Thursday March 2, 2023

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday March 2, 2023

Google is stealing from Canadian newspapers and advertisers

For 15 years, we’ve all been hearing a fake story about why newspapers around the world are dying. It goes like this — the internet killed the news, with old, slothful media companies being unwilling to adapt to new technology. The closer you look, the less sense this story makes. There are plenty of new media companies, everyone from the Huffington Post to BuzzFeed, digitally native firms with deep pockets and clever managers, who can generate huge amounts of web traffic, but aren’t able to sell the advertising to monetize it. And there is still advertising, lots of it. It’s just that the money for those ads isn’t going to the newspapers on whose sites they sit.

The real story of why newspapers are suffering can be found in an action in January by U.S. Attorney General Merrick Garland, when the U.S. Justice Department’s Antitrust Division, along with eight U.S. states, filed a suit to break up Google’s advertising business. According to American enforcers, the search giant has unlawfully engaged in “monopolizing multiple digital advertising technology products,” basically the software plumbing underneath most online advertising, and thus, the revenue that newspapers rely on. Google inflated its profits, redirecting advertising revenues from newspapers to itself.

It’s a complex story, but at the heart of it is what looks like theft. Most of us think of Google as a search engine, and it is. But Google has many other lines of business. This particular suit involves display ads on the open web, which are what you find on the Wall Street Journal or ESPN. These ads are bought and sold in an unusual manner. If a user goes to the site of a newspaper, unbeknownst to the consumer, a highly complex financial market kicks into gear. Newspapers no longer sell most of their advertising directly but have become integrated into a giant set of global auctions. In these auctions, advertisers bid for the right to place their ad not into a specific newspaper, but in front of a specific user. Money then changes hands, from the buyer of the ad to the publisher, with a set of middlemen each taking a cut. This happens in a split second, billions of times a day. At this point, online advertising is far bigger than the stock market in terms of the number of transactions.

Well, guess who runs the software to manage this financial market? Google. And guess who takes the lion’s share of the revenue? Google.

There’s a decade-plus-long backstory to this scheme. In the mid-2000s, Google transitioned from its role as a search engine into the main intermediary of all online advertising. In 2005, Google had a lot of advertisers that were buying its search ads. It also started to let smaller websites put strips of ads up and gave them a share of the revenue. Ad industry insiders at the time realized that advertising was transitioning from a Mad Men-style set of local, regional and national markets to an automated set of marketplaces.

Google’s strategy wasn’t to remain a search engine, but to expand and control all online advertising. But the firm had a problem. It couldn’t break into the market for the space on big established publisher sites, because that market was already controlled by another near-monopolist, DoubleClick. DoubleClick had 60 per cent market share in the software used by publishers to manage how they sell ads on their site, or what’s known as an ad server. So, Google’s then-CEO, Eric Schmidt, did what every good monopolist does when in a lax policy regime: he bought his rival — DoubleClick — in 2007. (Continued: The National Post)