Rein in Google, Facebook before they kill the fourth estate

The investigation into the tech giants’ impact on the media’s ability to fund quality news couldn’t come soon enough.

The royal commission into financial misconduct has highlighted the problems of “vertical integration”, where banks buy related financial services firms, increase their market power and hone their ability to extract money out of unwitting customers.

The problem is arguably worse in the market for internet search and social media, where the digital leviathans Google and Facebook have stamped out competition and amassed unparalleled information about their customers, underpinning growth in revenue that only cements their position further.

Since 2005 Google has made around 200 acquisitions including mobile-phone interface Android, YouTube, and advertising technology firms AdMob and DoubleClick, ensuring its dominance of the advertising and search market. For all the money Microsoft has poured into rival search engine Bing, its market share is 3 per cent.

Facebook, for its part, acquired Instagram for $US1 billion in 2012 and Whatsapp, an emerging threat to its own Messenger, in 2014 for $US19bn.

In Australia Google has 98 per cent of the search market and Facebook reaches about 84 per cent of the population. These two foreign-owned giants are far more powerful than the big four banks, which have less than 85 per cent of the mortgage market together.

The Australian Competition & Consumer Commission’s landmark investigation into the tech giants’ impact on the media’s ability to fund quality news and analysis, which would make recommendations before June next year, couldn’t come soon enough.

Over a few years to 2015, news­paper and magazine publishers lost $1.85bn in print advertising and gained $98 million in ­online advertising, not much of a ­consolation. About 2500 journalists have been laid off by Australia’s media companies since 2011, according to the media union, about a quarter of the total.

“I’ve long had the view that three things we need in Australia to remain democratic is a robust parliament, an incorruptible judiciary and free media, even though on occasions it’s a pain the neck,” former prime Minister John Howard told The Australian last month.

That free media is coming under great pressure, as the digital duo scoop up the revenues that were once used to scrutinise government and business. Globally Google’s advertising revenues have soared from $US16.4bn in 2007 to $95.4bn last year. Around 98 per cent of Facebook’s $US40.7bn in revenue last year came from advertising. One of the world’s biggest newspaper publishers, News Corp, had global revenues of around $US8.2bn.

The virtuous circle that saw media firms plough their advertising dollars back into journalism has been punctured. The tech giants’ revenues don’t go toward increasing scrutiny on governments and corporations, which have become larger and more powerful arguably than ever. As the ratio of communications workers to journalists soars, news rooms increasingly struggle to pursue original stories and sift through the deluge of press releases and “helpful” phone calls. Senior journalists become senior typists.

No one can deny the benefits of Google and Facebook have delivered consumers in the ease of finding information, buying and selling goods and services, and sharing and keeping in touch with other people.

But to the extent competition rules can be strengthened to help news organisations prosper in this new digital landscape, they should be. For instance, should the tech giants be able to force news organisations to provide some of their articles for free, under threat of being banished if they don’t comply? How many paragraphs of a news story should a digital platform be able to “scrape” and display for free to browsers? Should Facebook and Google ensure their algorithms treat all sources of news equally, or prioritise quality over trash?

These, seemingly technical, questions can have huge ramifications for the media’s ability to attract subscriptions and shore up their own advertising bases. Facebook and Google together directly affect around three-quarters of internet traffic. They would barely notice regulatory changes that increased publishers’ rights and bargaining power. There’s no one recipe for a free market in news and information.

The “creative destruction” that sees new products and technology replace the old is ultimately a positive development for everyone. Only their suppliers shed a tear for horsedrawn carriages, Kodak film or compact discs. But when the emergence of an industry has the potential to kneecap the fourth estate, which performs a broader social function, it’s time to ask: do we want a strong private media in Australia or do you want the Nasdaq index to hit a new high?