As the world learns from Australia’s news media bargaining code that has reportedly driven $200 million of funding to news organizations, a whistleblower revealed the tactics to try to stop other nations from importing and building on it. This panel featured the CEO of the whisteblower’s law firm, an advocate for the digital future of news organizations, and a member of Parliament working on new laws to create a more competitive market.
Held June 23, 10:45-11:05am ET at The 2022 Collision Conference in Toronto Canada
Jason Kint, CEO, Digital Content Next Libby Liu, CEO, Whistleblower Aid Nathaniel Erskine-Smith, Member of Parliament for Beaches – East York, House of Commons of Canada Alex Kantrowitz, Founder & Editor-in-chief, Big Technology
Nominated by President Biden, and recently confirmed by the Senate, Alvaro Bedoya was sworn in as the 5th Commissioner of the Federal Trade Commission (FTC) this month. As a result, Chair Lina Khan now has a majority of Democratic-nominee votes with which she intends to move quickly to implement a promised progressive agenda. Let’s dig deeper into what issues Chair Khan and the FTC are likely to move forward and how this might play out.
In February, the FTC gave the required advance notice to the relevant Congressional committees that it intended move forward with a rulemaking “to curb lax security practices, limit privacy abuses, and ensure that algorithmic decision-making does not result in unlawful discrimination.”
Now that Commissioner Bedoya is confirmed, it is widely expected that the FTC will move forward in the very near future. Historically, an FTC rulemaking of this kind can take years to process. However, in 2021, the FTC streamlined the process including by removing the requirement for a staff report and analysis. So, while it is not clear exactly how long it will take, the intent is to move quickly.
One of the wild cards in this process is a petition filed last year by Accountable Tech, which urged the FTC to ban “surveillance advertising” under its authority to prosecute “unfair or deceptive” acts. The petition suggested the FTC could act in one of two ways:
Prohibit platforms from using personal data for targeting ads, or;
Prohibit businesses from “sharing user data, for the purposes of advertising, to any business line, website, advertising technology, or tracker other than the business or service with which a user intentionally interacts” AND prohibit platforms over a certain threshold from using consumer data to target ads.
As hinted at in the second option, Accountable Tech’s petition notes that “any rule should make clear that it does not ban all advertising or even all targeting of advertising.” Indeed, they specifically call out search, contextual, and first-party targeted advertising as acceptable practices in line with consumer expectations. All that said, it is unclear whether and how much the FTC will follow the suggestions of the petition.
Ramping up COPPA enforcement
In 2019, the FTC initiated a mandatory review of their regulations concerning the Children’s Online Privacy Protection Act (COPPA), but we have heard very little since. Consumer groups have been calling on the FTC to modernize the COPPA rules, which have not been updated since 2013. Now that Chair Khan has a majority, we are likely to see revised draft regulations sometime before the end of this year.
In the meantime, on May 19, the FTC issued a policy statement indicating that they intend to closely examine whether ed tech providers are fully complying with COPPA. Specifically, they will focus on whether these companies have sufficient “limitations on collection, use, and retention, along with security.” Enforcement action in the ed tech space could provide clues as to how the FTC wants to update the COPPA rules.
The Biden Administration has publicly announced that it will closely scrutinize any and all acquisitions by big tech companies. To that end, the Department of Justice and FTC are working on updating the merger guidelines.
As part of a series of “listening forums” to gather feedback, Chair Khan voiced concerns about mergers in the media sector, noting that there were $200 billion worth of mergers in 2021. She disclosed that “we are working to ensure that our analytical methods are keeping up with new market realities.” Specifically, she wants to avoid consolidation that leads to firms having “outsized power over how information is distributed.” At the same forum, DOJ Assistant Attorney General Jonathan Kanter expressed concerns that consolidation in the media sector has led to a decrease in the amount and diversity of content.
From my perspective, there are two big takeaways from this listening forum. First: The Administration is doubling down on its efforts to stop big tech platforms from developing (via acquisition) a dominant position in the content industry. To that end, they are looking for new ways to identify and quantify harms to content creators and the market in general. And Second: While we can expect the Administration to remain hyper-focused on big tech mergers and acquisitions, publishers should also understand that the FTC and DOJ will be closely scrutinizing deals between publishers.
Last year, the FTC issued a policy statement to curb the use of “dark patterns” to trap consumers in subscriptions. Since then, the FTC has followed up with enforcement action against various companies and we expect that action to continue going forward. Many have observed that Amazon may be in the Commission’s sights. While that may be true, the FTC’s enforcement record indicates it is looking at the industry more broadly.
A bold era begins
Lina Khan has been heralded as a bold thinker, ready to lead the FTC into a new, modern era. Yet, for most of her tenure, she has been hampered by the lack of a working majority. With that constraint removed, we can expect more and aggressive action from the FTC on privacy and competition. Indeed, the era of Lina Khan is about to begin in earnest.
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.
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.
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.
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.
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.”
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.”
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.”
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.
“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.”