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Creative Network-Marketing Research Institute
14 May 2017

Social media giants build wealth by ignoring copyright laws

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You don’t have to be a market analyst to appreciate that the world of Australian media is changing at an unprecedented pace.

The so-called “rivers of gold” print classified advertising that once funded print publishers has run dry, and the Facebook and Google digital advertising duopoly now dominates the global and local media landscape.

Most developed marketing economies now spend at least half of their total advertising budgets on digital media. About half of this will flow to Facebook and Google via its holding company Alphabet. This means Google and Facebook will generate an estimated $100 billion and $47bn respectively in advertising revenue this year.

To put this in perspective, every week Google generates more ad revenue than the Seven, Nine and Ten networks combined over the entire year.

In 2017, global internet advertising expenditure will grow 13 per cent to reach $US205bn, according to media buyer Zenith’s recent Advertising Expenditure Forecasts. This will be the first year in which more money will be spent on internet advertising than advertising on traditional television ($US192bn). Zenith expects global ad expenditure to grow at 12 per cent in 2018. This will be mainly at the expense of traditional media.

Google and Facebook’s overwhelming dominance mean that all those increases will be absorbed by the duopoly. The rest of the digital media industry is standing still, while Google and Facebook continue to exert ever greater control over the media world. As that happens, a “double whammy” becomes apparent even to those who work outside the media industry.

Contracting advertising revenue at traditional media channels means cost-cutting and a significant decline in journalism and news generation.

The growing popularity of social media provides an ideal breeding ground for “fake news” and the manipulation of mass opinion. Google and Facebook’s ubiquity in our lives not only helps spread fake news, but also simultaneously undermines and exterminates the one agency, the news media, that used to expose it.

This toxic and potentially disastrous situation has finally forced the hands of politicians. Last week Labor, The Greens, South Australian Senator Nick Xenophon and some of the Senate crossbench established a high-powered select committee to investigate the current parlous state of Australian media. The committee, which will report its results at the start of December, is rapidly becoming known as the “three F’s committee” given its apparent focus on Facebook, Fairfax and Fake News.

The committee would do well to examine three much broader areas of investigation. First, rather than simply looking at Facebook, the committee should assess the overall structure of the advertising media industry in this country. It’s growing increasingly apparent that the Australian Competition & Consumer Commission’s approach to media consolidation is outdated and unsuitable for the rapidly changing media world we now inhabit.

As Xenophon himself noted last week in the Media section, regulators have “failed to keep up with the rapacious incursions in the advertising marketing by Facebook and Google”.

While the ACCC is yet to announce its final decision on the proposed merger of outdoor advertising firms oOh! Media and APN Outdoor, the fact the deal is being viewed by the ACCC purely in the context of the out-of-home sector and not the broader media industry illustrates the problem.

Google, for example, commands a 75 per cent share of the Australian search advertising market. Combined with ad revenues from sister brand YouTube, this enables the search giant to generate up to $3bn in ad revenues from Australia, or about 21 per cent of the total ad market.

The ongoing debate regarding copyright infringement also requires urgent attention. Use of stolen content, in both print and video form, is rampant across digital channels and without immediate and effective legislation it serves to both propel Google and Facebook to even greater profits while eroding revenues at the content creators.

At the top of the committee’s list of objectives must be a practical way to either charge for formal usage rights in the digital sector, create an additional general tax to account for their use or prevent their re-use completely with a new suite of copyright laws. Another issue that should be high on the agenda is the thorny issue of media agencies. While online transparency issues have focused on Google and Facebook as the ultimate beneficiaries of the swing to digital, there is a significant issue in the way digital media is purchased and sold in this country.

I remain convinced that media agencies are pouring billions of dollars into digital media because of more generous incentives in the form of rebates. Last month, The Australian’s media section revealed Facebook is offering rebates based on how many staff media agencies employ in their ­social media divisions and whe­ther they sign up to the company’s Blueprint training program.

The world’s biggest publisher also sweetens agency ad expenditure deals with an all-expenses-paid trip to Facebook’s headquarters in Menlo Park, between San Francisco and San Jose, where founder Mark Zuckerberg is based. The combination of client ignorance and digital profitability is a potent and problematic mix. Clearly there are genuine and enduring advantages to be had from digital media advertising. But mixed into the dramatic growth in digital is the fact that more money can be made from selling it to clients than traditional options.

If this profitability is declared openly to advertisers then this is simply a function of the market and not a topic for the committee but if, as has long been rumoured, advertisers are not being made aware of the inherent differences in profit or the nature of the deals that are done on their behalf, there are issues to be examined.

Read More: http://www.theaustralian.com.au/business/media/opinion/social-media-giants-build-wealth-by-ignoring-copyright-laws/news-story/5f1992356b9bc6cee1b9476f618f6bf3