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Advertising | Featured Post | Perspectives | Policy

Apple and California are pushing advertising to adapt. That’s a good thing.

For far too long, many have falsely equated the value of digital advertising as the ability to track consumer behavior. This belief, and much of the marketing strategy it inspired, eroded consumer trust, which hasn’t been a win for anyone. Regulation is catching up and efforts are now being made to align business practices more closely with consumer expectations.

Regulation is catching up and efforts are now being made to align business practices more closely with consumer expectations. Unfortunately, this has a lot of pundits opining about the negative impact of privacy governance on marketing. The reality is that digital advertising has much more than tracking to offer consumers, marketers, and media companies. The changing landscape is a necessary evolutionary step, and an opportunity to get things right.

CPRA in effect

Later this summer, California regulators will spell out draft rules for how companies should comply with the California Privacy Rights Act (CPRA), which builds on and strengthens existing California privacy law. One of the biggest changes will be the ability for consumers to opt out of being tracked with a single click. The CPRA specifically requires companies to honor an opt out signal generated from a global privacy control in a browser or device.

Interestingly, this new provision in the CPRA mirrors Apple’s approach with App Tracking Transparency (ATT), which it rolled out in 2021 as part of its update to iOS 14.5. Under ATT, apps must ask consumers for permission to track them. The results have not been surprising: 81% of consumers have chosen the option not to be tracked.

So, what will happen when Californians have the same ability to opt out as Apple users have today?

It’s not unreasonable to assume that Californians will opt out of tracking at similar rates. Given that there are more than 39 million California residents, an 81% opt out rate translates to 31,590,000 people. And really, if even half that opt out, it is not a small number. Advertisers will understandably want to find new ways to reach these consumers. The industry is already feeling the impact of consumers’ privacy preferences and advertising must evolve accordingly.

Dominant companies dented

Since the launch of ATT, companies that depend on web-wide tracking of consumers have suffered. Facebook warned investors that Apple’s improvements to privacy will cost them $10 billion in revenue this year.

It’s interesting to note that ATT’s impact is felt solely in Apple’s platform, which has provided Google with the unique calling card to advertisers of being the operating system and browser still “all-in” on tracking. However, CPRA will apply to everyone. Given that Google, like Facebook, has built an advertising empire based on invasive tracking, it seems inevitable that the company will see an impact on its ad revenues as well.

Some have noted that Apple has also seen revenue climb from its own App Store search ads. However, they are quickly reaching capacity constraints in the app promotions category, so this is unlikely to serve as a major growth category for Apple.

Ad innovation

Of course, despite limits to tracking, Apple users still see display ads as those ads just aren’t targeted using behavioral profiles. Apple allows ads to be targeted to cohorts or by using first party data. So, I believe that we will start to see more innovation in how advertising is targeted to consumers. First party targeted ads seem like an obvious winner. In particular, ad innovation on Apple platforms could yield significant success because those audiences have long been seen as a more valuable consumer demographic than Android users.

Premium advertising alignment

Consumers frequently complain about creepy ads that follow them around the web. Those kinds of ads are not subtle. In fact, they are viewed by many as the digital equivalent of junk mail. And, as such, they don’t match well with premium content.

However, ads that are based on first party data might be better suited to a premium environment. For starters, the consumer is likely to realize that they are seeing a certain ad because of data they shared with the publisher. They are also likely to have a more favorable view of that ad because of the context. That’s because – instead of focusing solely on targeting a user at the lowest cost – the advertiser has instead intentionally aligned themselves with the relationship the publisher enjoys with the consumer. The ad is, therefore, likely to leverage that premium context to greater effect. In a world where third-party profiling is restricted, we could start to see higher quality ads in premium contexts – and ads that are more effective as a result.

Valuable consenting consumers

While it is a relatively small number, the 19% of consumers that intentionally opt-in to data sharing with sites and companies they trust will become extremely valuable. Trusted, well-respected brands promise to be the main beneficiaries as they are those most likely to gain consent from consumers. Obviously, advertisers would pay a premium to reach these audiences. It’s also interesting to consider how premium publishers could find new ways outside of advertising to monetize their most loyal consumers.

If past is prologue, big tech lobbyists and lawyers will forebodingly warn that the CPRA will cause irreparable damage to the advertising industry. They will bemoan the impact on small businesses and diverse voices. However, it is critical to remember that their real goal is to blunt the hit to Google and Facebook’s bottom lines, which is already driven by upwards of 70% of the digital advertising market.

The future is good advertising

Ultimately, we need to focus on the fact that consumers want, and will get, more control over how their data is shared across the web. As Carnegie-Mellon economist Alessandro Acquisti points out: When consumers are empowered with more privacy, welfare doesn’t evaporate, it shifts and reallocates towards a new set of winners.

The adaptation required from ATT and CPRA are likely to shake up digital advertising and shift advertising revenue from current channels. Like Apple’s tracking prevention last year, CPRA is poised to have a huge impact on the companies dominating digital advertising by logging every aspect of a consumer’s behavior. At the same time, these shifts promise to expand opportunities for trusted, premium publishers; They will stand out to consumers by offering something consumers actually want: valuable news and entertainment, delivered in a way that respects them and their wishes.

Featured Post | Perspectives | Policy

Magic wand meets crystal ball: My digital media predictions

It’s the start of a new year. So, two of the most popular questions I get are: 

“If publishers could wave their magic wand, what would they change about media?”  

“If you look into your crystal ball, what do you see for the future of publishers?”  

You may be surprised to hear this, but I don’t own a magic wand or a crystal ball, although I’d find either quite satisfying.  Despite my lack of magic tools, I do have predictions about the future: Publishers have never been closer to having many of their key needs being addressed in the market. I see a steady march towards meaningful change. And now, publishers only need to maintain the drive to follow through on what they’ve wished for.

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Market power of the “gatekeepers”  

On both sides of the Atlantic, legislation is emerging that limits the potential for, and real abuse of, market power. This will specifically impact “gatekeepers” like Google, Facebook, Microsoft, Amazon, and Apple. The EU’s Digital Markets Act, which is expected to pass by summer, will put heightened obligations and constraints on gatekeepers. Meanwhile in DC, antitrust reform legislation has gained serious bipartisan momentum. 

In particular, two bills are front and center: the American Innovation and Choice Online Act and the Open App Markets Act. These seek to limit platforms “preferencing” – highlighting or promoting – their own products and services, whether in advertising or content discovery and limit app stores in their ability to capture unfair profits. For many years, DCN has played a leading role in documenting the clear imbalance in market power. And now, for the first time, DCN has chosen to endorse legislation in our support of these two bills.  

Prediction #1: By the end of 2022, we will have the first laws passed that limit gatekeepers from abusing their market power.  

The emperor has no clothes  

Years ago, Facebook taught the market that it couldn’t be trusted as a business partner. And it has reinforced this fact again and again and again and yet again.

These days, most publishers treat Facebook as any other marketing channel in which the business value needs to be proved – it’s no longer the new, sexy test bed for marketing ideas. Of late, we see this in the lackluster performance of long-form video on IGTV, causing Facebook to once again pivot to short-form video with Reels. Long gone are the days in which Facebook would say “jump at this shiny new object” and publishers would respond “Yes! How high?”  

Through various lawsuits, Google finds itself in a similar situation. Publishers are finding out that the promises made by Google’s external ambassadors often differ wildly from the company’s internal ambitions. We see this in many ways, from how it conducts advertising auctions to its abuse of consumer data or the way it positioned Accelerate Mobile Pages (AMP). DCN recently surveyed our members to understand their thoughts on AMP and learned that more than half were re-evaluating their use and expect to stop participating because it significantly under-delivered on the revenue and promised value by Google.  

Prediction #2: Google and Facebook feel significant pressure for the first time to truly appease publishers through their commercial deals.   

Value of direct relationships with consumers and advertisers      

Facebook’s record one-quarter-of-a-trillion-dollar stock drop last week should signal optimism for publishers. There is significant movement in technology and public policy to align the value of data and attention with the sites and apps we trust — and actually choose to use. The downturn in Facebook’s fortunes is a sign that their core surveillance advertising business model no longer passes muster. 

Apple has played a leading role by cutting out much of the tracking done by companies with which consumers aren’t even interacting. This move led to a reduction in Facebook’s revenue expectations by $10 billion, a whopping number that represents more than half of our membership’s annual advertising revenues.  

Counter to the sky-is-falling-rhetoric posited by Facebook and Google’s trade bodies, this advertising investment won’t just “vanish into thin air.” Expect further market realignment as regulators flex in the EU and as California’s new law comes into enforcement in January 2023.  

Prediction #3: By 2023, the tracking of consumers and the use of third-party data to target them will have changed significantly under the pressure of legislation, lawsuits, and consumer preferences. 

Premium means premium  

We’ve long established that brands are proxies for trust and, in turn, value for both consumers and advertisers. As the advertising market continues to accelerate away from the 2020 slowdown, there is a noticeable shift appearing – validated in our DCN Benchmark Report – towards premium environments where advertisers can create desire and demand for their products. Often this entails instructing their agencies to be more focused on where their ads appear, a strong advantage for professional media over user-generated content.  

Additionally, consumers are speaking with their wallets louder than ever. DCN members are setting new highs for subscriptions across the board – from streaming services to news brands and from local to international. And as our Gen Z research showed, the kids are alright and more likely to put their money behind services that speak to their own values.   

Prediction #4: Although 2020-21 was an atypical growth period for subscriptions, expect steady growth in 2022 and beyond.  

The future we deserve 

If I did indeed wield a magic wand, I would curb data collection and limit it to the services people actually choose to use. I would also wave away the fear of giant gatekeepers, triggered by the sense that we can’t avoid them. They are not unassailable. What we see in terms of policy and public sentiment suggests exactly the opposite. 

Right now, the battle for a competitive, thriving, and plural publisher ecosystem sits at the integration of data and competition policy. For media brands to retain value and ensure that their news and entertainment isn’t seen as an interchangeable commodity, we must continue to push against unscrupulous data collection. 

Predictions and pressure prevail over magic. I see the power of the progress that has been made from the growing alignment of concerns globally and the education of those charged with regulating and policy making and maybe more importantly consumers and advertisers seeking out the trusted brands of the future.  

Advertising | Featured Post | Innovation | Policy | Revenue

Regulation, revenue, and relationships top of mind at the 2022 DCN Next: Summit

Held virtually January 31-February 3, the 20th annual members-only DCN Next: Summit was a gathering of digital content companies from all over the world.

CEO Jason Kint opened the event by offering his perspective on how the last few years have underscored the need for quality information. He also reinforced the need for trust, particularly as we move toward web3. “Where people have choice and a competitive market, where they spend their time, attention and relationships, trust will matter. Trust matters more than ever,” Kint explained.

Keynotes and discussion sessions touched on subscriptions, paywalls and reader revenue, video, film, audio strategy, and AI. The event also explored the political and technical forces shaping the media landscape today, with sessions focusing on cookies, identity, trust, privacy, and platforms.

The personal is political, and platforms

The opening keynote featured 2021 Nobel Peace Prize recipient Maria Ressa speaking with investigative journalist Carole Cadwalladr. They discussed platforms and the critical role a free press plays in healthy democracies. As Ressa put it, “Until technology gets guardrails around it, until we get to the point where the platforms that deliver the news are redesigned so that lies laced with anger and hate do not spread faster and further than facts, journalists will be under attack.”

Investigative Journalist Carole Cadwalladr in conversation with Maria Ressa, CEO of Rappler

Platform concerns and necessary regulation arose again throughout the event, notably in Thursday’s final keynote. Attendees heard from U.S. Senator Amy Klobuchar, mere hours after a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing.

Klobuchar, who has been working to hold big tech platform accountable, provided an update on the bipartisan antitrust app store bill that just went through committee, as well as other bills she’s leading.  “We just had an incredible vote on a bill that Senator Blumenthal and Blackburn and I … put out a few months ago on app stores: 21 to 1,” she said.

The bipartisan legislation, called the Journalism Competition and Preservation Act would enable news organizations to collectively negotiate terms with platforms to provide fair compensation for news content. Klobuchar  told attendees, “The big issue is advertising money and fair compensation. These companies are sucking up the ad dollars using the original content that you produce and they’re using the data they collect from your audiences to compete against you.”

Chris Pedigo SVP, Legal Affairs of Digital Content Next, interviews Senator Amy Klobuchar

First-party data and identity

Unsurprisingly, the upcoming deprecation of the third-party cookie was a topic of much discussion at this year’s summit. The change has destabilized the advertising ecosystem. Experts discussed how to prepare for the post-cookie reality and how publishers could invest in their first-party data.

To prepare for the post-cookie reality, Rachel Parkin, CafeMedia’s EVP, Sales and Strategy, suggested publishers strengthen relationships with advertisers and build up their arsenals and come up with the right framework for identity and authentication for users and content.

TRUSTX CEO David Kohl suggested that publishers, by acting as a group to create scale, can create competitive advantage. ” We are in transition and there’s tremendous chaos in identity and audience data. But here’s the thing: Chaos creates opportunity,” he said. “And the question is, how can publishers take the lead in organizing the chaos? How can we band together? It is time to create an ‘easy button’ for scale.”

Another session discussed how publishers are leveraging consent-based visitor relationship data sources to fuel monetization as the industry moves forward into a cookie-less future. David Rowley, senior director data and identity products at News Corp. said they feel first party data is going to be one of the most important assets to a publisher. News Corp is assessing what’s out there for external identity solutions, Rowley said, and building out a proprietary identity solution.

“Publishers use so many different types of technology, DMPs, CDPs, analytics platforms, you name it, all of them spit out and create their own identifiers. Being able to stitch all of those together to have a unified view of a user is critical, so you can have that one-on-one relationship with a user,” he said.

People and empathy

Another theme that echoed through the conference was that of managing during these difficult times. As Agnes Chu, president of Condé Nast Entertainment remarked, “I think it’s hard to drive change during a time where people are experiencing so much anxiety themselves.”

Lindsay Peoples Wagner, editor-in-chief of The Cut, outlined that it’s important for leadership to have and bring a sense of empathy. Leaders must “be able to step outside of yourself and understand that, yes, we’re all employees and work at a company, but we’re human beings,” Peoples Wagner said. “People, especially in the past couple years, have had a really hard time with mental health or their family issues or being sick. It’s important to understand, I think, that people may need time, and that push and pull as a manager, I think is more important than ever.”

Michelle Manafy, Editorial Director of DCN interviews Lindsay Peoples Wagner, Editor of The Cut

The biggest shift for TripAdvisor’s Christine Maguire when the pandemic hit, was from building products to empathy. “I had to sort of take a step back and realize where everybody was in their journey,” she said. “Having empathy for what goes on in their day to day is so important, because oftentimes we come in to make a change when there is a problem, and that’s too late.”

The future of work

The newsroom of the future may look nothing like the pre-pandemic one. Indeed, as publishers move forward, they’re stepping into a future which doesn’t look much like the past. There’s upside, such as the ability to create more flexible working situations, which facilitates broader recruiting.

However, as author Anne Helen Petersen noted, when companies allow their employees to live anywhere and work any time, they may run into a lot of sticky situations.

“The larger question that a lot of companies are dealing with is if we say that people can have really flexible work schedules and can go in when it is most convenient for them, are we also going to put stipulations on the states or countries where they can live,” she said. “Are we going to say that they get into New York within the day, that they take the train in? Is that okay? Or are we going to say that it’s one flight away? What are our boundaries?”

The future of the industry

On the last day of the summit, Co-founder and CEO of Insider Henry Blodget and Atlantic CEO Nicholas Thompson engaged in a spitfire conversation about the digital media industry. They discussed the complicated relationship with platforms, new technologies like AI, NFTs and blockchain, and made predictions for web3.

Blodget was optimistic about the future of local news. However, he sees a different scenario play out for others going forward. As the industry evolves, he thinks there will be three to five big generalists, a bunch of targeted specialist publications that serve a particular niche, and everyone else is in the middle.

Atlantic CEO Nicholas Thompson in conversation with Henry Blodget Co-founder & CEO of Insider

“I do think we’re all going to face pressure and there’s going to be a lot more consolidation because there are enormous returns to scale,” Thompson replied. “We see that every day with The New York Times, when they roll out some cool new tech feature that they can spread across their 10 million subscribers.”

“Let us just acknowledge that The New York Times is Netflix of journalism,” Blodget said. “My view is in five to 10 years, they will have 25 million subscribers and they will still be growing strong and they will become one of the most powerful English language journalism publications in the world. And the rest of us are gonna have to find places to carve out what is left.”

Featured Post | Perspectives | Policy

Avoid the hype. Focus on policy for 2022.

From political races to red carpet award shows and global sports competitions, there are very few “franchises” that aren’t being stretched longer and longer to capitalize on the public’s interest. We find ourselves once again at the time of year when industry prognosticators offer their curated lists, social media hot takes, and opinion pieces in an attempt to memorialize the most important events of 2021 and to make predictions for 2022.

In tech and internet policy circles, this cycle seems ironic, given that forecasts are delivered daily – often several times a day, depending on the latest news cycles. But as we head into the final stretch of 2021, I have a few thoughts about how we need to avoid the distractions and stay focused on the one big change likely to occur in the new year.

Reality check 

To start, I’ll set the table on what I am skeptical about focusing on as we move forward: anything “metaverse” or “creator economy.” And I’ve got some good reasons to hope that, as we head into a new year, we don’t repeat the mistakes of the past.

Amidst the current hype around virtual worlds, augmented reality has certainly emerged as a powerful tool. And it is entirely possible that virtual reality will have practical applications beyond gaming (and not akin to never-quite-there 3D TV).

However, I feel compelled to remind everyone how the pivot to video became an industry obsession. That massive shift was not because of consumer demand; it was driven by Mark Zuckerberg’s 2016 prediction that nearly everything on his kingmaker platform would be video within five years.

So much has happened in the ensuing five years, not the least of which has been a steady and escalating series of revelations of how utterly deceiving this particular CEO and his company have been. And, unsurprisingly (at least in retrospect), we learned that this prediction was at least partially built on a Facebook deception. And, while we can ask ourselves why we had so many years when Facebook said “jump” and publishers and marketers blindly responded, “how high?” – perhaps the most enduring and meaningful lessons are learned from mistakes.

Facebook is not alone in the self-serving prophecy business though. Google’s Accelerated Mobile Pages also became an industry obsession, not because it was in the consumers’ best interests as Google claimed. Rather, it was simply a function of another industry-take-all-platform shaping the market to its liking. As we recently learned in unsealed antitrust allegations, it was a means for Google to bolster its advertising interests by slowing down competition. 

Creative control 

The hype cycle is also obsessed with the “creator economy.” There is an absolute flurry of innovation in providing platforms for individual creators. Though this isn’t entirely new. Google’s YouTube, for example, has both inspired and capitalized on it for ages. The same can be said more recently about TikTok.

Yes, it is very exciting to watch. However, these creator models are essentially comprised of typical vendor services: subscriptions, newsletters, distribution and, more recently, audio services. It’s not a coincidence that much of the investment and press hype—bordering on industry obsession—can be tied back to Facebook or its board of directors. Don’t forget that the company has its own Substack-like “creator platform,” Bulletin. Neither the hype nor the investment is surprising, though, given Facebook’s longstanding interest in disrupting media institutions.

What you should really be watching in 2022 

The most important industry story of 2022 will continue to be the at-times dull, but critically important, accountability around antitrust and data policy. We can thank Facebook and Google for adding a sprinkle of excitement to these conversations through whistleblowers, code names (Project NERA, Bernanke, Jedi Blue, and Poirot to name a few) and improperly filed redactions. As an increasing number of privacy laws come into effect, regulators may want to consider more Star Wars-inspired naming conventions to spice things up a bit.

Names notwithstanding, we are going to see regulation continue to intensify next year. In the near term, Europe appears set to finalize two landmark regulations: the Digital Markets Act and Digital Services Act. If these prevail, Europe will be first to have a purpose-built “gatekeeper” law for the 21st century.

The Digital Markets Act addresses the imbalance in negotiating power in a networked economy that results in both individuals and businesses lacking autonomy and choice, which harms the public at large. It recognizes that no individual publisher or consumer can truly opt-out of Google’s search engine that scrapes the entirety of our lives via the internet. Almost as impossible to avoid are Facebook, Instagram, and WhatsApp, which connect people to communities. And then there’s the binary mobile and app store marketplace, delivered by Apple’s iOS or Google’s Android.

With this level of market power, publishers and consumers have little to no choice in negotiating rights to their data and consent with these powerful gatekeepers. The European approach mirrors the work of Australia’s competition and consumer protection regulator — and it looks like U.S. authorities are headed in the same direction. In a market dominated by superpowers, regulation follows to govern how that market power is used or abused.

The Digital Services Act will then modernize the rules for content liability and possibly how advertising can be targeted when based on surveillance capitalism by companies that, in many cases, consumers don’t even intend to interact with. The DSA and DMA have two main goals: First, to create a safer digital space in which the fundamental rights of all users of digital services are protected. And second, to establish a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally. Not many can argue against these goals, it’s only a matter of whether the legislation will achieve them.

Bringing it home

In the U.S., California’s CCPA is currently the strongest data protection law for digital advertising stateside, followed closely by Colorado’s new law. However, as state and federal laws are negotiated to carry the baton, all eyes and minds are on Europe. There is an acute concern about making sure to address market power and create a sustainable path for publishers going forward, one that isn’t determined for us by industry gatekeepers like Facebook, Google and Apple. This likely requires laws that directly integrate competition and data policy rather than developing rules in the same room as the industry titans, which has failed to result in anything fair if even legal.

So, as we look forward, let’s not repeat the mistakes of the past. When the dominant digital power players press their self-serving agendas, we do not have to buy in. We don’t have to follow their lead. We don’t have to amplify their messages. And for goodness’ sake, we do not need to pivot.

Instead, we should stand our ground, steady on the bedrock of consumer trust and responsible business practices. If 2021 showed us anything, it is that consumers value great content. It’s what we do. And we will continue to do it well. Nothing meta about that.

Advertising | Perspectives | Policy | Supporter Spotlight

A regulatory reckoning over scam ads approaches

The classics are so well-known they’ve become punchlines: acai berry treatments, one simple trick to get rid of belly fat, get rich working from home. Newer scam ad verticals like bitcoin and crypto schemes, home solar energy savings, and nutritional supplements for diabetes sufferers are slamming consumers on every corner of the Internet.

And yet scam and deceptive advertising is simply accepted as an ugly part of digital media and advertising. And it’s only getting uglier. Since the beginning of 2021, The Media Trust has detected a 50% increase in scam campaigns hitting publisher properties. Still, too many AdTech companies and publishers look the other way as the scams roll through the programmatic pipes, hoping their audiences have the good sense not to be bamboozled.

The Media Trust detected unique scam campaigns ramping upwards throughout 2021 with a major spike in July.

Unfortunately, there have been virtually no consequences for sites running scam ads. There’s the occasional massive fine, like when the Federal Trade Commission came down hard on Clickbooth for its acai berry barrage. However, for the most part, scammers advertise with impunity and AdTech and publishers become their accomplices.

However, consequences may be coming—and the fallout may be dire—judging by the developing online regulatory situation in the UK and increasing attention elsewhere.

The scope of online safety measures

British Prime Minister Boris Johnson has promised to present the Online Safety Bill before Christmas. The bill would require publishers, social networks, and many communication/messaging apps to deter, remove, and mitigate the spread of Illegal and harmful content—particularly when aimed at children. The bill threatens fines as high as £18 million or 10% of global revenue, and possible criminal sanctions.

Beyond content that sexually exploits children (which must be reported to law enforcement), the harmful content in question includes malicious trolling and racist abuse—with the added goal of “protect[ing] democracy,” presumably through stemming online disinformation. The UK Office of Communications (Ofcom) will enforce the proposed law, which will also give the regulatory agency the ability to completely block access to a site or platform.

However, advocates like famed British personal finance advisor Martin Lewis think the bill doesn’t go far enough. That’s because it’s laser-focused on user-generated content and doesn’t regulate online advertising—most notably scams. Lewis, whose likeness is often exploited in scam ads pushing bitcoin schemes, has been on a crusade against online scam ads for years, including forcing Facebook to settle for £3 million over a 2018 lawsuit regarding more than 1,000 scam ads featuring his appearance.

Drowning in scam ads

The data backs up Lewis’ claim that the “The UK is facing an epidemic of scam adverts.” In 2020, 410,000 cases of fraud reported to the UK police represented a 31% jump from the year prior, according to consumer group Which?, with £2.3 billion fleeced. Including anxiety and psychological damage, Which? puts the actual total suffered by UK consumers at £9 billion.

And the greatest frustration among consumers and public advocacy groups is the lack of recourse and sense that scammers act with impunity—aided by AdTech and digital media. In another Which? report, 34% of consumers said a scam they reported to Google was not taken down, while 26% said the same of Facebook.

In 2020, The National Cyber Security Centre removed more than 730,000 websites hosting scam advertising landing pages featuring the likenesses of Lewis, Richard Branson, and other celebrities. Despite that effort, The Media Trust has seen a 22% increase in these types of scam (aka “Fizzcore”) content throughout 2021 that use similar landing pages.

Fizzcore attacks, which typically feature celebrities and hawk bitcoin scams, have grown 22% over 2021 despite crackdowns.

Fizzcore is more nefarious than other scams because it employs cloaking to hide malicious creative and/or landing pages from creative audits and other detection techniques. The vast majority of these have been pushing bitcoin investment scams, often with the same Lewis and Branson content.

Personal finance advisor Martin Lewis and billionaire philanthropist Richard Branson are common faces in scam ads directed at UK citizens.

Even if online scam advertising fails to make the final Online Safety Bill, a reckoning for scam ads could come in other forms. The UK’s Department for Digital, Media, Culture and Sport (DMCS) is developing the Online Advertising Programme (OAP), a framework that enables regulators to address potential consumer harms from digital advertising, including scam ads.

And just to pile on, UK. Home Secretary Priti Patel announced a relaunched Joint Fraud Taskforce on Oct. 21. Addressing the significant rise in scams during the peak of the coronavirus pandemic, the taskforce will focus on addressing scams and fraud through private-public partnerships and refurbishing of government reporting tools.

Fallout beyond the British Isles

The ramifications of all this regulatory (buildup) ought to make the industry anxious. The Online Safety Bill would put heavy new burdens on publishers and social media in moderating user content in the UK, but the inclusion of scam ads might directly affect revenue. In the absolute worst-case scenario, publishers would need to vet all specific advertisers running on their sites as well as be familiar with all creative to avoid liability. That could mean many risk-averse publishers shut off programmatic advertising.

Scam advertisers are notoriously hard to pinpoint. They use any and every buying platform available, and then tools like cloaking in code to hide their malicious motives. When it comes to rooting out scam campaigns, the proof isn’t completely in the ad code. While creative and domain patterns can be identified and blocklisted, finding scammers also requires investigation into the elusive end-advertisers, their motives, and their histories. It’s not impossible, but it requires dedicated teams always on the pursuit.

Beyond stopping scammers cold at the source, the next best way to stem proliferation of scam ads is to bring culpability to publishers and their AdTech partners. However, publishers are the low-hanging fruit. The website was where the consumer was attacked, so they’ll always be the prime regulatory target.

Despite the intense pressure in the U,K., regulators in other countries are also most definitely paying attention and looking for a potential roadmap. In the U.S., reform of Section 230 of the Communications Decency Act—which shields online media companies from legal liability regarding user-generated content—appeals to both major political parties. Really, what politician would say no to the easy win of protecting consumers from online scams? According to the Federal Trade Commission, consumers lost $3.3 billion to fraud in 2020, up from $1.8 billion in 2019—and that’s only the 2.2 million reports filed. 

Self-regulation to the rescue?

The IAB UK is conversing with the DMCS on the OAP, but ultimately the trade group believes industry self-regulation is the answer. While self-regulation on the data privacy front became a mockery of itself, self-regulation of scam ads doesn’t need to meet the same fate. First off, trade groups like the IAB need to establish stronger ad quality guidelines that offer standards for handling malvertising, scam, and other harmful ads.

In addition—or short of that—publishers need to take control of their own destinies regarding scam ads. Every ad quality provider should be identifying scam ads and enabling publishers to block them. Slapping down redirects simply isn’t enough for a bad-ad-blocker—a publisher serving scam ads is violating the trust of its audience and leaving consumers vulnerable.

Not only is blocking the scam ads the right thing for publishers to do, it is a way to get ahead of—or perhaps helping avoid—a regulatory onslaught that will have catastrophic revenue consequences. Failing to mitigate will come back to haunt the industry.

Advertising | Featured Post | Policy

An unredacted view into Google’s unbridled ambition

Google takes somewhere between 22% and 42% of all the money flowing through its ad system, according to the unredacted version of the Southern District of New York federal case, Texas v Google, which was unsealed last week. While we knew or suspected many of the revelations, surprising new details were uncovered including internal communications that expose just how big their ambitions are the and tactics they take. The case and the supporting evidence present a chilling and calculated effort by Google to squash all competition. There is much to unpack in the newly released documents, but I’ll focus on three aspects that jumped out to me.

Google fees

It has always been unclear how much Google charges when it is involved with an ad. However, the recent evidence shows that they charge on all sides of the transaction — and they charge a lot. The suit lays out the scope of Google’s ad business: “Google operates the largest electronic trading market in existence.” In fact, it appears that 75% of all ad impressions in the United States were served by Google’s Ad Manager. In Google’s words, “more daily transactions are made on AdX than on the NYSE and NASDAQ combined.” Eleven billion online ad spaces each day.

At the same time, Google owns the largest buy-side and sell-side advertising platforms. As one senior Google employee admitted, “(t)he analogy would be if Goldman or Citibank owned the NYSE.” More accurately, the analogy would be if Goldman or Citibank were a monopoly financial broker and owned the NYSE, which was a monopoly exchange.

And, because of this dominant position on all sides of the market, Google can charge monopoly rents. Most ad exchanges charge a take rate of four to five percent of ad spend. Google takes 22 to 42 percent. And, on top of that, Google charges another 10% if a publisher wants to divert inventory outside of Google’s system.

Oh, and that’s just on the sell side. The suit lays out similar predatory fees and anticompetitive practices on the buy side as well.

Header bidding, an existential threat

When “header bidding” came along, it offered publishers the ability to make their ad inventory available to multiple ad exchanges simultaneously, fostering competition and innovation. Publishers hoped it would give them greater flexibility to monetize their ad inventory and increased leverage to negotiate better deal terms – something that would have resembled a healthy marketplace. Apparently, the very notion of header bidding hit hard at Google’s core.

As noted in the evidence, Google identified header bidding as an “existential threat.” In the unsealed complaint, we see that one of Google’s most senior executives declared eliminating the threat his top priority, which merited an “all-hands on deck approach” for the leadership team.

Then, in a stunning play to protect its dominance, Google struck a covert deal with Facebook. At the time, Facebook was actively considering getting into the header bidding space, which would have put them on a direct path of competition with Google. However, both companies recognized that they had more to gain by fixing the market for themselves than by competing openly.

The unsealed evidence reveals that a senior Facebook executive understood why Google wanted the deal: “They want to kill header bidding.” That’s a clear quid pro quo around an alleged violation of Section 1 of the Sherman Act. This could translate into criminal charges, depending on how the courts see this evidence.

Google also promised that Facebook would win a certain percentage of auctions in open bidding, Google’s alternative to header bidding. In return, Facebook promised a minimum spend and bidding frequency. They also capped the number of line-items that publishers could use, which severely hindered publishers’ ability to use header bidding. Google likely figured that it would pressure publishers to use open bidding instead.

Finally, after pushback from Facebook, Google agreed to remove the ability for publishers to set a floor price for their inventory. In Google’s ad marketplace, which was already  stacked against publishers, this tilted the playing field even further in favor of Google and Facebook.

AMP, the offer publishers could not refuse

Google created a new format for content creators called Accelerated Mobile Pages (AMP), which was pitched as a way to improve the consumer experience on mobile. Not coincidentally, Google announced that it would start giving priority to AMP pages in search results, which gave the Google-led project a path to fast adoption. Essentially, Google made an offer that no publisher could refuse: Use AMP or lose the ability to be found via the dominant search engine.

Despite Google’s claims, there are multiple benefits for Google’s business baked into AMP, as well as downsides for publishers:

  • It’s a Google domain so Google can collect even more data as a first party about a publisher’s audience;
  • Custom ad formats don’t work on AMP, nor does header bidding, so publishers make less money (40% less according to Google);
  • It’s another platform that requires resources to manage; and
  • The unredacted documents show that Google also inserted an artificial one-second delay into non-AMP pages in order to give AMP “a nice competitive boost.”

The takeaway

All this new evidence shines a bright light on a pattern of behavior by Google to close off competition at every turn. Suffice to say that the harm to publishers has been dramatic. Google’s goal was not to build better products or services. And it certainly wasn’t trying to improve the overall health of the advertising ecosystem.

In these unredacted transcripts, we see the details of Google’s anticompetitive strategy articulated in Google executives’ own words. Their goal was to choke out competition: by killing off a new technology that would have improved the health of digital advertising; by cutting a deal with Facebook to rig the market; and by forcing publishers to use AMP.

I expect this case will only get more attention going forward. We are likely to see additional private suits filed as competitors realize they were conned by Google (and Facebook). I suspect we will see additional states join this lawsuit or file similar suits as it is clear that consumers were harmed by a dysfunctional market.

Finally, many speculate that the Department of Justice could add its considerable weight to this fight as soon as Jonathan Kanter is confirmed as the head of the antitrust division. Given the scope and impact of this case, we welcome any and all help to fight one of the most brazen examples of anticompetitive behavior in recent memory.

Featured Post | Perspectives | Policy

Seeing through Facebook’s transparency report

“Transparency is an important part of everything we do at Facebook.” Well, at least that’s according the first line of the company’s just-released Widely Viewed Content Report. The report is intended to provide insight into what content flowed across Facebook in the second quarter of 2021. In particular, it examines what content was viewed most in consumers’ News Feeds.

Facebook claims that most of the content on its platform comes from its users’ friends and family. The report states that news (or content that appears to be news) only represents a small fraction of what users see and share. It appears the company wants us to believe its platform is filled with family pictures and GIFs of kittens. Move along, industry watchers. According to Facebook there’s nothing to see here!

Cleaning house

The New York Times uncovered that this wasn’t the company’s first such report. According to the Times, Facebook prepared a Widely Viewed Content Report for Q1 but not release it. Apparently, the picture it painted wasn’t pretty.

According to the Times, “the most-viewed link was a news article with a headline suggesting that the coronavirus vaccine was at fault for the death of a Florida doctor.” Although the article came from a major publisher, it was the headline – and the way it was shared in a particular context by anti-vaxxers – that put it on top. Meanwhile, the 19th most popular page during Q1 was from the Epoch Times, an outlet widely known for pushing conspiracy theories.

Weird. These aren’t exactly posts about grandma’s mouth-watering apple pie or dare devil kittens hanging from ledges.

Remember, Facebook only reluctantly published the Q2 report after it spent a year discrediting external research from its own CrowdTangle data, which measures engagement (liking and sharing). When Facebook dismissed these reports, academics and researchers responded by pointing out that they were simply using the data Facebook had, itself, put out into the market. Meanwhile, CrowdTangle’s personnel were dispersed to other parts of Facebook, and the tools were pared back by Facebook, in what looked like an effort to regain control of the data and narrative.

It kind of feels like Facebook is hustling us in a giant game of Three-card Monte.

Revisionist history on repeat

Maybe there are those still inclined to give the company the benefit of the doubt. As Facebook spokesman Andy Stone soft-played their actions when he tweeted “we might have been guilty of cleaning up our house a bit before inviting company.” Unfortunately, the dumpsters full of incendiary trash impacted untold numbers of “guests” way before Facebook purportedly tidied things up and invited the “company” of critical analysis.

Facebook has a long track record of covering up and thwarting transparency at critical moments including the countless times where they enabled companies to collect data about consumers and then repurpose that data for number of reasons. Notably, these included selling Facebook’s data to third parties like Cambridge Analytica, which turned out to be one of the largest data breaches in history.

Deception is part of the business model

Recently, Facebook blocked researchers ability to gather information about what political ads are being shown across their services. It was especially galling that Facebook justified its decision as a protection of “user privacy.”

Given the company’s track record, it shouldn’t be surprising that Facebook once again opted to block full transparency. And yes, once again, the real reason is because it could hurt the business model. Even the FTC weighed in and warned Facebook not to use privacy “as a pretext to advance other aims.”

Truth told

For the Facebook model, it doesn’t matter whether the content is truthful. In fact, if there is a bias at all, it must be in favor of the least trustworthy, most salacious content (e.g. vaccine misinformation, Epoch Times) because that content tends to catch fire more quickly. And profits are way up. The business model is clearly working.

On top of that, at key junctures in Facebook’s history, executives have unequivocally chosen to hide the truth to maintain these profits. Vague commitments to transparency come only when they find themselves once again caught with a hand in the proverbial cookie jar. And now, even those promises to “do better” come with a giant caveat: We’ll only tell you something if it makes the company look good.

At this point, there are legitimate questions about whether Facebook is a good-faith actor that can ever play a constructive role. Facebook’s business model is at odds with transparency and their executives seem committed to running the business like a Three-card Monte hustle. With deep political divisions in our country hindering our ability to tackle a shared crisis (or even have a thoughtful discussion), we need leaders to step forward and demonstrate an unequivocal commitment to transparency and trust.

Featured Post | Perspectives | Policy

Today’s tech policymakers are more knowledgeable – and more aggressive

I will never forget back in 2006, when former Senator Ted Stevens (R-AK) infamously referred to the internet as a “series of tubes.” The cringe-worthy statement has gone down in the annals of unintentionally hilarious politician-speak. In defense of Senator Stevens, however, it merely belied a massive lack of understanding throughout the U.S. Congress about the then-burgeoning tech industry.

There are many reasons for this knowledge gap, not the least of which is that politicians aren’t technologists. In addition, most members aren’t “digital natives.” Meanwhile, the internet has grown ever more complex — as have tracking, monetization, and devices. And let’s not forget that Congress has responsibilities for governing on a wide swath of other complex public policy issues, which often leaves members and their staff stretched a mile wide and an inch deep.

Even in 2018, there were still examples of monumental ignorance about tech. But they are becoming fewer and farther between. In part, that’s because Congress has held numerous hearings over the years on tech issues, which has forced the members to become smarter. One tangible piece of evidence is that you can see a huge improvement in the questions asked by Members of Congress to tech executives over the last few years.

Europe first out of the gate

European policymakers have long outpaced their U.S. counterparts in digital savvy, even if the results have been less than groundbreaking. The ePrivacy Directive was an early attempt to provide more transparency for consumers about the mechanisms for online data collection and tracking. The ensuing “cookie banners” were not so great. The General Data Protection Regulation (GDPR) was the first major consumer privacy framework against which nearly every new privacy law is compared. Yet we’ve been waiting for more than three years for significant enforcement. This year might be the year… maybe.  

Then, in late 2020, Europe rolled out the Digital Markets Act (DMA) and Digital Services Act (DSA). The DMA is intended to rein in the anticompetitive behavior of “gatekeeper platforms” while the DSA is focused on providing protection and transparency for consumers and on addressing harmful content that flows across the web. These proposals represent a more thoughtful and aggressive approach than we have seen in the past from European policymakers who clearly understand how big tech companies have cemented their dominant positions. 

[Side note: If you are a DCN member, I highly encourage you and a member of your policy or legal team to attend an event we’re hosting on June 22, "Digital Markets Act: What Is It and Why Should Publishers Care?" We will provide an overview of the DMA followed by a panel of DCN members discussing the pros and cons of the DMA and the parallel proposals in the U.S.]  

Congress steps up to the plate 

Fast forward to last week, when a bipartisan collection of members of the House Judiciary Committee announced five bills to rebalance competition in the tech marketplace. These bills are an outgrowth of multiple committee hearings held over the last several years. The outcome of those hearings was a comprehensive blueprint for action released by the Committee last October.

The five bills are intended to:

  1. give greater authority to US regulators to break up dominant platforms which unfairly use their dominance to promote their own services;
  2. require platforms to offer data portability and interoperability to consumers;
  3. prohibit platforms from “self-preferencing” and/or discriminating against competitors;
  4. raise the bar for platforms seeking to acquire potential rivals; and
  5. increase filing fees for companies proposing mergers.

Action across party lines

While Washington D.C. is still deeply divided along partisan lines, it is striking to note that a number of Republicans  co-sponsored all of these bills. And they did this just days prior to the confirmation of Lina Khan (69-28) in a largely bipartisan vote as she was appointed as the new Chair of the Federal Trade Commission.

Earlier this year, Representative David Cicilline (D-CT), Chairman of the House Judiciary Subcommittee on Antitrust, re-introduced the Journalism Competition and Protection Act (JCPA) with bipartisan support, including from Rep. Ken Buck (R-CO), the top Republican on the Antitrust Subcommittee. Our understanding is that they are working together on ways to strengthen the JCPA in light of the lessons learned from the European Copyright Directive and Australia’s News Media Bargaining Code.   

Meanwhile on the other side of the Capitol, Senator Amy Klobuchar (D-MN) introduced a comprehensive proposal for reforming antitrust law. Senator Mike Lee (R-UT), her Republican counterpart on the Senate Judiciary Antitrust Subcommittee, recently introduced his own anti-trust reform bill. However, it isn’t likely to garner any support from Democrats.

While they offered starkly different solutions, the two lawmakers have a long history of working together to highlight the harmful conduct of big tech platforms. With the news that Senator Klobuchar is reportedly working on counterpart legislation to the House bills, it will be interesting to see whether a similar bipartisan dynamic plays out on the Senate side. 

Taken together, there is a distinct shift in the posture of Congress. They have moved from hearings and investigations to remedies and solutions.  

What’s next? 

If Vegas bookies offered odds on whether Congress will pass any significant legislation in the next 18 months, it would be considered a long shot. It’s not easy to get a majority of 435 members in the House to sing off the same choir sheet. It’s even harder to find agreement between Senate Majority Leader Chuck Schumer (D-NY), Senate Minority Leader Mitch McConnell (R-KY) and 60 of their colleagues (most of whom have their own fiefdoms and presidential ambitions). But you have to start somewhere. And, right now, both parties appear to be clamoring for legislative action to rein in big tech platforms. 

There will be a lot of debate in the coming months about the specifics of the House bills, the companion bills which are reportedly coming from the Senate Judiciary Committee, and the DMA and DSA in Europe. And you can be sure that the big tech platforms, which are the unquestioned targets of this scrutiny, will be spending copious time and money trying to muddy the waters and blunt these proposals.

But this much is clear: Policymakers have a come long way in better understanding the tech industry since the “series of tubes” analogy. We have reached the point where they are poised to write rules for the road that reflect how the modern world operates.

Featured Post | Perspectives | Policy

Accountability and opportunity go hand in hand

Relationships matter. As humans, we diverge from acting out of self-interest to accommodate the people with whom we have relationships. This might mean little things like saying “thank you” or holding the door open for the person behind you. It could be bigger things like buying a birthday gift for a friend or helping a neighbor in need.

People make sacrifices every day for those they care about. And, in any kind of relationship, there is some level of accountability. If I am jerk to a grocery store clerk, the five minutes during checkout could be really awkward or that person might decide to double-charge me for an item. Being rude to my server is not likely to speed up my dinner order. If I’m inconsiderate of my wife, I will probably be miserable until I make amends. These sorts of simple relationship dynamics play out hundreds of times every day.

The relationship business

Commercial relationships have similar dynamics. From my perch at DCN, I see premium publishers working hard every day to earn the trust and loyalty of consumers. News organizations employ journalists, who investigate and check facts, and editors, who vet content and ensure rigorous standards are followed. If they mislead, they can be held accountable by under libel laws. If they fail to engage and inform, they lose traffic and advertisers or subscribers.

Movie companies hire directors and actors to create humor, drama, or horror to entertain consumers. If they don’t do so, their movies fail to draw at the box office, they command lower fees for other distribution channels. They lose money.

Whether it’s weather, health, sports, or financial information, publishers in every vertical and across every medium work hard to create quality, compelling consumer experiences. In all of these cases, the publisher’s brand is closely tied to the content because the publisher is trying to build a relationship. And, as with any successful relationship, trust and accountability are key to developing a deeper commercial relationship with people as well.

Responsibility issues

Some of the currently pressing public policy issues have arisen in areas where there is little accountability to consumers. One big example is Section 230. It was enacted into law in 1996, as part of the Communications Decency Act, when the burgeoning tech industry was a darling of all politicians. Things have changed dramatically since those halcyon days with multiple members on both sides of the aisle introducing legislation to overhaul or eliminate Section 230.

Ironically, Section 230 was intended to empower platform companies to take responsibility. Instead, this liability shield tends to be used mostly by companies who can’t or won’t take full responsibility for their services. Tech companies tend to use Section 230 to avoid taking action. Backpage was one of the highest profile examples. However, Facebook regularly invokes the legal protections to avoid responsibility for the toxic content flowing across its services.

It’s not a coincidence that news organizations are far less reliant on Section 230 than platforms, because they stand behind their content. Content is their calling card and if customers reject it, that relationship is over.

Accountability issues

Consumer privacy is a hot topic these days because there are big tech companies building profiles about consumers behind the scenes with little transparency or accountability. From hyper-targeted advertising to potential discriminatory offerings, consumers are increasingly aware that they are being manipulated and their data is being used for myriad unexpected purposes.

Consumers have generally felt fine about their data being used within the context of a relationship with a company – e.g. ensuring the site or app loads properly on their device, remembering log-in information, or recommending new content. However, when data is used outside of that relationship, consumers react negatively. Hence, the blowback for Facebook around Cambridge Analytica. These public policy spats underscore a key difference between companies that have direct relationships with consumers versus those that are intermediaries. Direct relationships create accountability.

Building business with relationships

Accountability is an inherent part of direct relationships. That said, solid relationships provide opportunity as well.

The most visible sign of the power of direct consumer relationship is the growth of subscriptions. The New York Times and Netflix are notable success stories. However, hundreds of other media brands are finding loyal audiences that are more than willing to pay for premium content.

In addition, publishers with trusted brands are well-positioned to thrive in a world where privacy laws and tech controls increasingly restrict web-wide data surveillance. Whether it’s GDPR in Europe, CCPA and CPRA in California, or the handful of other states that are actively considering privacy laws, policymakers are trying to give consumers greater control. They seek to prevent the kind of unexpected data harvesting that happens outside of a consumer’s relationship with a company.

At the same time, key companies are rolling out privacy-friendly features. Apple built Intelligent Tracking Prevention (ITP) into Safari and is preparing to unveil App Tracking Transparency (ATT). Both are designed to crack down on companies following consumers everywhere they go online. However, they do allow for tracking within a consumer’s direct relationship with a company.

Google announced that Chrome would follow the lead of every other major browser in blocking third-party cookies. To be clear, there are a lot of suspicions about whether Google might try to give itself preferential treatment here. But, at its core, it looks like a positive move toward consumer privacy.

Real relationships

Companies with direct, trusted relationships have an opportunity. This window of opportunity, especially for news providers, could not come at a more important time for publishers — and for our society. The news industry has taken a beating in the last decade or so as intermediaries aggregated publishers’ content and retargeted audiences. Big tech platforms incentivized scale over trust. On top of that, there has been a raging debate about the impact of platform-driven disinformation and algorithmic bias on our democracy.

Well-paid lobbyists for some big tech companies are actively working to deflect accountability. However, publishers are embracing the direct, trusted relationships (and the ensuing accountability) they enjoy with consumers. News organizations continue to produce and stand behind quality journalism – researched, fact-checked and vetted. Local news publishers are leaning into what has always made them unique – critical context and deep understanding – to serve their communities.

Strong relationships are built on open, honest, accountability. They are built on trust. For quality media brands, this is nothing but good news. 

Featured Post | Policy

Australia’s new media bargaining code: What’s really up down under

“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.

Featured Post | Perspectives | Policy

Why healthy competition would heal our big tech problems

Public policy debates over consumer privacy and platform liability will feature prominently in 2021. Some are even hopeful that policymakers can reach bipartisan agreement on solutions. These are two important issues that I want to explore. However, I wonder if they aren’t the byproduct of a bigger problem.

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.

Featured Post | Perspectives | Policy

Here are 3 big changes coming for digital media

In case you haven’t heard, there is an election coming up in a couple of weeks. Regardless of which party wins, the public policy landscape for digital media is likely to undergo some major shifts in the next couple of years. Let’s take a look at three big changes on the horizon:

Google and Facebook will pay for premium content

In 2019, the European Union approved the Copyright Directive and underlying publishers’ right, which gave news publishers legal leverage to demand better terms from platforms. Now, all eyes are on France where a court ruled earlier this year that Google must negotiate in good faith with publishers. Of course, Google will avail itself of all the legal channels to slow down any effort to force them to pay for content. However, it’s likely just a matter of when, not if.

On the other side of the globe, in 2019, the Australian Competition and Consumer Commission (ACCC) to develop a voluntary code to rebalance the relationship between news organizations and big tech platforms. As the latter predictably dragged their feet, the ACCC switched gears earlier this year and moved to the development of a mandatory code, which appears likely to be easily approved by the Australian parliament in 2021.

In response, Google and Facebook have threatened to drop news from their services and/or pull out of these markets altogether. However, we know these are empty threats. For one, there’s common sense. If Facebook’s news feed and Google’s search results were devoid of trusted news organizations, what kind of miserable consumer experience would that be?

Really, given the massive profit margins of these tech companies, and the political scrutiny they are facing on multiple fronts, it makes sense for them to simply buy their way out of this problem. Case in point: Earlier this month, Google launched Google News Showcase, which will pay out approximately $1 billion in licensing fees to a select group of news publishers. As News Corp’s CEO, Robert Thomson, noted, “…the principle and the precedent are now established.” My take: Google sees the writing on the wall and is trying to get ahead of regulators in an effort to set the market.

Also, earlier this month, the House Judiciary Committee issued a lengthy report that summarized their investigation into big tech platforms and laid out a host of legislative solutions. One of those proposals would allow news publishers to collectively negotiate terms with platforms like Google and Facebook. It’s pretty clear which way the wind is blowing. Platforms will pay for premium content in the not-to-distant future.

Consumer privacy laws will impact data collection and profiling, especially programmatic advertising

The EU’s General Data Protection Regulation (GDPR), which went on the books in 2018, was meant to give citizens new rights and protections over their data. Since then, the common narrative from big tech’s apologists has been that GDPR didn’t work. It only resulted in annoying pop-up notices while Google and Facebook cemented their dominance in digital advertising.

I dispute the narrative that GDPR didn’t work. It hasn’t been enforced…yet. The most significant enforcement action to date has been a French court ruling (currently under appeal) that Google improperly gained consent from consumers, which resulted in a $50 million fine. The resolution of that case could have huge implications for the entire industry, not just Google.

Meanwhile, Google, Facebook, Apple, and other companies claim Ireland as their European headquarters, which gives primary jurisdiction to Helen Dixon, Ireland’s Data Protection Commissioner (DPC). Last month, in response to a European court ruling, she announced that Facebook and other companies could not transfer data about European citizens back to the U.S. because the U.S. does not have equivalent privacy safeguards. In response, Facebook sued the DPC and declared that they might pull out of the European market if this ruling stands. (Sound familiar?)

At the same time, there are hundreds of cases pending before the Irish DPC, any one of which could have wide-ranging ripple effects. Adding to the pressure for her to act, the Belgian data protection authority issued an initial finding just last week that the IAB Europe’s Transparency and Consent Framework (TCF) is not compliant with GDPR. While the IAB Europe is expected to push back on these findings, the ruling could have massive implications worldwide for programmatic advertising, in particular the real-time bidding systems for open exchanges.

According to the United Nations, 132 out of 194 countries have enacted some kind of data privacy law – many of which are modeled after GDPR. This November, California voters are likely to approve a ballot initiative called the California Privacy Rights Act (CPRA), which will align California’s privacy law much more closely with the GDPR.

Of course, Google and Facebook have enormous legal and lobbying budgets that they will leverage to forestall regulation and enforcement for a time. But, eventually, the same public pressure that led to the enactment of GDPR and other data privacy laws will lead to the enforcement of these laws, which are primarily targeted at limiting the ability of big tech platforms to collect data about consumers.

Platforms will soon face new responsibilities and liabilities

Policymakers on both sides of the Atlantic seem to be hell-bent to make platforms more accountable for what’s happening across their services. This morning, the U.S .Department of Justice, along with 11 state attorneys general, filed suit alleging anticompetitive practices by Google with regard to the search marketplace.

The suit does not lay out specific remedies but could include breaking up pieces of Google into separate companies and/or imposing new obligations on the company. While the suit is likely to take years to play out in the courts, it dramatically ramps up the pressure on Google while also ensuring the conversation will remain top of mind for policymakers. It’s also widely expected there will be additional suits filed by the bipartisan state attorneys general who have been investigating Google on a range of practices including digital advertising.

Meanwhile, members of both political parties in the U.S. have expressed grave concerns about the anti-competitive practices and dominance of the big tech platforms. Democrats have expressed additional concerns about the impact on democracy, news organizations and vulnerable segments of society. Republicans have lambasted the platforms for allegedly suppressing conservative speech.

Importantly, both parties agree that platforms’ algorithms should be transparent. They think regulators should have greater authority to oversee their actions and mergers. And both sides believe that that Section 230 protections should be significantly narrowed. The CEOs of Google, Facebook and Twitter will likely be walking into a political minefield next week as they testify to Senate Commerce on this sensitive topic under threat of subpoena.

In Europe this month, European Commission Vice President Margrethe Vestager announced plans to move forward by the end of this year with two major legislative initiatives designed to impose a whole new set of obligations on big tech platforms. These big tech companies used to be the darlings of innovation. Now they are nearly uniformly seen as impediments to economic growth and democracy.

What does all this mean for publishers?

Taken together, these three unfolding and inevitable changes should provide a unique opportunity for premium publishers. Obviously, public policy debates are messy. And lawmakers and regulators don’t have the best track record in terms of truly understanding tech.

But, as we’ve seen with enforcement action in Europe, investigations by various competition authorities and hearings before the US Congress, policymakers have gotten a lot savvier and are poised to act in bold, new ways. Going forward, companies that enjoy trusted, direct relationships with consumers and advertisers are likely best positioned to flourish in a world where premium content and contexts will have greater value.

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