directive allows collective management organizations to negotiate licensing fees and distribute them back to publishers. 

In 2021, members of the U.S. Congress proposed a new version of the Journalism Competition and Preservation Act of 2021. This bill would create a four-year safe harbor from antitrust laws for print, broadcast, or digital news companies to collectively negotiate with platforms regarding the use of the news companies’ content. In other words, media news companies could collaborate to discuss bargaining with Google and Facebook without fear of antitrust violation. Despite bipartisan support, the bill appears to have stalled.

Profits and progress

Google and Facebook claim that news content generates little revenue. However, their earning calls suggest otherwise. These companies benefit tremendously from the trusted content and audiences that news publishers deliver. 

Radsch’s report calls for platform transparency, including sharing traffic reports and the number of ads served around each news item. This would be a good first step to revealing the amount of revenue the news content generates on the platforms. Once this amount is determined and platforms equitably paid for news content, the relationship between the two can reset. Given the importance of advertising revenue to journalism, it’s important to get this right. Radsch’s report offers guidance and insights that will help policymakers move forward meaningfully.

The post Research explores the best way to balance big tech and journalism appeared first on Digital Content Next.

In my last post, I mentioned there would be a lot of uncertainty when operating within multiple sandboxes (aka monopolistic platforms). Frequent rule changes and regulations imposed by the big tech platforms challenge media owners’ core business. And, as publishers must operate their sites or apps to survive, it is important to explore alternatives. 

This new dynamic means publishers will need to change strategies to navigate and extract the most value for themselves. The key to success is remembering that each sandbox, privacy rule, etc, is but one element of that sprawling big tech ecosystem. And the ecosystem itself is where publishers should heighten their focus.

Is your tech stack creating risk?  

The technical stack is the beating heart of any media organization’s revenue production. While it is a necessity, if left as the sole engine for driving a majority of your revenue, it creates the biggest dependency and single point of failure for any media owner. Why? Simply because the big tech platforms control the browser, the buy-side tech, the sell-side tech, and the identity tech… Talk about being a superpower. They own the whole ecosystem. And this has created an imbalance of control. This intentionally manufactured dependency allows big tech to generate vital revenue streams for their benefit first. It also poses a significant risk of revenue loss for publishers.

Operationally, it is possible to switch tech providers, but the stack isn’t easily replaced. I’m not advocating an outright replacement, as that is not the answer for most publishers. A singular tech stack may have worked in the past. However, it’s no longer tenable to depend solely upon a single company acting as judge, jury, and executioner. Publishers must be ready and willing to mitigate risk through diversification. A singular stack will no longer offer rules to monetize all types of traffic.

Protecting against loss

If the future means navigating a world dominated by the big players, the best way to protect your interests is to understand how to work with multiple providers. To start, one should use the main tech stack to extract the most value from what that stack will deliver. For most publishers, GAM serves as the main stack and requires publisher data to feed it. As long as consumers provide consent, revenue should remain intact. However, with the rise of consumer privacy regulations, we will see an ever-growing pool of users who won’t provide consent. 

Without consent and data, a secondary tech stack can complement a publisher’s monetization efforts. Additional value can be unlocked through options for targeting non-consented traffic. In instances of no consent, these impressions can be paired with semantic contextual targeting to help ensure ad delivery. Additionally, this helps protect against potential revenue loss.

Insurance policy: a second stack

A secondary stack may also provide rules that complement the rules of the main stack. For example, content classified with an R rating that gets excluded from one platform can be monetized by engaging another tech provider. The same can be true for niche advertising categories, such as cannabis. As more states legalize cannabis, depending solely on a provider that limits access to sensitive categories can have a large impact on revenue. Diversifying the stack also offers better monetization options for different ad formats and can provide access to different regions. 
So, while it may seem counterintuitive to operational efficiency, leveraging the respective strengths of multiple tech providers can result in greater efficiency and decreases your dependency on a single platform. Understanding what each offers can help you tailor a solution that best protects your interests and insures you against potential risk. 

The post Mitigating risk in the age of big tech appeared first on Digital Content Next.

Tech inventory takeover

Just over six years ago, nearly half of the impressions across DCN members’ websites and apps, including both video and display, were sold directly by the publisher. When we receive final 2020 numbers next month, we expect that number will have dipped below 20% for the first time. The driving force here is data.

Third-party adtech firms have a competitive data advantage because they are able to track users without their knowledge across the web and apps. This pervasive audience-targeting, combined with the scale and ease of buying through these large third parties, has significantly shifted sales channels away from publishers and into the arms of data aggregators.

Tech financial takeover

Shifting to a reliance on third parties to sell 80% of publisher impressions didn’t need to be bad. Unfortunately, it is. Very bad indeed.

A majority of these ads are purchased based on microtargeted audiences — often using Apple’s IDFA or third-party cookies as a proxy for real people. In this process, publishers’ apps and websites are treated as interchangeable commodities. These third parties, Google being the largest, extract data and detach it from the inventory. This allows audiences to be targeted elsewhere on the web at the cheapest price available. That’s why advertising purchased directly from a publisher is sold at 5x the rate of inventory purchased through these third-party channels. Publishers are able to monetize the value of their brand, content and user relationships when selling the ads rather than being repackaged into a nameless audience bundle.

Two big winners: the two biggest “trackers”

In the two largest sales channels (Facebook and Google), premium publishers’ inventory must also compete against the two firms’ own inventory, and an insurmountable data advantage.

Between 2015 and 2019, this data advantage allowed the “duopoly” to capture 86% of the incremental U.S. digital advertising growth. Last year, the trend continued with the two taking 87% of the digital advertising market growth in the U.S.

Industry, regulators and, most importantly, the public, have grown to understand the core of the two companies’ business models relies on unbridled data collection. The numbers below clearly back this up. The bar chart on the left shows the change in sales channels of U.S. digital advertising from 2015 to 2019 and the percentage of the growth (right pie chart) captured by only two companies in 2020. 

The privacy and data protection scale is tipping

There is little debate that users overwhelmingly choose privacy over tracking when they are asked which they prefer. The most famous privacy law to date, Europe’s General Data Protection Regulation (GDPR), has yet to fully bare its teeth. However, it is grounded in clear purpose limitations that minimize tracking and other uses of data that fall outside consumer expectations without very specific consent.

This inspired the most significant privacy law in, not coincidentally, the most populous U.S. state: California. Its latest incarnation (CPRA), which allows users to opt-out of tracking, is set to go into effect next year. It has even spawned the Global Privacy Control (GPC) to make this a simpler process which the Attorney General has recently endorsed as legally enforceable. 

Meanwhile, Apple’s restricted use of its universal identifier IDFA, which has long been used for tracking, in the latest push of its iOS. Apple now mandates, for the first time, that apps ask their users to make a choice: They need to either ask the app not to track them or give explicit consent to track them. Unfortunately, this can create collateral damage even when an identifier is only being used by a service provider to the publisher that the user values and trusts.

Early reads on the data are that well over 90% of the users choose not to be tracked. So, Facebook had good reason to predict an earthquake coming its way since it’s not a service provider — but is the poster child of distrust. I can’t endorse a podcast more highly to distill the implications of this battle between Apple and Facebook than NYT The Daily. They elegantly illustrate that this is a high-stakes global war. And it’s patently obvious you wouldn’t want to line up on the side of Facebook in a battle over privacy.

But won’t this hurt ad prices and only make Google and Facebook stronger?

The two key arguments against data protection like Apple’s update are that 1) it will hurt ad prices and 2) make the duopoly even stronger. Indeed, third-party inventory is worth a lot more when it is coupled with third-party data. Unsurprisingly, adtech-funded research likes to tout this.

However, that perspective only looks at prices for a narrow type of targeting. There are very few empirical studies that examine the full marketplace. And these tend to show only modest benefit to publishers from unbridled third-party data. Publishers that have leaned into their first-party data ahead of the market are in a position of strength going forward. And, as the bar gets raised across the industry, they should see the increase in value from other more acceptable forms of targeting. Blunt technical solutions that fail to understand the nuance and trust of the publisher pose a risk to this opportunity.

In terms of Google and Facebook getting stronger, remember that they already have an insurmountable data advantage and their business results back it up. Clearly, Facebook wouldn’t have run national ad campaigns against Apple (even — ironically — threatening an antitrust lawsuit), if Apple shutting down IDFA tracking would have actually helped Facebook. 

And no one actually believes that the Facebook behemoth is the champion of small business. They claim that personalized ads are the lifeblood of small business advertising and that offering consumers the option to forgo tracking would limit these businesses’ ability to effectively reach customers. Apple, however, points out that users are welcome to opt-in to data collection, thereby enabling personalized advertising. And let’s face it: In a privacy first digital advertising environment, those with first party data and trusted relationships with audiences will still reach them.

However, Facebook’s data dominance isn’t based upon a clear exchange of data for services. In fact, U.K. regulators issued a report (figure 2.3, page 50) showing that more than 50% of Google and Facebook’s data is collected when people aren’t actually intending to use a Google or Facebook service. This is the very definition of the kind of unbridled “tracking” that is so damaging to trust and the digital advertising business. That’s a critical data point — and one these companies aren’t crowing about in national ad campaigns. 

Ok, yes, both companies have a significant amount of first-party data. However, shifts towards privacy pose a significant challenge to keeping this data fresh and enriching their interest profiles. This is spelled out in their 10Ks every time they file. Additionally, antitrust lawsuits focused on their data practices, along with new regulations like the Digital Markets Act in Europe, are squarely directed at them. Soon, they will appropriately put heightened data limitations on these powerful “gatekeepers.”

What to do if you’re a premium publisher

These changes are happening with or without us. The timeline, like all tectonic shifts, is unpredictable but the aftermath will be significant. However, publishers who understand the possibilities, see the emerging white space, invest in their direct consumer relationships, and are forthright about user expectations will have an advantage. Risks lie in allowing large tech platforms and lawmakers to define the terms and conversations impacting premium publishers.

I encourage publishers to lean into DCN to make sure we’re properly informed on your plans. We’re here to help you evaluate the risks and face unexpected challenges. DCN has technology supporters that are paving the way for publishers who need help. No doubt, there are elements of Apple’s move which can break core, and expected, functionality as they limit tracking.

Apple has used the definition of “tracking” developed years ago by a multistakeholder group, which included DCN and all sides of the industry. However, blunt technical enforcement always creates unintended consequences. We need to understand these issues so that we can help guide tech firms, lawmakers, and regulators to address consumer interests and the publishers who serve them day in and day out.

We feel the digital advertising landscape shifting. Yes, things will get broken. Some of those will not be missed, however. And, when the dust settles and we take stock of the reshaped landscape, we will see that the crumbling cookie and the fall of pervasive and invasive “tracking” will clear the way for our industry to build better solutions. These will be based upon quality experiences and transparent and in-context data collection. And this, in turn, will build a strong foundation for effective marketing and revenue that rewards companies that truly value their customers.

The post Aftershock: What the industry looks like after Apple’s privacy update appeared first on Digital Content Next.

To put this in perspective: What percentage of US digital ad spending did the Triopoly capture in 2018? 

A. 53%
B. 48.6%
C. 66.8%
D. 78%

How about 2019? What percentage of the US digital ad spending did the Triopoly capture in 2019? 

A. 63%
B. 58.6%
C. 80%
D. 68%

If you answered C for both questions, you are right. The Triopoly took 66.8% in 2018, 80% in 2019, and 90% in 2020. This is a pretty disconcerting trend if you are a publisher. However, it is equally consequential for readers as well as society as a whole.

So, what are the majority of web publishers doing about this?  How exactly are they trying to stop this train from crushing them, or at least slowing it so that next year it’s not capturing 92% or 95% or 98%?

Stop complaining and act

The answer is they are doing not much more than complaining about it. Many (if not most) senior publishing executives will tell you the answers are direct revenue from consumers (subscriptions, memberships, etc.). Seems reasonable until you consider that most of it is already available for free from the competition.

Unfortunately, most publishers are not The New York Times, The Wall Street Journal, or The Economist. Therefore, subscription revenues are unlikely to replace the loss of the billions of dollars of advertising revenue that enables most publications to survive and grow.

And what exactly does the Triopoly have that web publishers don’t have?  Well, that’s a long and somewhat complicated answer but let’s take a look.

A better mousetrap

Essentially, they have built an easy to access and toll-free on-ramp to every publisher’s unique content. Thus, they’ve eliminated the need to invest in the time-consuming and expensive process of creating that content themselves. What’s more, they have the ability to capitalize on their audience engagement in this content (that they neither created nor own). They offer high value and effective ad impressions to target specific audiences.

Now let’s pretend for a second that you sell fly fishing gear…

• Google serves the ad to fly fisherman searching for gear
• Facebook serves the ad to fly fisherman or those who appear to be
• Amazon connects with fly fishermen via targeted ads and keyword search

In each case they have the ability to deliver a high value advertising environment that delivers proven ROI. In short, they get rewarded for their access to the content the user wants at scale.

Make your audience king

What, dear reader does the publisher have?  They will say “we have unique content.” I respectfully and reluctantly say, BS. Many sites have content that is largely undifferentiated from that of other publishers. Even if some publishers actually do have unique content, they are not rewarded for the millions of dollars they invest to create that content as a result of the painful efficiency of programmatic advertising and RTB.

Truth is that the programmatic buying machine doesn’t reward publishers for better content. It simply seeks the most cost-efficient way to deliver advertising to the targeted audience.  The algorithms don’t really care if they find their prospects at Bloomberg, The Wall Street Journal, or Fandom. In the programmatic world the target audience is king.

So, it’s very easy to see why the Triopoly has racked up 90% of the ad spend.  Remember the Facebook boycott last summer?  How long did that last?  Advertisers ran back to Facebook because they have built a proverbial better mousetrap that consistently delivers a measurable ROI. The result? Facebook’s numbers are off the charts (as usual) and so are Google’s and Amazon’s.

My question is:  What have we allowed to happen to our beloved and irreplaceable publishing community? Every year market share erodes, now 10%, in 5 years what?  It’s time to stop that steady drip, drip, drip. These are desperate times for our industry and the survival of our cherished media will require bold action. If the audience truly is king then let us all capitalize on the engagement and commitment of our collective audiences and stop fighting with our sisters and brothers for the ever-dwindling market share. To paraphrase Pogo, “We have met the enemy, and he ain’t us!”

An immodest proposal

I am hereby issuing a clarion call for web publishers to stop competing among themselves. Your peers are not your opponents. They are your colleagues. Now is the time to band together and develop a consortium that can rival the Triopoly with the scale and the ability to provide unique ad solutions. It’s time for publishers to receive their just rewards for creating premium content. Yes, this has been tried (mostly without success) before, as discussed in this recent Digiday piece. 

Yet, the concept is sound. And the time is upon us to act boldly and massively. Three or four or a dozen like-minded publishers will not make the difference necessary to turn the tide. A broad industry initiative led by an organization as credible as Digital Content Next and with support from its members and affiliated technology partners is what is called for. We are committed to make this happen. Who else is in? Let’s not wait a moment longer.

About the author

Bruce Brandfon is Chief Media Officer of Duration Media. Prior to that he was EVP of Webspectator, and before that VP and Managing Director at Publicitas. Before joining Publicitas, Bruce was VP and Publisher of Scientific American. He has also held leadership positions at The Philadelphia Media Network, Newsweek, and Time Inc. Bruce is Director of the Board of Advisors at Planet Forward, and an Adjunct Professor of Media Studies at Westchester Community College.

The post Instead of scrabbling over the triopoly’s crumbs, publishers must unite appeared first on Digital Content Next.

“Don’t worry about the world coming to an end today. It is already tomorrow in Australia.”

—Charles M. Schultz

For those focused on where the future of the internet media economy is headed, all eyes turned to Australia in recent weeks. And, despite a last-minute PR spin campaign filled with half-truths and outright deception by pundits around the world vying to influence the debate, the end result is a new law, the News Media and Digital Platforms Mandatory Bargaining Code, which foreshadows the future for Google and Facebook.

We’ve had enough hot takes. It’s time to kill off, once and for all, the disinformation, misinformation, and talking points of the infamous duopoly, which I’ll try to do here by busting 10 myths. (Happy to talk through any of these further. Just reach out: publicly or privately.)

Myth busting

1. The bargaining code resulted from an arbitrary process.

This couldn’t be further from the truth. The Australian government undertook a thorough, multi-year process to establish this new law. Importantly, its competition regulator (ACCC) spent nearly two years investigating the dominance of Google and Facebook. The result was a 600+ page report that clearly demonstrates the imbalanced bargaining power held by the duopoly. At the same time, the Australian government – with support from all political parties – formulated a public policy decision about how to better fund journalism. The only assumption made was that the press is critically important to democracy. This should not be a controversial assumption. 

2. The inventor of the web has called this a “link tax” that will break the internet.

Yes, Tim Berners-Lee wrote a letter rightly expressing his concern that if it was possible to require payment for links throughout the web, it could break the internet. In the letter, he often hedged and clearly wasn’t focused on the specifics of the law, which does not require payment for links. We’ve seen this “link tax” talking point high on Google’s list in the past. And it’s a galvanizing force for defenders of the open web – as it should be. The law does mention linking but only in the context of describing what a digital platform does by publishing, curating, and linking to the news. It’s narrowly focused on the two platforms and in no way does it suggest a platform should be required to compensate for its links to news outlets.

3. Facebook won key concessions at the final hour.

The concessions for Facebook were, in fact, relatively minor. When Facebook pulled news off Australian users’ feeds, their goal was to trigger global outrage, shake up the press cycles, and turn the globe against Australia. Then, by throwing its PR might behind some elegant spinning about a great compromise, Facebook saved face. That’s all they did.

The final concessions included the addition of a couple windows of time (measured in months) in which Facebook will lobby and protest about having to pay for news. The “concessions” also included two changes that clarify the mechanics of the code.

4. This law is a gift to Murdoch and hurts everyone else.

Yes, News Limited has a lot of influence in Australia as its leading news company. In fact, as the ACCC Chairman noted, 80-90% of the journalists in Australia work for one of three companies (News, Nine, ABC). However, the idea that Google or Facebook would negotiate with these three companies and hang the other 10% of the market out to dry seems very unlikely considering the modest amount of additional funds it will take to round out the rest of the industry.

Having spent a significant amount of time on Australia’s 600+ page report, I would suggest that the law is much more clearly in the camp of increasing bargaining power for all journalism. It’s hard to argue that any news publisher with more than $150k in revenue per year isn’t better off with this law in place. Moreover, the law also allows for publishers to collectively bargain if they prefer. That does seem likely if they’re not getting what they need from Facebook and Google.

5. News Corp’s global deal with Google will result in settlements of antitrust lawsuits.

This anti-antitrust argument is the silliest thing I’ve heard. There is no greater fallacy in digital media right now than attributing the global antitrust scrutiny on Google and Facebook to one or even just a few parties. The antitrust lawsuits currently filed have the weight of the U.S. government, in 49 out of 50 states, and both parties in Congress.

The cases are robust, particularly the Texas-led advertising tech case against Google (which mirrors some of the work of the ACCC), Congress. Another is from the CMA, which is the UK’s comparable regulator. It also alleges a Section 1 charge of bid rigging between Facebook and Google. No market regulator walks away from these cases based on the whims of one complainant. The work in Australia has only added weight to these cases.

6. Publishers in Europe should be celebrating.

Globally, there is a lot of positive reaction to the work done in Australia. However, it’s also notable that the European market has been working for even longer on better funding professional content. In successfully passing an updated copyright directive, they’ve taken an approach that establishes additional rights for publishers through a publisher’s “neighboring right.”

Importantly, the European approach is not restricted to just news. It covers all content including snippets offered on Facebook and Google. France was first to bake this new right into law. Google responded by trying to avoid paying for anything that they’ve historically taken for free.

They’ve even invented a new product offering, Google News Showcase, to bury their payments and bundle in all rights needed. This minimizes any increased bargaining power for publishers, which has caused even more scrutiny. This opaque bundling of payment for rights by Google and Facebook keeps popping up wherever they face regulatory threats. If payment for snippets isn’t clearly delineated, and the financial terms aren’t transformative, the EU is likely to view Australia’s new law as a missed opportunity.  

7. Government will set an arbitrary price for platforms to pay for news content.

The reality is that Australia has come up with a solution that uses market forces by requiring negotiated deals with publishers ahead of a mandatory bargaining code or an arbitration process. It uses a clever “final offer” process (also known as “baseball arbitration”) to finalize deal terms. In both cases, the government recognizes its weaknesses in over regulating a fast-growing digital marketplace. Instead, it leverages its antitrust enforcement to create a carrot and then a stick to get companies benefiting from a gross imbalance in bargaining power to the table to properly and quickly negotiate.

8. A straight platform tax would be a better solution.

The simple problem with a straight tax is all content would need to be “treated equally.” A click on Breitbart would have the same value as a click on The Wall Street Journal. The government would then divvy up a pot of money between everyone. This creates all sorts of uncomfortable government leverage over news. And one can only imagine how they would choose to split the loot. Think about the market incentives if they divided it up based on monthly uniques or page views. Better to push negotiations back into the market where intangibles such as brand, heritage, trust, consumer perception, and scoops have significant value.

9.This is unique to Australia and won’t translate to other countries.

Every lawmaker in Canada, Europe, the U.K., and U.S. who is focused on these issues will draft off Australia. Arguably, this was the biggest concern for Google and Facebook. They hoped to limit discussion to an island on the other side of the world. Our global market no longer works this way. Everyone learns from each other. Despite Facebook and Google’s ability to leverage their global dominance to protect their fortresses through trade deals, lobbying, and ducking lawmakers, the whole world is catching up to them.

Also, there are major allies in these fights to support the free and plural press. Microsoft, one of the few companies larger than Google or Facebook, has aligned with publishers on the new policies in Australia and Europe. (Forgive me, as Microsoft’s support evokes the classic “That’s not a knife” scene in Crocodile Dundee.)

10. Facebook and Google have pledged $1 billion each to news publishers so we should be happy.

Together, these two companies will easily surpass $250 Billion in global advertising revenues in 2021 without even participating in China. As of now, they’ve pledged $1 billion each towards journalism over three years. Thus, Google and Facebook are pledging barely 0.2% of their global advertising revenues towards journalism. Facebook’s protesting of payments was evidence in itself for Representative Cicilline to state that the company “is no longer compatible with democracy.” (And I tip my hat to the publisher that flatly stated that Facebook’s offer was not enough.)

These are two globally-scrutinized companies which pride themselves on moonshots. Yet they have failed to properly address how their algorithms help spread misinformation, disinformation. This has led to genocide in Myanmar, an insurrection on our Capitol, and health misinformation causing untold illness and death worldwide … to name just a few “unintended consequences.”

The future is now

The simple fact is that Facebook prefers to pay into journalism no more than it does for fake news from Macedonia, while continuing to grow its nearly $100 billion per year business of surveilling and microtargeting citizens with ads against the cheapest engagement available. They’ve devalued context. They’ve devalued facts. And they’ve devalued journalism for profits. In Australia, we see democracy fighting back.

Australia’s law has been endorsed by all major political parties in a representative democracy as a means to better fund journalism. Importantly, though this was rarely discussed, the code has a one-year review period to see how it’s working. If you listened too closely to American pundits the last few weeks, you would have thought this was the end of the open Internet – hypocrisy considering the closed platforms of those who shaped it.

The law prevailed. The world didn’t end.  In fact, it’s already tomorrow in Australia. They are ahead on this one, and there is a lot we can learn from it.

The post Australia’s new media bargaining code: What’s really up down under appeared first on Digital Content Next.

Consumer privacy: A policy patchwork

One could argue that the digital advertising industry has been “regulated” (even if enforcement was less than robust) since 2010 when the industry’s self-regulation group, the Digital Advertising Alliance (DAA), rolled out its AdChoices program. In 2018, Europe began enforcing the General Data Protection Regulation (GDPR). In 2020, the California Consumer Protection Act (CCPA) came online followed by the November passage of the GDPR-like California Privacy Rights Act (CPRA).

Against this alphabet soup of patchwork regulation, we may be reaching a tipping point. For one thing, more states are expected to pass consumer privacy laws in 2021. Even with pandemic-altered legislative calendars, 16 states nearly passed laws in 2020.

Additionally, Congress has held countless hearings over the last two years to investigate big tech’s massive data collection operations. Those hearings are sometimes painful to watch, but they are serving to educate members of Congress, who appear to be much more knowledgeable now than they were a few years ago. (Remember when one of them asked Mark Zuckerberg how Facebook makes money? Oy.)

As further evidence of an increasingly savvy Congress, there is a bipartisan group of Senators quietly negotiating to craft a national consumer privacy framework. From what I’ve seen and heard, their approach is fairly solid. With slim Democratic majorities in both houses of Congress, this kind of bipartisan approach is the only way that any meaningful privacy law can get passed. However, the deck may be stacked against them. It is difficult to move major legislation with slim majorities in the House and Senate because the margin for error is very small.

All that said, the California laws (CCPA and eventually CPRA) are likely to serve as the de facto national standard. Many companies already apply those laws nationwide, not just for California residents. Besides which, most of the big tech giants are based in California. While the CCPA was a strong first law designed to give consumers more control over how their data is collected and used, CPRA is directly targeted at curbing Google and Facebook’s massive data collection and profiling operations.

GDPR has a similar focus. However, Google and Facebook have employed creative compliance strategies that have allowed them to temporarily evade a direct hit to their businesses. The big question is whether European and California regulators can force big tech companies into finally complying with the spirit of these consumer privacy laws. Fines are fine. But the laws were actually intended to empower and protect consumers.

Section 230: A Tale of two parties

Often referred to as “The 26 Words That Created The Internet,” Section 230 became a target of both political parties in 2020. Prominent Republicans and Democrats — including each party’s Presidential nominee — have called for the elimination or massive overhaul of Section 230. And yet Congress is not all that close to resolving anything.

The problem is that each party’s concerns lead them to propose different solutions. Democrats and Republicans both agree that big tech platforms have too much market power. Hence, the flurry of antitrust lawsuits filed by a Republican Department of Justice (and likely to be carried forward by a Democratic Department of Justice) and a bipartisan flotilla of state attorneys general.

With regard to Section 230, however, Democrats criticize tech platforms for not taking action quickly enough to combat disinformation, harassment, and demagoguery. Republicans, on the other hand, allege that big tech companies use the legal shield of Section 230 to suppress conservative speech. Essentially, Democrats want tech companies to do more while Republicans want tech companies to do less. These fundamentally different viewpoints are likely to make it difficult for Congress to agree on any big changes to Section 230.

Big picture, bigger issue

What’s interesting to me is that the public policy debates around consumer privacy and Section 230 are largely driven by dominance and anticompetitive behavior of big tech companies. I wonder if we would even be having these debates if Google and Facebook faced meaningful competition.

The aforementioned alphabet soup of consumer privacy regulations was developed to address consumer concerns about the ubiquitous and non-transparent collection of consumer data for use in behaviorally targeted ads. The two most dominant players in the digital ad industry, Google and Facebook, have built massive ad targeting businesses (basically the digital equivalent of junk mail), which are fueled by the collection of consumer data across the web and our lives. The duopoly, as we have called Google and Facebook for years now, accounts for 70 to 80% of the growth in the digital advertising marketplace. Much of this advertising is delivered on their own properties regardless of where they mined the data.

With regard to Section 230, the original intent of the law was to incentivize companies for making “good faith” actions to clean up their services. However, without meaningful competition among digital platforms, those companies are merely incentivized to protect themselves against legal action as opposed to competing for consumer loyalty.

Anticompetitive by design

Imagine a world where Facebook and Instagram were separate companies competing for consumers. I think they would be vying to prove which company would be the best at snuffing out disinformation, stamping out illegal activity, and generally providing the most trustworthy service.

Significantly, when Facebook was first launched, it touted a super strong set of privacy protections and controls to differentiate from the established market players at the time. But not now. The “like” button was originally designed as a user signal to show content interests. It has become an opaque means to track people’s movement around the web. Facebook’s business model is so reliant on tracking users it ran a national ad campaign last month to publicly pressure Apple to blink on its plan to restrict the use of its advertising identifier (IDFA). And let’s not forget that Facebook only reluctantly and belatedly de-platforms hate groups and removes disinformation.

If there was meaningful competition, big tech platforms would behave very differently within the industry and for consumers. The latest bit of evidence that Google and Facebook agreed to cooperate rather than compete with each other was particularly appalling. The two dominant players in digital advertising decided to carve up the market for themselves while icing out everyone else. The fact that the agreement exists at all is quite amazing. Perhaps more amazing is that these two companies had enough chutzpah to even engage in the negotiation in the first place. In many ways merely confirmed what many industry insiders already suspected. It’s the Duopoly’s world and we’re just living in it.

While we engage in meaningful and important debates about consumer privacy and the responsibilities of companies in a digitally-dominated world, let’s not lose sight of the fact that the competitive landscape is heavily tilted in favor of the big tech companies. The antitrust lawsuits and regulatory scrutiny faced by Google and Facebook are hugely important for restoring a heathy dose of competition, which could alleviate some of the downstream public policy concerns.

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