Articles by: "Jason Kint, CEO – DCN"

Publishers have their mojo back

April 11, 2019 Jason Kint, CEO – DCN

I’m calling it. 2019 is the year publishers get their mojo back. While there’s still work to be done – and the rewards for many are further down the road – the signs are pointing in the right direction.

More than ever, digital media companies understand that their most precious assets are their audiences and advertisers. They understand that they must foster this relationship over time through their programming, advertising opportunities and the overall experience they create wherever they touch their customers. And, they understand that their brands are proxies for this trust. Without a doubt, the companies that publishers choose as business partners — whether distributing their content or advertising — can, and do, have a lasting impact on this trust.

Those of you who have been in the digital media business for a while are probably thinking: “Haven’t we been here before?” and perhaps you’re wondering what’s really changed in the past two years. Here’s the way I see it:

Facebook: pivots around publisher content

Initially, publishers believed the promise of a fire hose of traffic to their sites but eventually grew tired of the hoops they were jumping through to address Facebook’s changing priorities. From organic content to paid promotion, external traffic evolving into Instant Articles, embedded video becoming Facebook Watch, and everything-must-be-free to efforts to support paid subscriptions – it’s mind boggling. But all of this has resulted in publishers wanting to control their own destinies more than ever before.

Apple: push for consumer privacy

While Apple’s push for consumer privacy in its Safari browser is a laudable approach, it has hamstrung publishers’ ability to monetize their web inventory. At the same time, it pushes publishers towards Apple’s closed app platform where they cough up 30% of their revenues from selling subscriptions to their own apps. In an odd way, this 30% take-rate by Apple has made its reported 50% take on its new Apple News+ product seem more acceptable. In any case, growing consumer trust through a higher privacy bar while building in real support for publisher ad and subscription revenues are steps in the right direction.

Google: control of advertising supply chain

Google has demanded that publishers allow it to track their customers and collect their behavioral data across the web. At least if they want to get the full benefit of what has evolved into a Google-influenced, if not controlled, advertising supply chain. Google has also essentially made it a requirement for publishers to participate in AMP if they want to avoid being lumped into a news black hole on mobile. The relationship with Google can easily be one of the more sensitive issues inside any media shop and rocking the boat will almost certainly have consequences. However, consumers aren’t happy with unrestricted tracking, and that bodes well for trustworthy publishers who are transparent and handle consumer data with care.

Emerging platforms: a chance to get it right

There are new platforms growing quickly, which will succeed or fail based on their ability to fully appreciate the value of high-quality programming. Each one surfaces new negotiations and concerns. Roku is one to keep an eye on as they have the chance to reinvest in high-quality, brand-differentiated programming by truly partnering with their publishing partners. Or, they may be the next Blackberry — steamrolled as their market advantage is lost to other larger platforms that can beat them on technology alone. However, the path to success for emerging platforms will be true partnerships with trusted content brands.

What’s next?

While we may never know exactly what has caused this shift, it is a positive sign that digital media companies here and in Europe are also asking for the same things, which I’ve seen first-hand. Publishers now speak of Facebook, Google, and even Apple not simply in terms of opportunity but with skepticism. They see the positives of each in driving new audiences, innovations, and experiences – and to be a part of what is “next.” However, they’ve turned a critical eye to each platform’s motivations and are pressing for better terms, including:

Protecting and preserving the relationship with their audience. They know that trust and value reside in the relationship: The data, the brand and two-way dialogue with the customer.

Ability to drive subscription or membership revenue. For too long, this was antithetical to the interests of platforms, which wanted to touch as many users as possible for the purpose of mining their data for targeted advertising. The global discussion around this issue has shifted, starting in Europe. Now, the rest of the industry is trying to catch up.

True partnerships. They’re not looking for another quick fling, featuring a spotlight appearance at Facebook’s or Apple’s soiree. Hopefully that no longer carries the glamour it once did as the hangovers are real. Instead, publishers are looking for fair value and a long-term commitment by the platforms to work together, solve issues, and build success for all parties.

Publishers everywhere are looking at these opportunities with a shrewd business eye. They recognize that these opportunities are being designed and offered by an intermediary to their customers. And, as the stock market clearly demonstrates, these intermediaries are focused on maximizing their own profits.

Whatever the reason, or confluence of events that caused it: The non-negotiable, take-it or leave-it discussions from platforms are in the rear-view mirror. Change is here and publishers have rediscovered their mojo.

Now it’s time to put it to work.

Balancing the equation: In a fair market, subscriptions work

February 14, 2019 Jason Kint, CEO – DCN

The best things in life aren’t free, they’re loved.

In the table-setting remarks opening the 2019 DCN: Next Summit, I shared a publisher challenge that I strongly believe our industry is well on its way to overcoming: “Fighting the pervasive mentality that content must be free.”

While there is speculation that subscriptions won’t work for many content companies online, there are a growing number of companies succeeding with subscriptions as well as other direct to consumer revenue models.

Truth be told: We don’t know if direct revenues from the audience will suffice to sustain the industry in the broadest sense. However, there are positive trends on all dimensions. We’re certainly seeing more evidence across the DCN membership that people are willing to pay for premium publisher services. It’s no longer simply the financial or national news outlets that can garner subscription and membership revenues. Local news outlets, entertainment channels, and new bundles are attracting consumer revenue. We’ve started to capture these learnings in DCN research, as well as through our events on direct audience revenues.

We see three positive subscription trends happening:

If you want to differentiate a news or entertainment service, you need to compare it to the rest of your category on YouTube or the Facebook news feed. Your offering, your brand, needs to clearly stand out as compared to the next best user-generated offering in the ways more and more users are discovering it.
Every new subscription to a publisher’s product drives more intelligence and more investment back into the product so that the next subscription is easier to convert. In a world of more stable and dependable payments from your audience, it’s also easier to drive a percent of the revenue back into constantly improving the product (see trend 1) whether it be hiring more journalists or adapting the experience to the needs of the audience.
The population that has grown up with digital devices shops for news and entertainment with the tap of their fingerprint on a mobile device. Subscribing to Spotify, Netflix, Hulu, Apple Music, and more is a way of life for them. They will not hesitate to invest in news and entertainment that they trust and value. Each successful experience drives their behavior going forward and is more likely to bring their friends into the market of paying subscribers.

Importance of free to Google and Facebook

Whenever the sentiment is shared that people simply won’t pay for content in the digital age of abundance, it’s likely that Facebook or Google is lurking around a corner. They’re a crafty pair. Often, they prop up this notion with a truly worrying concern: that a shift to paid content will only serve to further divide the public based on ability to pay. However, their intention is to protect their free fortresses. An industry-wide effort and belief that audiences will pay for content is bad business for them. Hence the veiled efforts over the years to spin the narrative and control the outcome.

DCN has long established that the free digital content market has mainly benefited these two companies. The math is simple, and it’s been cited far and wide. However, it’s important to recognize how critical the free content ecosystem is to their unbalanced equation. And you don’t have to take our word for it. On Monday night, the UK government released the long-anticipated Cairncross Review, which contains over 150 pages of analysis of the digital news marketplace.

The Cairncross Review highlights two clear problems with the disturbing dominance of the Google and Facebook business models:

1. The first problem (that forms the foundation of the duopoly’s dominance) is Google’s control over the buying, selling, transacting, and measuring of the digital ad marketplace. As Cairncross so eloquently puts it:

“Google has ad inventory in the form of Google Search and YouTube videos, and it owns ‘demand side technologies’ (used by advertisers to bid and buy inventory online), such as Display & Video 360 and Google Ads, and supply side intermediaries (that publishers will use to sell their ad space to advertisers), such as Ad Manager and AdSense. It also owns supplementary technologies such as Chrome browsers, Google Analytics (a ‘freemium’ web analytics service that tracks and reports website traffic as a basic free service, with more advanced features that can be paid for), and the Android mobile operating system.”

It’s clear what’s wrong with this: Antitrust much?

2. The second problem that bolsters the foundation of these platforms’ superiority is Google and Facebook’s unmatched ability to collect voluminous amounts of personal data on peoples’ everyday interests and behaviors in both the digital and physical worlds. Again, Cairncross astutely captures:

“Publishers gather user data from their own sites, including login data for their subscribers, but this pales in comparison to the power of online platforms, which have a rich set of user data giving them significant advantage over others in the market. Whether it is search data (Google), the social networks of users (Facebook) or generally the devices, locations, interests and behaviours of users online (both), these players have an unimaginable wealth of information – valuable to advertisers and publishers – about who is coming to which news sites, and who is seeing which adverts.”

Google and Facebook are fueled by the amount of personal data available to their heavily-controlled advertising systems. Subscriptions inevitably create more user friction and restrict the flow of data. This means that movement towards subscriptions also forces these companies to step outside their carefully constructed profit guardrails. For risk-taking Silicon Valley start-ups, they’re terrible at stepping outside their shareholder comforts. Cairncross hits the nail on the head in calling for regulatory scrutiny (without mincing words) of these businesses — in how they deal with publishers, their position in the advertising market, and how their algorithms make decisions in promoting journalism.

So, who is the knight in shining armor?

To be clear, there are also positive moves by industry and government to encourage these developments. Interestingly, the Cairncross Review takes a similar position to the Canadian government by recommending a tax incentive for subscribers to news, local news, or investigative content. Again, we agree with this recommendation and expect it would help support publishers.

To their credit, Google and Facebook have made donations to innovation, journalism institutes and, in the case of Facebook, run seminars to share best practices on subscriptions. Again, their profit guardrails make it impossible for real moonshots. So, while these are good efforts, they are not enough.

And then there is Apple. A company with the leadership, the payment systems, the brand architecture, and lack of dependence on everything in between Facebook and Google’s profit guardrails (data collection, advertising). And, as news starts to trickle out on Apple’s plans for a subscription news service, there is a lot to like in it. However, as I shared with Ad Age, the reported 50% revenue share is offensive especially if it also comes with the risk of another intermediary controlling the customer relationship. I’m frankly surprised they would roll out with anything close to these terms and hopeful it’s merely a head fake.

I don’t have any proprietary information, but my back-of-the-envelope numbers on Apple’s offering means that the 100 million monthly users of Apple News translate to approximate 10-20 million daily users. Even if 10 million of these users moved into a subscription tier, this is a mere $120 million in revenue. And according to what’s being reported, a paltry $60 million would get divided between all of the participating news companies. That math doesn’t add up. If Apple has higher confidence in their model and ability to expand the market, then they’re going to need to put some revenue share behind it.

It’s just business. Oh, and the future of journalism.

Featured Post | Innovation | Perspectives | Revenue

In 2019, these 4 shifts offer opportunities for trusted media brands

November 29, 2018 Jason Kint, CEO – DCN

Successful media companies have always relied upon having a direct, trusted relationship with consumers and advertisers. Consumers want to know the brand and the experiences they’ll get from them. And advertisers that want to build this same level of customer relationship directly seek out these trusted media brands or tune advertising algorithms their way.

The teams at trusted content brands wake up every day and create content people love, products that serve them well, and safe and valuable advertising environments—all while maintaining the high level of ethics and professional standards that benefit viewers, readers, listeners, and a healthy marketplace. And we’re here to support you.

What makes our members unique is also what makes DCN unique. By focusing at the brand level across the entire media strategy, we’re able to advocate and work to advance the future of trusted news and entertainment and partner to develop all sources of revenues. We can also do it without needing to curry favor or meet the needs of a few large tech platforms with out-sized influence who are required partners for any modern publisher.

As we turn toward 2019, it is a good time to reflect on the top-of-mind trends for media companies. Here are four important shifts happening in digital media right now—all of which play into the strengths of trusted media brands:

1. Revenue, direct from audience.

With our quarterly and annual members-only benchmark report, DCN has unique access to market research specific to premium publishers. Importantly, our research isn’t skewed with numbers from Google and Facebook. (This is a very common issue in industry research. Always look “under the hood.”) Our research is based solely upon our members. One of the things our benchmarks tell us is that approximately 80% of members’ digital revenue comes from advertising. However, we’re finally seeing growth in direct revenue from audiences whether it comes in the form of membership, subscription, or donation.

Trusted publishers are uniquely positioned for this shift because they offer exactly what people want: high quality news and entertainment – that’s worth paying for. It remains to be seen how the market evolves in order for this revenue segment to grow as it must, but we’re thrilled to see our members playing a proactive role in shaping the opportunities.

2. Distributed platforms, going over the top

The list of platforms is endless and evolving: YouTube, Facebook, Snap, Twitter, Apple News, Flipboard. While publisher revenues on these distributed platforms have been promising at times (YouTube), they’ve often been disappointing (Apple News, Facebook Watch). But right now, quality content creators are seeing the fastest movement in the video space, particularly long-form and over the top (OTT).

Our best practice research on OTT earlier this year showed how our members are taking aim at these opportunities. However, new gatekeepers are surfacing in the OTT space like Amazon and Roku. And while Google and Facebook don’t like being called “walled gardens,” every new platform will no doubt be planting their own seeds to maximize their profits off your content. Experimentation is essential. But protecting your IP and deal terms early on is critical.

3. Ad targeting, rebirth of context

In the EU, the impact of GDPR has just started. There are new claims calling into question the entire way Google has collected consent for its ad supply, how real-time bidding operates, not to mention endless class-action suits mostly focused on Google and Facebook. DCN has distributed research on Google’s unique and unavoidable ability to mine behavioral and location data significantly beyond user expectations as you browse the web and walk the streets . We’ve argued towards raising the bar on companies who collect data across most of the web while recognizing the inherent trust in choosing to visit your environments, brands and context.

Global leaders are asking more questions than ever. Looming large over the discussion is a new law in California which will impact the very companies that are now (albeit, ironically) advocating for federal laws to save them through preemption. It’s been a wild year when Google, Facebook and its trade group, IAB, are now finally pushing for a federal privacy law thereby admitting their existing frameworks may be failing consumers. Quality publishers have a unique role in shaping any solutions as consumers seek more controls and alignment with their expectations. Consumers don’t know the hundreds of ad tech companies mucking up their web experiences, but they do know you and your brands. And, of course, this value then transfers to ads in this environment.

4. Advertising, direct to consumer

Research from the IAB, as well as industry discussions, has driven a DTC (“direct to consumer”) movement as the next big thing. Here is the great news about this conversation: It’s no longer focused on the plumbing, data, ad tech, and vendors. It’s focused on how brands have value and can connect directly with audiences and consumers, bypassing gatekeepers and intermediaries. This is the sweet spot for quality content companies. In fact, I’d say if anyone wants to better understand how to go direct to consumers, they should start with the members of DCN.

But here’s the rub: Many players in the market won’t ever really be able to go “direct to consumer” without relying on the brand equity of trusted media. In order to find scale, they’ll first need to build demand, be willing to bundle, and find quality brands to associate with and carry their flag. They’ll want to be near those with purpose and value recognized by the public.

I’m sure each of these movements will surprise us in ways we can’t predict. They may develop more slowly than anticipated or accelerate at light speed like the privacy regulation has with GDPR and Facebook’s mishaps hitting in the same quarter. But either way, premium publishers should be ready as, with the right proactive strategy, there are opportunities in all.

Perspectives

Facebook: Take out the trash

July 26, 2018 Jason Kint, CEO – DCN

After last week’s uproar over Mark Zuckerberg’s comments on censorship, Axios asked experts what they would do to decrease the fake news on Facebook. Clearly, this is not a simple problem to address but we must. In fact, because Facebook hasn’t taken proper action over the past two years, governments all over the world have stepped in to take steps to address the problem of misinformation.

As the trade organization representing media brands that seek long-term consumer trust through the creation of high quality news, information, and entertainment, we take the problem very seriously. In 2016, we wrote an unanswered letter to the CEOs of Facebook and Google – Mark Zuckerberg and Sundar Pichai – to provide our perspective on the dangerous proliferation of “fake news” throughout the digital ecosystem.

In the letter we asked Facebook to aggressively harness their brilliant minds and massive resources to clean up the garbage that was flowing, with little friction, through their platform. We also cautioned against acting as a censor. Given the escalation of concerns and the fact that the 2018 midterm elections are less than 100 days away, it’s critical that Facebook take more significant and concrete actions to help ensure their platform isn’t used against our democracy again.

In the spirit of transparency, here are a few things we mentioned to Axios that Facebook could do today.

Eliminate the viral and monetization benefits for known fake news peddlers. Take Infowars as an obvious example. (1) At this point, Infowars should only reach users who explicitly follow its account. We’re not asking for the account to be banned entirely, although the arguments to do so are reasonable at this point. (2) Infowars shouldn’t be able to buy advertising with creative containing links to Infowars content and (3) user activity (likes/clicks) on Infowars content should not enhance its presence in the feeds of users who don’t follow it. Essentially, their content shouldn’t be exposed to users unless they explicitly ask for it. It’s why on Tuesday I asked what percentage of the views of a grotesque Infowars clip were viewed by Infowars followers. The answer could be very revealing.
Publish a clear escalation policy (as YouTube does) which would suspend and permanently ban accounts which repeatedly violate their hate speech and harassment rules. Although YouTube’s escalation seems to have loopholes and oddities, as proven yesterday, it’s at least transparent and up for scrutiny by the public.
Elevate the brand presence around content. The brand is a proxy for trust and Facebook (and Google) have long minimized the brand in their experiences. This is important for those who have built up trust through their reputation but it’s also important to newer publishers who want to build their brands. If you’re reading an Axios story on Facebook in your feed, you should know the source. Likewise, if you’re reading a Russia Today story, you should know the source.
Develop a transparent ranking system by domain/brand. This is not a novel approach: Google does it. Email services do it. If Infowars wants to keep publishing garbage, then let’s see their domain score fall off a cliff. The score has to mean something. The fact is that most respectable news publishers, regardless of subject matter or leanings, would score well and not be impacted. However, the trash would get taken out.
Hire more human moderators. Algorithms are amazing but personal responsibility should involve people. The company needs to take ownership over its “news feed” or stop calling it a “news feed.” We also need transparency on where these moderators are being hired. As platforms have challenged the economics of local news, we’ve also lost local accountability to the public. Moderators need the proper context for the areas, countries and cultures they’re serving.
Engage with member associations and non-profits to get advice on codes of conduct that responsible news organizations follow. Facebook had a significant misstep here when they rolled out their political advertising labels and archive. They dangerously conflated boosted news coverage about political issues with advertising about political issues. Facebook chose to ignore counsel from publishers and shut off communication with member associations despite more than 20,000 news publishers expressing concern to its CEO and COO.

A couple of executives at what is arguably the most impactful news distributor on the planet are making business decisions that have a massive impact on the political dialogue in our democracy. They should thoughtfully listen to concerns, advice, and legal inquiry in order to become a responsible member of the digital ecosystem from which they reap great profit. The problem of misinformation is not small, it is not easy, but it’s a problem that we all have a stake in solving.

Advertising | Featured Post | Perspectives

Being big and behaving badly

May 23, 2018 Jason Kint, CEO – DCN

On a panel a few weeks ago, Makan Delrahim, a top antitrust official at the Department of Justice, said that “Being big is not a violation of antitrust policy. Being big and behaving badly is a problem.”

We’ve established without debate that Facebook, Apple, Amazon, and Google are big. As their Q1 earnings showed, they’re extraordinarily big. Rockefeller big. Carnegie big. But how have they been behaving? Rather than make any assumptions, I went to Twitter knowing many of my followers work in the press, inside the beltway, or across our industry and are very close to the behavior of the tech giants.

The results were surprising to me. Not because Facebook came out on top. But that one out of three voters chose Google over Facebook. (Apple and Amazon didn’t even come close.)

I thought it was worth examining the parallel paths of these two “winners,” to consider some facts that may not be on everyone’s radar.

Facebook and Cambridge Analytica

Everyone has had their punch lines about the ineffective ten hours of United States Congressional hearings with Mark Zuckerberg in Washington last month. We can add this week’s meeting in Brussels to the joke. But not everyone has been paying attention to the work being done by the UK Digital, Culture and Sports Committee, which has been digging into the case for nearly 18 months and asking really smart questions. Here are a few facts established as of today. I’ll let you read through them and determine who is behaving badly:

Last month, Facebook disclosed that up to 87 million Facebook users’ data was harvested in 2014 by GSR and then sold to infamous Cambridge Analytica (now being dissolved). These disclosures were made after joint reporting by The Guardian and The New York Times, and after legal threats by Facebook were reported by The Guardian. Facebook later admitted these warnings were not their wisest move and offered an apology.
Facebook has refused to clarify exactly when Mark Zuckerberg or Sheryl Sandberg first became aware of GSR or Cambridge Analytica. Though The Guardian first reported on both companies in a report on December 11, 2015 and a Guardian reporter started asking questions in December 2014.
GSR was launched and run by two “equal partners,“Joseph Chancellor and Dr. Aleksandr Kogan.

It was recently disclosed that Facebook signed a confidentiality agreement with Kogan. This confidentiality agreement was signed by Kogan and an undisclosed Facebook executive on June 24, 2016. (Interestingly, this was the date results of the vote on the Brexit referendum were announced.)
Lesser known fact: In November 2015, Facebook hired Chancellor and he signed a confidentiality agreement as an employee of Facebook. Yes, Facebook hired someone who participated equally in what Facebook characterized to The New York Times as a scam and a fraud.

This leaves us with a minimum of 27 months (December 2015 through March 2018) and a maximum of 39 months (December 2014) in which Facebook was aware of the records being harvested and sold to Cambridge Analytica. Yet, they’re still not sufficiently answering questions about the matter.

What is next here:

The emerging pattern appears to be a massive cover-up. So far, despite a threat of future arrest, Mark Zuckerberg has refused to give testimony in the UK where the toughest questions will be asked. The Federal Trade Commission is investigating the issue raised by Senator Kamala Harris’s questions about who made the decision and why Facebook didn’t inform its users back in 2015 when they knew the “fraud and scam.” Being big and behaving badly.

Google and GDPR

For a while now, DCN has been analyzing, advocating, and lobbying on GDPR, which will come in to enforcement this Friday, May 25th in the European Union. The law, which applies to data collection of EU residents, was approved in April 2016 so it’s anything but new at this point. However, despite DCN and publishers inquiring for many, many months, we only found out what Google was up to in the 23rd month of the two-year grace period. And then only after the Wall Street Journal scooped Google on their plans. (Un)fortunately, this news happened in the same week the Facebook and Cambridge Analytica news was breaking so its plan didn’t get the attention it deserved. And to be clear: Google’s plans are fairly offensive.

Google’s Privileged Position

Let’s take a step back and look at how Google operates as a privileged platform in the advertising marketplace where they can set the rules of the game while also playing and winning the game. What gives Google the most leverage is its market power and unprecedented amount of data collection in this market (all estimates courtesy of Arete Research).

Google DBM (their advertising bidding solution on the demand side) has $1.7B net revenue vs Google’s nearest peer (The Trade Desk) at $308 million. MediaMath is in third place at around $220 million.
Google DoubleClick AdX (their exchange sitting in the middle) has $1.9B revenue vs nearest peer at $155 million.
Google DFP (their solution on the supply side) has $700 million net revenue vs nearest peer with significantly less.
Google’s measurement/attribution solution has $600 million net revenue vs nearest peer at under $100 million.

In other words, Google is 5-10x its nearest competitor in every stage of the digital advertising supply chain — where Google both creates the market and makes the market. So, the question becomes what is Google’s responsibility in rolling out the GDPR, the most significant data protection law in history? We know our members depend on Google for nearly every component of their advertising revenues (which drive on average 80% of our members’ overall revenues.) It’s a simple fact that nearly every one of DCN’s members use Google DFP as their ad server.

The Monopolist Move

So DCN was rightly concerned by Google’s vague policy updates where they attempted to retain all of the rights to the data harvested by each and every one of Google’s ad services without details in how they would use this data. And that they did this while the risk was being assigned to the publishers was, as I previously said, fairly offensive. They might as well don a top hat and cane. It’s the move of a monopolist.

Taking on Google regarding their policies in protecting one of their most treasured assets, their data collection, isn’t for the faint of heart. So, we worked with three other major global trade bodies representing more than 4,000 publishers and sent a letter of concern to Google CEO, Sundar Pichai. In the month since we’ve sent this letter, Google has continued to set up private meetings with publishers. However, we’ve consistently been told Google is unwilling to commit to the necessary terms for publishers and when they even begin to approach something workable, they will not put anything in writing.

Hence the open public letter by DCN with our seven key questions.

We’ve found it unfortunate that Google has refused to answer our questions and has since moved on to public relations tactics including organizing a “collaboration meeting” on May 24th — the last day before GDPR enforcement begins. We took the counsel of the other associations, their members and the legal and legislative experts across our DCN membership and declined Google’s invitation for a private, off-the-record event.

What is next here:

At this point, it’s unequivocal that Google has strategically waited until the final months with the goal of protecting its own interests. This serves to push the market towards systems orchestrated by Google and the trade bodies that represent it and protect its interests above the interests of the public and the publishers. Again, given the dominance of Google throughout the digital advertising supply chain, publishers don’t have a reasonable choice to not sign Google’s terms and essentially shut down advertising revenue on May 25.

The key question will be whether Google and its trade bodies roll the EU regulators. It’s worth noting Facebook’s troubles and a high-profile 60 Minutes report on Google last Sunday won’t help their cause. Being big and behaving badly.

When I do the math on these companies’ actions, they both add up to being big and behaving badly. And that’s a big problem. Being big is not inherently bad. Power can — and should — be used for good. But with great power comes great responsibility. And these are not the actions of responsible companies.

DCN-Research

Jason Kint: Here are 5 ways Facebook violates consumer expectations to maximize its profits

April 10, 2018 Jason Kint, CEO – DCN

As the Facebook scandal continues to snowball, COO Sheryl Sandberg and CEO Mark Zuckerberg have finally admitted publicly they have a lot of work to do to restore trust in, and combat abuse of, their platform. Those are facts supported by independent research from Edelman.

Trust is a result of delivering on expectations, whether the customer is another business or the public. Facebook and Google, more than any other two companies, have controlled and influenced the trust issues now being surfaced across our industry which impact the publishers and advertisers who choose to associate with their platforms.

In 2014, I wrote about Facebook’s questionable practices in The Wall Street Journal, focusing on Facebook’s mining of user’s browsing history. We argued that people do not expect Facebook to track them across the web and within apps in order to target advertising to them. Unfortunately, the backlash was slow to build (except for those most intimately involved in consumer privacy and regulation) and Facebook continued its practices. The 2016 election and the Cambridge Analytica scandal dramatically changed that.

Although Facebook recently added the ability for users to opt out (via a deeply buried setting) and announced new “controls” and “settings” are coming, the fact that it takes an avalanche of bad press and a #DeleteFacebook movement to motivate them to act in their consumers’ best interests clearly shows their products are designed to maximize profit rather than behave according to consumer expectations.

At Digital Content Next, we wanted to get a clearer picture of how consumer expectation does (or does not) align with Facebook’s data practices. So last week — at a time when consumer expectations of Facebook are likely at an all-time low — DCN surveyed a nationally representative sample to find out just exactly what people expect from Facebook.1 Here’s how they responded.

There were only two ways in which a majority of respondents felt that Facebook was acting according to their expectations.

Facebook Instagram WhatsApp Data Collection and Merging Chart

There were five areas where respondents answered that Facebook was acting outside of their expectations. Importantly, these are the issues which drive down consumer trust, and they mostly involve activities where Facebook is taking data from publishers. These activities clearly show how Facebook’s financial gain comes at the expense of trust and profit for news and entertainment companies.

Facebook tracking on apps it doesn't own expectations chart

Facebook purchase of personal information from data companies chart

(Note: Facebook announced last week it would abandon this practice).

Facebook location data collection expectations chart

Facebook Like Button click tracking on outside pages expectations chart

Facebook Like Button non-click tracking on outside pages expectations chart

In summary, most users expect Facebook to be collecting some data about them in exchange for use of its “free service.” For example, most users probably assume that data is collected about things that they choose to “like,” or from information they enter directly into the Facebook app as part of using it.

However, when asked about some common Facebook tracking activities across the web on other properties, the survey results show that most people do not approve. These activities — and your data — have generated extraordinary wealth for Facebook and the limited number of executives who control the company. Your data is delivering more than $20 billion per year in profits at 50 percent margins.

Bottom line: Does Facebook have the ability and the desire to adjust its business model to better align with consumer expectations and attempt to rebuild trust?

Notes:

ORC International Online CARAVAN®, 1,000 Adults 18+, March 29–April 1, 2018. 85 percent of sample replied yes to having a Facebook account.

Reprinted with permission from Nieman Lab.

Advertising | Perspectives | Policy

Why the IAB GDPR Transparency and Consent Framework is a non-starter for publishers

March 19, 2018 Jason Kint, CEO – DCN

The most significant opportunity in more than a decade to steer value towards our members is playing out now in Europe.

It is DCN’s role to help shape the future of the digital ecosystem to bend towards the interests of trusted content companies while your team focuses on the day-to-day operations. We work every day to do this and to raise the bar of trust with both advertisers and consumers. Unlike other parts of the web media industry, we’re fortunate these efforts often align. That is, by increasing trust for consumers and advertisers, the brands of DCN will prosper in the long-term. We are starting to see the pendulum swing in our favor – both in consumer subscriptions and the trust and transparency of the advertising market – and are working hard to accelerate it.

Since DCN exclusively represents content companies, we occasionally have a different point of view from other parts of the media ecosystem including intermediaries (e.g. ad tech companies, Google, Facebook). The business model of these intermediaries has for many years relied on harvesting the data generated from advertiser and consumer relationships with our members’ websites and apps. Right now, there is significant debate over how to best participate in the General Data Protection Regulation (GDPR) in the EU and what the effects of the roll-out of will be. The rules of GDPR, which set a new bar for consumer privacy, were finalized years ago and since that time have inspired a rich amount of misinformation, disagreement and fear, only increasing as the GDPR enforcement date of May 25, 2018 approaches.

The IAB and IAB Europe, which are charged with representing a much broader set of stakeholders including hundreds of ad tech companies, Google, Facebook, Oath, and many others with significant intermediary interests, has released its plan to handle the GDPR roll-out. The IAB framework, which was submitted for industry commenting, was clearly designed by ad tech companies and included endorsement from 23 ad tech companies and, most notably, zero publishers.

The IAB GDPR Transparency and Consent Framework should be considered a non-starter by all publishers as it fails on several levels and requires significant changes.

Details will be discussed in other forums but can be summarized as it:

relies on cookies which are unreliable in many experiences;
pushes all liability to the publisher without providing any control over the CMPs, SSPs, DSPs, exchanges and how they use this data;
outsources the consent relationship with the user to a “Consent Manager Provider” (CMP) operated by an IAB-friendly;
does not leverage the direct relationship between a publisher and its audience to manage consent and store it persistently in the browser (e.g. DNT);
fails to reduce friction for users giving consent for purposes most important to publishers and most acceptable to users;
unintentionally creates more friction with your audience for editorial and product features for the sake of protecting ad tech vendors.

Thus, it will most likely enable a practical use case where global consent is enacted to protect the status quo of maximum behaviorally-targeted advertising and unbridled data collection. In other words, their goal is to use “free” services to encourage users to click, “Turn All On” and opt back into the status quo.

Please reach out to us directly and make certain your business leaders and partners understand there are serious flaws with the IAB Consent Framework. We strongly urge publishers to hold off signing up with the 23 companies (and Google and Facebook behind the scenes) to support the framework in its current form.

Once again, there is a window here in which publishers can rebuild consumer and advertiser trust. The most significant advertisers in the world are aligned with us on this as they begin to see their pursuit of truly one-to-one advertising across the wider web as economically and legally challenging. GDPR will create opportunity for audience selection based on cohorts and context which is a significant risk to Google and Facebook. GDPR moves advertisers away from their current buying habits supported by the myth they can simply harvest demand through microtargeting personal data. Creating new demand through context and true relevance is the sweet spot of trust and true publishers.

And where there is significant risk to Facebook and Google and opportunity for growing consumer trust, you will come out ahead.

Perspectives | Revenue

Numbers don’t lie. But Google continues to obfuscate

March 8, 2018 Jason Kint, CEO – DCN

People ask me why I think the “duopoly” conversation resonated so profoundly when DCN began to use the term in 2015. I think it’s because publishers had long-sensed something was wrong with the widely proliferated and utterly misleading growth stats of digital advertising. They were ready for someone to call b.s. and start open conversations about it because many weren’t seeing the purported “growth.”

I’ve been told that executives at Google and Facebook dismiss the term duopoly as a marketing gimmick invented by publishers to go after the two companies. They are dead wrong. This discussion didn’t surface in some public relations brainstorming meeting. Sure, it’s useful if you can describe an entire marketplace in one word. But at the end of the day, the duopoly label resulted from simple number crunching, the results of which challenged conventional wisdom on who was actually benefiting from the growth in digital advertising. Perhaps now is a good time to dig deeper and take a closer look at some Google math.

Google’s battle with transparency

A whopping 50% of the US Digital Advertising Market is recorded as a single line in Google’s financials, deftly titled “Google Properties Revenues.” This single line includes advertising on Google Search, YouTube, Gmail, Google Shopping and more and will surpass $100 billion this year – a number larger than the entire US digital advertising market. Let that sink in for a moment and then consider the fact that we hardly know anything else about it.

While fledging and century-old publishers live and die in the millions of revenues, Google doesn’t even specifically disclose revenues for its flagship growth site, YouTube. Their video business, which seeks to compete with broadcast television, is widely estimated to have revenues approaching $10 billion — a number larger than more than half of the companies in the S&P 500. Last week Bloomberg reported that the SEC had taken issue with Google’s lack of transparency but was sent packing after Google made the astounding claim that YouTube revenues aren’t important enough to hit their CEO’s desk. Say what now?

There is also near zero transparency in how this revenue is shared with the ecosystem. In the case of major cable companies, we know very clearly how much they pay each year, measured in the tens of billions, to the programmers who create valued news and entertainment for their services. This is helpful information, and revenue. Transparency is a hallmark of a healthy ecosystem. On the other hand, we have no idea how much Google spends on news and entertainment because they bury this programming expense in multiple places. In terms of YouTube, we’re left to run our own analysis and we only know the members of DCN see less than $100 million of the billions that YouTube is raking in.

Where have all the billions gone?

We also know that Google is using billions in cash to shore up its monopolies. Google invests heavily to secure the default position over any browser that competes with its “free” web browser, Chrome, including Apple Safari and Mozilla Firefox. It subsidizes its lock on a majority of mobile devices through its “free” operating system, Android. We also know that billions go toward populating the long-tail of the web with Google’s AdSense text links. Once again, all of this undisclosed money is lumped together and buried in a few lines of Google’s financials. This leaves everyone in the dark while making it easy for Google to spin its way around those who question it – in Washington and in the press.

Heck, we even learned that Google pays off ad blockers to whitelist its own ads. But once again: We don’t know how much. This is a distasteful situation considering the leadership position Google has chosen in the future of solutions for ad blocking. Google is literally blocking publishers’ ads while paying an undisclosed amount to have its own ads whitelisted. Say what now?

Numbers don’t lie. The simple, irrefutable (and unacceptable) fact is that the digital advertising landscape is more lopsided in favor of two companies than we’ve seen in any previous media market. This is especially striking when you recognize that neither of these companies contributes directly to the creation of the news and entertainment they so richly capitalize upon. They profit solely by directing and mining attention across the valuable assets others create. Please note I haven’t used the term Alphabet once here. To publishers, their layered corporate structure isn’t anything more than Google fighting tooth and nail to avoid disclosures. If Google and Facebook want to be seen as benefactors to the media world — or better yet, become honest, trustworthy partners in it — they’re going to need to provide a level of transparency that they’ve quite clearly avoided.

Perspectives

Hey Facebook and Google: The stakes are high. You in or out?

January 18, 2018 Jason Kint, CEO – DCN

“I don’t trust Facebook.”

“At this point, I start from a position of distrust in dealing with Facebook as a company.”

Regrettably, I found myself sharing these thoughts last Friday with reporters who were working around the clock to process the latest Facebook news. And I’m not alone. Even the most trusting publishers have gone from giving Facebook the benefit of the doubt when they rolled out Instant Articles a few years ago, to a “prove it” mentality today.

This is unfortunate considering the power and influence that Facebook has on our lives. Like it or not, Facebook is effectively the largest public square where nearly two billion people around the world gather to exchange information. And there is certainly merit to the argument that the world benefits from the success of Facebook’s experiment to create an open and connected world.

So, what changed?

Business as Usual

Ben Thompson wonderfully captured the heart of the question several years ago, “Even if Zuckerberg is right, is there anyone who believes that a private company run by an unaccountable all-powerful person that tracks your every move for the purpose of selling advertising is the best possible form said global governance should take?”

Our industry is at an important crossroads. In many ways, the Facebook announcement to reorder News Feed priorities isn’t very different from Google’s early shifts and changes (remember Panda?). Many times search engines have been more impactful to the finances of publishers than anything a publisher could control directly. But really, despite some early utopian proclamations, these platforms are just doing business as usual. They lean in heavily to innovation that aligns with their own business interests and has a positive product outcome while slow-walking anything that creates risk to their own financial interests. Why wouldn’t they?

Yesterday, I sent an email to the members of DCN that was quite critical of Facebook. Implicit in my concern is the parallel that can be drawn to Google (something I highlighted in a Washington Post op-ed last October). These two companies are the front door to information for billions of people. So, when they make a tweak or announce a significant shift, the entire information industry needs to pay close attention.

We are paying attention.

Moonshots, Money and Responsibility

Unlike business as usual, “moonshots” are intended to drive real break-throughs that go beyond the horizon of the more cautious bets constrained to basic organizational needs or that don’t inject risk into the cash cows. Last November, we asked Google and Facebook for moonshot-level thinking and initiative to address the fake news and other garbage flowing through their platforms. Yes, the fake news was starting to erode the solid foundation our members’ business is built upon. But the problems go well beyond business. The issues in play resonate deeply through our society.

To put it bluntly, both companies have failed to step up to the task. As a result, there are increasing levels of tension in the press, in Washington, and in Brussels as this distrust spreads. And this isn’t good for anyone.

There are two platform pressures that work against trusted publishers and, importantly, public interest:

Platforms are biased towards solving problems for the lowest-common denominator “publisher” so the solutions can be applied to the wider web. This often creates collateral damage for publishers playing the long game – cultivating brand and engaging customers – and not just focused on immediate financial gain. We’re seeing the impact now as Google attempts to solve for ad blocking or how the industry has dealt with measurement issues.
Platforms also have incredible growth expectations, as they really have one goal to surpass Apple as the most valuable company on the planet. These revenue and profit obligations create an inherent bias toward their own products. In fact, the European Commission already found Google guilty of this. Facebook will always drive consumer intent and publisher interests to the most profitable outcomes. This is why video was Facebook’s #1 priority last year. And now it’s not.

There are also two big issues that affect the entire ecosystem and, importantly, public interest:

Americans don’t trust “the media.” In fact, they trust it less and less each day. The research says they do appropriately trust many of our members and the journalists and creatives they employ. However, what Americans think of as “the media” continues to change and now includes platforms, distributors, advertising technologies, artists, advertisers, and publisher brands. And the public doesn’t separate or even understand where the buck stops with each. Every ounce of research I’ve seen shows that more and more consumers are going to places like Google, YouTube, and Facebook to get their news and information despite trusting these platforms significantly less than other outlets. This distrust in platforms and ad technologies extends into the media at large.
Facebook and Google are the two most significant sources of traffic to publishers. Facebook drives about 17% of the inbound visits to DCN members; Both companies share less than 1% of their revenue with DCN members. They are very important for the discovery of news and entertainment. Yet they feel it is very unimportant to pay for the creation of it.

These gaps aren’t going to be closed through hearings in Washington. They’re also not going to be closed by walking away from dialogue. Ultimately, we need major platforms to decide that moonshots matter and be both humble enough and comfortable enough with their own vulnerabilities to work with publishers and academics on solutions. I don’t see that happening yet but I believe that we’ll get there in time. It’s just that important.

Perspectives

Trust is an opportunity. Don’t miss it.

December 7, 2017 Jason Kint, CEO – DCN

The problem is simple. The solution is hard.

When DCN (re)launched in 2014 as the trade organization for the future of the premium publishers, we predicted a decline in trust in our industry which has, indeed, bore out.

The thesis: A migration to automated channels for both the delivery of advertising and the discovery of content represented a significant opportunity. But we also warned that the industry needed to make consumer, advertiser, publisher trust a priority in order to fully realize the opportunity. Now we have to ask ourselves: Has the industry failed in doing this?

With trust at the core of everything we do, DCN has spent much of the past three years shining a light on advertising supply channels, advocating positions that align with consumer trust, and learning from each other across the growing DCN membership.

This week, DCN released new research showing a measured and significant decline in trust for digital information discovered on Facebook and YouTube. It’s a problem that no one wants to talk about as it puts us at direct odds with the most powerful companies on the planet. But it’s real. And it’s a real problem for the whole industry.

Unlike much of the previous research, this study focused on more than news, analyzing the impact on entertainment content and also on advertisers. One significant finding is that the gap in trust on social networks and YouTube also impacts the publisher and advertiser brands that choose to participate in these platforms.

As always, developing a nuanced interpretation of research is critical. The easy spin is to argue for a reversal of trends by pointing out that brand websites and apps enjoy considerably-higher trust than Facebook and YouTube as sources of digital content. They do. However, history shows us that’s the short-sighted and self-preservation mindset publishers don’t need. For more than a decade, newspaper and magazine companies hoped that young readers would migrate back to print. They didn’t.

In fact, as Bharat Anand pointed out at the DCN Next: Summit last January, the great migration away from newspapers began in the 1940s. Here is the rub: We’re not going to beat the major platforms – Facebook, Instagram, YouTube – at what they do best. They provide remarkable scale and ease-of-access to information and entertainment. At the same time, they provide microtargeted audiences and ease-of-buying for advertisers. Quite simply, they are formidable players in the industry for both publishers and advertisers. But they have also been a significant force in driving the bar lower on media trust. Combined with a White House executive office seeking to discredit the media, we’re in a gnarly vortex and struggling to find the way out.

What we do know is that the solution to this problem will need to include the same ease of discovery of news and entertainment as provided by the platforms. Friction is not your friend. And advertisers are going to continue to want more in scale and automated channels. These two trends are irreversible and align with consumer and advertiser needs. Facebook, Instagram and YouTube, must be forced to enable a future beyond just protecting their financial interests and begin to take responsibility for their role in the larger digital media ecosystem.

The shot: Only significant global pressure will force Google and Facebook to risk their own business interests and be accountable to media overall.

More and more analysts are seeing it. At the recent Business Insider Ignition conference, professor and analyst Scott Galloway absolutely crushed his argument that Facebook and Google should be broken up. If you haven’t seen his remarks, I strongly recommend you watch now. Unbundling YouTube, DoubleClick, WhatsApp, and Instagram from their respective acquirers is a hard but a logical step.
Advertisers and agencies are fed up. Facebook and Google are enduring multiple colonoscopies as they submit to full audits of their measurement systems. No doubt Facebook has significant exposure here. Trust but verify.
Publishers are pressing Facebook and Google for more value which comes in the form of listening to their needs, supporting their business models and increasing brand presence in their feeds.
The press is starting to hold Google and Facebook accountable. The increased scrutiny of the company’s influence on academia, think tanks, and lawmakers – along with the overwhelming exposure of their issues – has made for an uncomfortable 2017 for the platforms. The more the independent press digs in, the more problems they find and the more safety in numbers as they call out the most powerful companies on the planet.

The chaser: Premium publishers are the solution. Advertisers are also expressing an intention to move their investments towards higher-trust media and measurement while doing everything they can to avoid being associated with the cesspools that exist on Facebook and YouTube.

Remarkably, every quarter of 2017, DCN members have seen sequential growth in digital revenues versus the same periods last year. In the swirl of what has been called the Media Apocalypse, DCN members are seeing the distant light. As much as Google and Facebook foresee opportunities to grow trust in their media by embracing trusted media brands, we’ll all come out for the better.

Perspectives

The Google PR lobbying machine rumbles back

November 20, 2017 Jason Kint, CEO – DCN

We’ve entered the perfect storm.

The press worked itself into a flurry last week about missed projections, mergers, acquisitions, staff reductions, doors closing, and political influence across its own industry. Amidst this activity, there is real momentum and honest discussion of the challenges in building a sustainable 21^st century digital news and entertainment business. And there is opportunity knocking. Newly compiled DCN member research shows early signs of marketer investment moving upstream towards quality content with sequential quarterly revenue growth for DCN members. News and entertainment companies are transforming into truly diversified revenue machines that are less dependent on advertising. More importantly, DCN’s “duopoly” analysis continues to reach wider circles of influence (and understanding) with reporters, think tanks, academics, and lawmakers now asking tough questions of both Google and Facebook.

Therefore, it’s puzzling to see these two companies operating with blinders on as we watch their reactions to inquiries from the press, partners, and lawmakers. It should offend us all that, despite gob- smacking earnings this month, Google is attempting to double-down on its argument that their platforms are merely weather-machines innocently reading data rather than a major source of the media storm itself.

It certainly offends me.

In a speech last week to the Society of Editors’ at The Tamburlaine Hotel in Cambridge, Ronan Harris, Managing Director of Google UK and Ireland, fed decade-old Google arguments into the winds, despite the current media climate. While acknowledging that, “the open internet has turned business models on their heads and raised all kinds of new questions and challenges for us all,” Harris systematically tried to distance Google from any negative affect and control over the demise of news media and its societal consequences. By opening his talk on the uniqueness of the company’s role, Harris makes his Google-eyed perspective clear with the company’s classic “But we’re a search company” retort to any attempt to hold them to the standards to which responsible media companies gladly adhere.

However, this particular PR rhetoric is far from the most egregious that Harris wove into his talk. As the UK’s News Media Association observed, my visceral response to some of Harris’ points—which I first expressed on Twitter—was that he was trying to reshape the escalating duopoly narrative. You have to wonder if he’s being willfully ignorant or overtly resistant to the discussion happening in every corner of our industry.

Harris attempted to refute the simple math that demonstrates how Google and Facebook capture a majority of the growth across western media’s digital advertising by stating he’s “heard lots of people say that Google and Facebook are ‘ruthlessly stealing’ all the advertising revenue that publishers hoped to acquire through online editions. That analysis just isn’t right.” He went on to claim that these analyses conflate search and display while boasting about the amount of traffic Google drives to publisher’s sites “for free.”

Huh. Let’s break that down, shall we?

The duopoly’s power defined

This notion of an internet advertising duopoly is not based solely on Google and Facebook’s shared and growing dominance of digital advertising. Rather, it considers that the two share a core business model that leverages “free services” that collect inordinate amounts of consumer data in order to micro-target advertising at a massive scale. Importantly, Google and Facebook suggest that because their services are free, they can’t commit consumer harm. They do this by using the Chicago School of antitrust theory out of the 70s and 80s, which is now being questioned as competition law experts attempt to consider these issues in the context of our 21^st century world. This is already something the European Commission is addressing in its fines of Google. And just last week, multiple Attorney Generals joined in Europe’s concerns. Regardless of your view on antitrust law, the point is that Google and Facebook have the same business model and their dominance begets more dominance.

Driving traffic or driven by content

Another shared trait between the duopolists is that much of the information that they are able to collect about consumers is based upon the content that they discover on these services. As any premium publisher can attest, you learn a lot from audiences by what they choose to read, watch, and share.

But that’s something Google knows all too well. This is a company that owns 96% of the mobile search market and 67% of search overall. Harris crowed about driving “more than 10 billion clicks a month to publisher websites — for free — from Google Search and Google News.” But the reality is that search—as a concept, much less as Google’s foundational business—would not exist without publisher content.

Revenue share

Another argument that Google’s Harris made was that publishers only share a minority of the revenue from their own sites with Google. This is an argument from a decade ago that fails to recognize Google’s dominant lock-in for search and data collection across the web, which is what they are actually monetizing—in a massive way. Yes, most publishers keep a majority of the ad revenue on their own sites—after they’ve paid out the significant costs for programmatic/automated delivery. But Google also has trackers (data collectors) on more than 750,000 of top 1 million sites. And, not even the biggest publisher has leverage to negotiate with Google to limit their data collection and use practices. This data collection allows Google to target audiences using the cheapest inventory and cheapest suppliers possible. (And for now, let’s not even go into the dank, dark places ads end up with this particular approach.)

Harris also claims that analysis of Google’s dominance in digital advertising “conflates two markets: search and display.” The majority of Google’s revenue comes from showing highly relevant ads when you search for a particular term.” In fact, in this way, search and display are not actually that different. Both target direct marketing ads based on data collection. This is what most of digital advertising is transacted on. And as we know, Facebook and Google are empires fueled by data, so this statement is more than disingenuous. It is absurd.

Newsworthy

Harris points to the lack of advertising on “Google News” as a clear sign that Google isn’t trying to compete directly with publisher’s hard-wrought news business. The fact there is a “Google News” vertical is something most people outside of industry don’t even understand. People are searching for and discovering news and information through many Google sites and channels (including YouTube and general search) where Google drives significant revenue—and data. Even though there aren’t traditional ads on Google News pages they are most certainly still monetizing that area of their business.

Revenue mix

Additionally, over the past five years, Google’s own revenue mix has migrated from Google’s network of publishers (where they have the lowest margins and includes their AdSense text ads and DoubleClick ads which serve across the web) to Google’s owned and operated businesses (where they have highest margins and includes sites such as Gmail, YouTube and Search). Google controls this effect.

Blocked

And here’s part of Google’s business model that Harris didn’t cover: ad blocking. The fact is that many EU pubs lose more than 30% of their site advertisements to ad blocking software which significantly impacts publisher revenues and the ability to pay for newsroom jobs. Google’s recent decision to include an ad blocker in its own browser is not the biggest issue here. Google has admitted to subsidizing major ad blockers in order to service the “whitelisting” of Google’s own ads. Let’s be clear: Google is paying companies that develop ad blocking software. Meanwhile, Google is also the dominant company in discovery, distribution, and delivery of ad blocking software. While the rest of the industry is bludgeoned by ad blockers, Google’s payments protect what is likely billions of its own revenues on its highest margin products from the effects of ad blocking yet they refuse to disclose the details of these deals.

That speaks volumes about the company’s priorities and tactics. Is this the behavior of a company that genuinely cares about the future of the media business? Harris claims that Google wants “to act thoughtfully and responsibly in our relationship” with the media industry. I can unequivocally state that transparency here would go a long way.

What’s next

I don’t disagree with every point that Harris made. As he said, “as more and more people interact with news in different ways, we need to take advantage of new digital tools and capabilities to develop new experiences and sustainable business models.” Believe me, digital media executives are thinking about this every single day.

And while Harris claims that we’re misunderstanding who they are and what they do, I think we actually have a pretty good idea how they are making money and where publisher content fits into the mix. We get it, Google: You hire really smart people to create your products and your PR pitches. But don’t think that means we’ve lost sight of the value of premium content and the fact that we should be able to sufficiently monetize it in order to continue to support the journalism Google purports such esteem for and derives so much revenue from.

It’s been a full year since DCN sent a letter to Google and Facebook asking for moonshots to better serve the news industry. Facebook spent a full year dodging tough questions while at times demonstrating signs of early self-awareness of the problem. Google, on the other hand, has acted like a monopoly with its much more advanced lobbying machine. The fact Google is turning up its spin in the UK and putting Facebook out front to take the shrapnel in Washington should concern us all. It certainly concerns me.

Perspectives

The impact of piracy on the media ecosystem: Address to the 2017 IP Crimes Conference

August 29, 2017 Jason Kint, CEO – DCN

The following remarks were given by DCN CEO Jason Kint on August 29 at the 2017 International Law Enforcement Intellectual Property Crime Conference in New York City – United Nations Headquarters.

Good afternoon. My name is Jason Kint. I am the CEO of Digital Content Next. DCN is the only trade group dedicated to serving high-quality digital content companies that manage trusted, direct relationships with consumers and advertisers. We have grown to represent more than 80 digital media companies which reach 100% of the U.S. online population and are leading much of the evolution in news and entertainment.

Despite the incredible advances of the last 20 years, the internet still holds vast, untapped potential for consumers. Devices are getting smarter. More immersive experiences roll out every day. At the same time, premium content companies face challenges in the transition to a digital world. What business model works best for each brand? How much should they partner with the big platforms? Is their content being used fairly? Are they being credited and compensated appropriately? Our members are at the forefront of these challenges – investing in engaging experiences and experimenting with new ways to distribute and monetize their content.

Copyright piracy is a serious crime that undermines the progress to a healthy digital ecosystem. Ultimately, it costs consumers in the form of higher prices. But, copyright piracy also hurts the ability for media companies, our members, to monetize their content.

Newspapers are constantly fighting online scams that offer discounted or free subscriptions to their premium content. In a case this spring, one website was found to be offering discounted subscriptions to 20 or so premium news sites including our member, The New York Times, Financial Times and Wall Street Journal. The site’s owner would sign up for free trial or short-term subscriptions and then re-sell the subscription as a full-year subscription. Of course, he collected full payment up front. The newspapers were tipped off when consumers called to complain that their subscription had been cut off after a few months. These efforts to combat piracy cost resources and money, but they also have real damages for consumers.

Live sports broadcasts are another category that is particularly vulnerable during the transition to digital.Companies are experimenting with new ways for consumers to view this highly compelling content. But, these efforts are undercut by thieves who blatantly post full live streams of entire games on social media or other platforms. According to one study, 54% of millennials have watched illegal streams of live sports and a third admit to regularly watching them.

This impact is felt disproportionately by smaller media companies with fewer resources to monitor and stop these crimes. Ellen Seidler, an independent filmmaker took out a second mortgage and racked up credit card debt just to make “Then Came Lola.” In 2006, it debuted at film festivals and then was released via DVD and via streaming sites. But the movie only grossed a quarter of what was expected because Ellen found that the movie was available for “free” on thousands of pirate sites. Similarly, Maria Schneider, an independent musician, testified before the US Congress that she has no time for making music anymore as she focuses entirely on protecting her copyrighted works. She is an artist who hast lost the time to create her art. In a game of whack-a-mole, independent creators like Ellen and Maria don’t stand a chance. And, left unchecked, consumers will be left fewer options for high quality news and entertainment.

Another harm, unknown to many consumers, is that many of the pirate sites also traffic in malware. According to a 2015 study by the Digital Citizens Alliance, one out of every three pirate sites contained malware. As organized crime syndicates moved into the content theft business, they saw the opportunity to make more money by distributing malware.

To really combat content theft, we need more resources/focus/coordination from law enforcement. Piracy actors react differently to law enforcement than they do to lawsuits. For instance, when Megaupload was taken down, a number of cyber lockers got out of the business. That wouldn’t have happened without the attention of law enforcement.

We also need more attention from Google, which holds a monopoly on the internet search market. Currently, Google will flag pirate sites after thousands of downloads or complaints. But, they make no effort to favor authorized copyright holders or trusted sources in their algorithm. Instead, Google crawls the Pirate Bay and other known copyright thieves every day to ensure that content can be found. Google enables this game of whack-a-mole that places a huge, unreasonable burden on the copyright holder. Google works with many of our members to take down pirated content, but they can and should do more.

The same holds true for Facebook. Content creators don’t have visibility into these platforms to see where their content is being shared illegally. Google and Facebook collectively act as a duopoly, sharing as much as 99% of the growth in advertising last quarter. At the same time, the platforms are slow to adopt measures to combat fraud or even provide more transparency to protect the content ecosystem. More can be done to ensure that valuable content isn’t illegally streamed.

We’re living in a new, unprecedented digital era. Consumers have the ability to discover premium content and experiences like never before. Facebook and Google engineers have created social and search discovery engines which are quite literally changing global society. But, without greater protections for content, consumers might be left with all the tools of discovery but with a bad malware hangover and no good content. Thank you for having me.