Comment: Why Google and Facebook will fall like Rome unless they share wealth with publishers

Former local newspaper journalist and founder of the Adiply  advertising platform Rick Waghorn explains why Google and Facebook should listen to Press Gazette’s Duopoly campaign and return more value to news publishers

In April 2016 the business desk of the New York Times ran a piece on the fracturing economics of publishing on the web.

Headlined: “Media Websites Battle Faltering Ad Revenue and Traffic”, it contained the following, simple paragraph:

“In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook, said Brian Nowak, a Morgan Stanley analyst.”

As seminal paragraphs go, it was right up there with the likes of Clay Shirky’s fabulous quote re media; that “right now in media, nothing works but everything might”.

General wisdom has it that the two, US tech giants are now hoovering up 90 per cent plus of every new ad dollar Stateside and will corner 71 per cent of the UK ad market by 2021 – which has everyone from Rupert Murdoch down running for their nearest government minister in a bid to clip the wings of Mark Zuckerberg, Sergey Brin and friends.

In the case of media, there are two riders of any impending apocalypse. I might add a third in Amazon, who have yet to play their hand in the field of local, but have the computational resource required to dominate the mobile battlefields ahead. And in owning the Washington Post, Jeff Bezos has the perfect proving ground.

State intervention, as currently sought, is to my mind invariably the last act of the damned. The fact that Facebook and Google are, between them, bringing 3,500 hi-tech jobs to London this year makes their hand ever stronger when it comes to the shaping of policy with regard to the hard-pressed legacy publishers by an incoming government.

And Rupert’s actions in this space are not without self-interest. Rebekah Wade’s first act on her return to the family fold at News Corp was the £58m purchase of Unruly, a video ad platform. One that will be feeling the squeeze from both Facebook and Google. Hence his interest in pushing back against the two tech Goliaths.

Cards on table, I’m no Harvard or Stanford mathematician. Once upon a time I was an Oxford history scholar; my PPE contemporary that year was a Nick Denton – whose trials and tribulations at Gawker I have watched from afar with great interest.

Point being, I take my lessons from history, not maths.

And why I read this with much interest – a Vanity Fair profile of Mark Zuckerberg and Facebook. You would suspect a similar mindset to operate at Google. Two peas from a pretty similar Valley pod.

This Vanity Fair description of the FB mindset – “Facebook is full of true believers who really, really, really are not doing it for the money, and really, really will not stop until every man, woman, and child on earth is staring into a blue-bannered window with a Facebook logo…” – will cut both ways.

In June, 2011, Zuckerberg went to war with rival social media platform Google Plus and locked his company down with the following words: ‘Carthago delenda est!’ [Carthage must be destroyed].

Turning to classical history for inspiration somehow befits a man whose imperial ambitions are now threatening to over-run publishers on either side of the Atlantic and have, in part, prompted Press Gazette to run its laudable Duopoly campaign of late. To try and rein in his reach – and that of Mark’s global rivals at ‘Carthage’, holed up in their Mountain View fastness.

The danger is, of course, that history repeats itself. That whilst Carthage may have fallen to Rome’s advances, the Eternal City too fell.

Why it fell has been the life’s work of a US anthropologist and archaeologist called Joseph E Tainter. Shirky quotes him at length in another seminal essay from the US media academic in discussing the collapse of complex business models – of which advertising-publishing is clearly one.

Tainter’s point – set in a 2017 context by Shirky – is that such complex societies as the Mayans, the Chacoans, the Romans and, by implications, the Facebooks, collapse quite naturally when the costs of being a member of said society come to out-weight the original rewards.

When the legions and their mercenary hordes fail to get paid, so they open the gates to the Visigoths. “What’s in this for me?” is the question everyone asks of themselves.

You can see Guardian CRO Hamish Nicklin asking the same question as he revealed GNM now take home a mere 30p of every ad pound courtesy of the current complexity within the adtech market; such thinking would also underpin the Guardian’s decision to pull content from Facebook’s Instant Articles platform – there’s not enough in it for them by way of reward. Therefore they follow Tainter’s path – and abandon that ‘society’.

We are at a tipping point.

It is one that the piece in the New York Times alluded to; one that I, in the guise of my simple, local-facing ad tech platform Addiply have second guessed for all-too many years.

Because if Mark and Sergey don’t heed the lessons of history; don’t heed the warning shot that Press Gazette has fired across their bows and return to a more equitable share of the digital spoils, they will fall. And they will fail.

Whether they take the legacy publishers with them will be for the next three to five years to decide.

And for those that doubt such scenario, keep your eye on the world’s biggest advertiser. Proctor & Gamble.

This week they pulled $1.5bn out of the global advertising space. Because they weary of the cost of complexity – a complexity in which fake news thrives and in which household brands find themselves ‘supporting’ jihadi videos. The ‘cost’ can be as much to brand perception as it can be to P&G’s bottom line.

“We’re working to lead the effort on media transparency, eliminating costs in the media supply chain created by poor standards adoption, too many players grading their own homework, too many hidden touches, too many holes, where criminals can rip us off and unsafe places for our brands to have ads,” P&G’s CFO Jon Moeller told investors, as he spoke in a language that Joseph E Tainter would understand.

The ‘complex society’ that Facebook and Google now bestride in triumph isn’t rewarding its principal members – be it the world’s largest advertiser or a globally-minded publisher of GNM’s ilk.

Should Mark, Sergey and Co heed the lessons of history, then they would follow Press Gazette’s call – and return greater reward to the revolting society over which they currently preside.

Ignore the call, and history will be their judge.

And, chances are, it won’t be pretty.

Main picture: Reuters

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