ACCC report Australia's advertising

Australia’s advertising systems are fundamentally broken: that’s the big takeaway from the ACCC report on digital platforms released on Friday. The bad news for news media is that there’s no way of mending them in a way that benefits journalism.

The challenges the ACCC identifies — excessive market power of Facebook and Google, an unequal regulatory mishmash and the mass aggregation of private data — all flow from this broken advertising model.

There are no magic answers in the ACCC report. The real solution is to break the platforms’ power by breaking them up. However, Australia can’t do it. US regulators can and that’s an emerging issue in the forthcoming presidential election.

The most important recommendations for Australia are to conduct a further inquiry into advertising and its technology and for the ACCC to take on an ongoing role in supervising the platforms through a special unit.

Fixing the digital advertising model won’t help journalism. The heart of that challenge for media comes from what an academic paper cited in the report calls “attention allocation in [an] information-rich environment”.

What does the report say about internet audiences?

The report shows that consumers are allocating their attention to the platforms, with Australians spending about 40% of their time online on one or another of the products of Facebook and Google. By comparison, Australians spend only 2.3% of their time on the traditional news sites of News Corp, Nine, the ABC, Seven West Media and Ten.

Mary Meeker’s influential internet trends report demonstrates the intuitive point that there is a direct correlation between the proportion of time spent on a medium and the proportion of advertising dollars that medium attracts. So it’s no surprise that the ACCC report crunches the data to show that 61% of online advertising ends up with Google and Facebook.

Worse, as the ACCC report makes clear, much of the advertising expenditure intended for websites (including news media) gets clipped by the platforms’ ad tech on the way through. Various studies estimate the loss between advertiser and web publisher at between one and two-thirds of online advertising spend.

Rather than simplifying advertising, the big tech platforms have made it more complex, and are benefiting from the complexity they’ve created. They control the platform for supply (where ad buyers place their ads), for demand (where publishers list their available space) and the exchange that pairs them in between. Google is the largest provider of each step of this ad tech.

This suggests that rather than supporting something useful (say, journalism), much of the advertising dollars — perhaps half of them — are now supporting the advertising industry itself from creative agencies through buyers and on through the various stages of ad tech, with each stage taking a cut.

How does the inquiry suggest a re-balancing of the scales?

The inquiry doesn’t see any way of redirecting these dollars to news media. It rejects the idea of copyright-style licensing fees to be paid to news publishers and doesn’t address an industry favourite of a levy on digital ads to support journalism.

It addresses, instead, the barriers to publishers promoting their news media (through shares, links and likes) imposed by the market power of the platforms who, after all, benefit from keeping the consumer on their own site. It examines seemingly obscure questions. How much text can be included in a Google link before a reader decides they don’t need to link to the publisher’s site for more detail? Not much it turns out. What’s the impact of Google-supported Accelerated Mobile Pages on news-related advertising (some, but a trade-off for speed).

It identifies the catastrophic effect on referrals resulting from Facebook’s 2017 algorithmic shift to downplay news in their “news feed” — a drop of 40% says Seven West Media.

Its solution is for the platforms to have an ACMA regulated code governing relations with the publishers, although that seems like a bit of bolting horses and locked stable doors.

Instead, it recognises the need for government intervention through grants (particularly to support local media), tax concessions to promote philanthropy and not-for-profit journalism, and regulations (on, say, local content) for streaming services like Netflix and Google-owned YouTube .

And stable funding for the ABC and SBS — wonder how the government will answer that in its response to the report promised by the end of the year.

Did the ACCC inquiry come to the right conclusions on Big Internet and its role in advertising and journalism? Write to [email protected] and let us know your thoughts.