Google And Facebook Didn't Kill Newspapers: The Internet Did

from the check-the-data dept

There is an infamous chart in media circles. It shows newspaper advertising revenue steadily rising until about the year 2000. A few years later, it drops off a cliff. Superimposed on this chart is the exponential growth of Google and Facebook:

Source: Thomas Baekdal

The obvious implication, at least to those who work in journalism, is that Google and Facebook killed their industry. That’s certainly the conclusion Matt Stoller comes to in a recent op-ed for the New York Times:

The collapse of journalism and democracy in the face of the internet is not inevitable. To save democracy and the free press, we must eliminate Google and Facebook’s control over the information commons. That means decentralizing these markets and splitting information utilities from one another so that search, mapping, YouTube and other Google subsidiaries are separate companies, and Instagram, WhatsApp and Facebook once again compete.

First, it’s important to note that newspaper advertising revenue peaked a few years before the rise of Google (and many years before Facebook). That’s one hint a broader phenomenon is at work. But more generally, Stoller frames the history of advertising and journalism in a fundamentally incorrect way. He argues as if the ad-based business model for local journalism was the natural state of the world — upended only by Facebook’s and Google’s so-called "monopolies." In reality, print newspapers had a monopoly on local information distribution due to the prevailing technologies of their time. These regional monopolies were slowly eroded by the introduction, first, of radio and then television (see Lorain Journal Co. v. United States). But, ultimately, newspapers were disrupted by the internet.

Source: Matthew Ball

So, why did newspapers have a local monopoly in the first place? Mostly due to the high fixed costs (e.g., printing presses, warehouses, reporters, delivery trucks) and low marginal costs (i.e., paper and ink) of newspaper production and distribution. Therefore, it was very easy for newspapers to dominate the local market with one bundled product, which included everything from political news and opinion to sports and classifieds. The monopoly profits were used to fund, among other things, investigative journalism (which would lose money as a standalone business but provides value and prestige as part of a bundle).

The internet blew this arrangement to pieces. No longer was owning printing presses and delivery trucks sufficient to charge advertisers and readers whatever you wanted. The newspaper was unbundled by many internet companies, large and small. The infographic below shows how different digital services peeled off a piece of the newspaper value proposition:

Source: Haseeb Qureshi

For example, Craigslist, eBay and other free or low-cost digital classified ad services out-competed print classified ads:

Source: Business Insider

Google and Facebook entered the ad market with more efficient self-service platforms for advertisers and quickly gained market share. Stoller attributes their success not to superior efficiency but to anti-competitive acquisitions:

Enabled by a loose merger policy, there was a roll-up of the internet space. From 2004 to 2014, Google spent at least $23 billion buying 145 companies, including the advertising giant DoubleClick. And since 2004, Facebook has spent a similar amount buying 66 companies, including key acquisitions allowing it to attain dominance in mobile social networking. None of these acquisitions were blocked as anti-competitive.

What this merger analysis omits, however, is that the vast majority of these were vertical mergers, meaning the acquired company wasn’t a direct competitor with the acquirer. In other words, Google is not dominant in search today because it engaged in killer acquisitions of rival search engines. Of the 66 Facebook acquisitions, only Instagram is a plausible case of horizontal integration between social media companies (and, even then, Facebook invested heavily post-acquisition).

But Stoller also exaggerates the extent of their market power, calling them “global monopolies sitting astride public discourse.” In 2018, the global ad market was about $540 billion. Google’s revenue from advertising was $116 billion; Facebook’s was $55 billion. That’s a combined 32 percent market share. Not quite a monopoly (or duopoly, technically).

Source: Benedict Evans

And if you expand the market definition to include both advertising and marketing, as Benedict Evans shows in the chart below, then Google and Facebook’s share gets cut in half.

Source: Benedict Evans

Stoller concludes by saying, “Advertising revenue should once again flow to journalism and art.” But even if we break up all the big tech companies, your local newspaper will not magically have a profitable ad business again. The money currently flowing to consolidated Facebook would go to the newly independent Facebook, Instagram, and WhatsApp (or other digital services if you curtail advertising on social media). Internet platforms are simply more efficient at matching advertisers with customers than are traditional newspapers.

If we want to “fix” journalism, it will require a new path forward (i.e., innovative business models). We've tried radical protectionism before: In 1970, Nixon signed the Newspaper Preservation Act, which gave newspapers a special carve-out from the antitrust laws. According to the NYT (in 1999!), it had no effect on the end result:

But in the world of 1999, does the loss of a newspaper matter as much as it did in 1970, when the scores of cable channels and hundreds of Web sites did not exist?

The new media landscape and the growing competition for advertising dollars, make it harder for a weak newspaper to survive, and make its survival less urgent, Mr. Lacy believes. ''I'm not sure I'd call the Newspaper Preservation Act a failure,'' he said. ''Just a nonsuccess. People back then did not realize that this would not make a difference in the long run.''

It’s possible policymakers could construct another special protection for journalism. But it would entail massive state control of media that no one would be satisfied with. Resurrecting the regional monopolies once enjoyed by local newspapers is both undesirable and unrealistic.

Filed Under: ads, business models, competition, democracy, internet platforms, journalism, matt stoller, trust
Companies: facebook, google


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  • icon
    hij (profile), 25 Oct 2019 @ 7:41am

    Logic of greed

    The consolidation of Internet companies is bad, but it is okay to ignore the consolidation of media properties? The so-called local television stations now span huge geographic areas which enables them to spit out nothing but the horrific/scary stories which are more likely to happen in their enormous geographic boundaries. Now that the Atlanta market encompasses most of Northern Georgia it is easy to fill the evening news with the worst of humanity.

    The same thing is happening, albeit at a lesser pace, to the print media. There are only a few viable print options now that many have either merged or collapsed. What has followed is a similar result, and the reduced competition and greater need for larger margins means less investigative and less interesting news. There are fewer reasons to consume any of the local media options.

    If Matt Stoller wants to make the case that big tech needs to be broken up to help other media markets, he needs to make the case that the other media markets are worth helping. He should also recognize that the consolidation he is whining about in tech has also happened in other media areas. I see little evidence that the other media deserve any governmental help. (They could certainly use less governmental aggression by dangerous politicians complaining about them, but that is another, more important story.)

    reply to this | link to this | view in chronology ]

  • icon
    Gary (profile), 25 Oct 2019 @ 8:30am

    Split em UP!

    The logic is sound. So obviously those monopolists need to be split up.

    First off, Newspapers will need to drop the classified sections altogether - that is unlawful bundling of content and advertising.
    Then the politics, lifestyle, and sports sections need their own separate companies.
    Obviously under this new plan local newspapers will only be allowed to report on local news. Advertising of course will have to be handled by a separate company.

    And to prevent undue overburdening, the newspapers will only be allowed to deliver printed papers - no more internet "publishing."

    reply to this | link to this | view in chronology ]

  • icon
    aerinai (profile), 25 Oct 2019 @ 9:17am

    Newspapers aren't the only form of journalism...

    Journalism is important, but it being 'in a newspaper' is not. Investigative reporting can be done by radio, television, docuseries, websites, etc.

    reply to this | link to this | view in chronology ]

  • icon
    aerinai (profile), 25 Oct 2019 @ 9:22am

    Facebook and Google Ad Dollars are not all stolen fro Newspapers

    The other issue I have with this argument is that Google, Facebook are only making ads ON NEWSPAPER ARTICLES! The amount of money Facebook and Google make has nothing to do with how many newspaper articles people read. It isn't 1:1... or even 1:10,000,000 in terms of revenues that are brought in by the newspapers that are complaining. Google News is not that profitable... it isn't like they are losing a large percentage of their revenue by shutting that one tiny portion of their conglomerate down. Guess what... even if they did... THEY WOULD STILL SELL ADS ON EVERYTHING ELSE.

    This is an apples and oranges comparison with a hokey 'but because they are doing good and we aren't, then they are the problem' argument.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 25 Oct 2019 @ 12:07pm

      Re: Facebook and Google Ad Dollars are not all stolen fro Newspa

      Not to mention the massive entitlement on the newspaper's parts. It isn't their money - they have to earn it. And they have failed at doing so.

      reply to this | link to this | view in chronology ]

  • identicon
    Bobo, 25 Oct 2019 @ 9:45am

    As the number clearly show, global warming is caused by a lack of pirates: https://imgur.com/gallery/vvhlA

    reply to this | link to this | view in chronology ]

  • identicon
    Anon, 25 Oct 2019 @ 9:49am

    To True

    One factor missing is time. I used to be a voracious reader, I would spend $50 or more a week on assorted magazines that piqued my varied interests 20 years ago. Now, I buy maybe one every few months. I used to read at least one book a week, science fiction and sometimes history. I've been working the way through one book for about two months. What changed? The internet. I spend a lot of time reading assorted news and chat sites. I used to read a lot of NYTimes until they went paywall - NYTimes was hard to find locally, the Sunday edition showed up days later. the news online was there immediately. Ditto for so may other topics. Google could point me to information about the Istanbul Metro or the Three Gorges Dam or the Muslim invasion of India and the Taj Mahal, or the current Supreme Court docket. Who has time for print media? This site is a perfect example... it's focussed on a few topics that I am interested in, I check it fairly regularly. Amazon and Google can help me research something I want to buy, or may someday want to buy, or likely will never buy but am curious about.

    The one thing I worry about is attention span. By consuming my attention reading single-page items instead of in-depth material, is that affecting how I think in other ways?

    reply to this | link to this | view in chronology ]

    • icon
      Gwiz (profile), 25 Oct 2019 @ 9:55am

      Re: To True

      The one thing I worry about is attention span.

      Me too! I worry that ....um .....uh ....um .....what were we talking about again?

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 25 Oct 2019 @ 11:18am

      Re: To True

      The other issue I have with this argument is that Google, Facebook are only making ads ON NEWSPAPER ARTICLES!

      That may well be a problem in your universe. Welcome to Planet Earth, where Google places ads on all searches EXCEPT NEWS. You'll find much worth reading here: although most of it never graced the pages of any newspaper.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Oct 2019 @ 9:51am

    Nespapers, labels and studios all say

    The internet has brought in lots of competition that we do not understand, so will the government please legislate it of existence so the we do not have to learn and change our business models, or go the way of ice sellers after the fridge was invented.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Oct 2019 @ 10:26am

    “The collapse of journalism and democracy”

    So the New York Times fox or tmz go out we are all going to die.

    See this is why i can’t take it serious anymore.

    reply to this | link to this | view in chronology ]

  • identicon
    cornflahkes, 25 Oct 2019 @ 11:12am

    Journalism is what

    "It’s possible policymakers could construct another special protection for journalism"

    Seems like that should read "for print journalism." Since obviously journalism is not something only done by newspapers, or stodgy Fortune 500 media conglomerate websites. But even by little Wordpress blogs or websites hosted on the 64th floor.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 27 Oct 2019 @ 8:48am

      Re: Journalism is what

      Sadly, the policy makers would craft legislation such that it provides special protections for the journalism they want everyone to be exposed to while silencing anyone or thing that might leak the facts.

      reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 25 Oct 2019 @ 12:08pm

    Long ago...far far in the past...

    News wasnt so bad, and was only a few pages, then ADVERTS got popular.. Anything for a buck. They dropped the prices for adverts and added more and more and more...
    When over 1/2 the page is adverts, because you are CHEAP to add, adverts...is it NEWS anymore??

    Newspapers are Local news, unless they Add State news from other cities around them, and national news as Filler, then international news as MORE filler so they can add more adverts.. then comes comics, Obits, classifieds, and all the rest.. have to add more pages for SUNDAY...And raise the price(???) because now we are really advertising..

    reality.
    1/2 this country dont want/need/care/cant get on or want to get on...the internet..In my opinion.(go look at our congress and guess which ones.)(im probably wrong)
    the Smart agencies, have jumped to the net, trying to make a walled garden and Advert at the same time, same reasoning as news papers. But they only need pay for the servers and not 100 paperboys/girls/adults.. and adverts are 3rd party now that can be traced/watched/hacked..
    Competition, is happening because MSNBC,MSN, and other news agencies Love to think they are Local.. and where did they get the news..
    things have reversed. insted of being local and grabbing National and other news to fill up the paper, its the BIG guys picking up the Local news.. But the old news paper HAD to pay for those resources....Are the big agencies paying for the local news?? I DONT THINK SO..
    AS I see Google linking to many sites for news, I can see where they are linking to local news, and the same stories on Major news sites..(if anything special happens) If you want news from an OLD town you lived in.. type News and a Zip code or town name...and get anything you want.
    Whats paying for the local news??...ADVERTS..
    Local news has certain features that the Big corps dont publish. Like the lawsuits happening locally..Classifieds. When the schools are closing...emergency news.. AND they still publish a Newspaper.. for the locals that DONT HAVE/WANT THE NET..
    Or just dont like looking at a $300 display that fits in their hand, and is TO SMALL TO READ..

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Oct 2019 @ 10:08pm

    The problem is that for many idiots in the newspaper business, Google and Facebook are the Internet.

    reply to this | link to this | view in chronology ]

  • icon
    Matt Wilson (profile), 25 Oct 2019 @ 11:25pm

    I bit the bullet

    Blatant virtue-signalling follows ... After the whole "fake news" attack thing, I decided that I had no right to complain about rubbish news coverage if I didn't support the good stuff. So I signed up (just online) to a bunch of newspapers across the political spectrum (WSJ is probably the most "conservative" paper that I pay money for). I've now got way more than I can possibly read, but it's worth it. The free stuff online is pretty shallow. The hot takes from the google news tab don't give you much of what the real journalists are saying. It really is worth paying the money, IMHO. I gather than the NYT did good business in online subscriptions after it was attacked as fake news. Forget about facebook as a news source, it's terrible. It's not even particularly good for keeping in touch with actual friends, its ranking and filtering just gets in the way. We need to find a way to make sure that journalists can keep getting paid. Even the ones that we disagree with, because sometimes they're right. Whether that means that the "mastheads" can survive remains to be seen. I wonder if the future will mean just subscribing to aggregaors like Reuters, AP, AFP etc.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 26 Oct 2019 @ 9:26am

    A missing piece to the story

    I had a subscription to the newspaper back in the days when your choices were newsprint or broadcast. What killed the newspapers was in a large part sloth. Go back and pull an old newspaper and look at all of the AP and UPI articles. The newspapers were re-printing the AP and UPI stories that the editors thought would appeal to their readers. When the internet came along, the newspapers were all competing against each other on a global scale using the same AP and UPI stories. Why pay for the paper when the articles are all online for free? (Don't get me started on the shitty delivery and poor customer service.)

    Sure, there was local content, but for the most part, that was slim to none. Want to know about that accident on the highway that blocked up traffic for most of the morning? Not in the newspaper. You might get a minute on the evening broadcast news if the traffic helicopter got good footage, otherwise nothing. Local crime, barely covered. Local government? Barely covered. Local elections? Maybe the results are printed in the back of page 8 but only if you are the paper of record. For the most part, these organizations were simply reprinting AP and UPI along with the comics and some other nationally licensed content. They didn't have the infrastructure to find the local news let alone print it. As far as I can tell, they were never even interested in what the public wanted to read. Every buy a newspaper subscription pitch was the same: Stay informed! Buy a paper. But never once why YOUR paper.

    Well, when the information hit the internet and it was free, I quit buying that useless newspaper. Why pay $35 or more per month for a paper that was usually tossed in the ditch by the hapless delivery person? Especially once the AP and UPI stories that I was buying for that subscription were simply free for the cost of the cable internet connection. Furthermore, to my wonder, the newspaper was often completely online for no cost at all and damned few ads! Again, nobody actually thought about how people work. Offer someone an ice cream cone for ten bucks at the first counter and then for free at the counter next to it. Guess how much ice cream is going out the door for free? All of it!

    In the early 2000's, I was accosted on the phone by a nice older woman who wanted me to buy a subscription to the county paper. I asked her why and she rattled off a whole bunch of reasons - all of which were about the wonderful content. Then I asked why I should pay for the paper if they were putting it on their website for free without so much as an advertisement. She was completely stunned. I didn't buy the paper. I did suggest various ways they could keep from screwing themselves out of business.

    My current local news organization - not really local, and owned by some conglomo out of Texas, is often described as "yesterday's news, tomorrow." I had a subscription and cancelled it. Too many paragraphs of word salad, bad English, bad spelling, typo's, full of ads, and lean on reading material. Expensive for a miniaturized version of Craig's list meets facebook with banner ads. To their credit, they don't allow their local stories on the internet having tucked them nicely behind a pay wall. I don't miss much because the quality is so poor and I get more of what happened from facebook, and that is as sorry a comment on journalism as I have ever made.

    I'll say this: The internet has not killed music. It has not killed literature. It has not killed movies. It won't kill journalism.

    reply to this | link to this | view in chronology ]

  • icon
    Peter (profile), 26 Oct 2019 @ 11:04am

    Newspaper publishers are like junkies

    Their addiction to the old monopoly profits makes it pretty much impossible to come up with alternatives to the good old printed paper.

    When the printing presses gave them (local) monopolies, people would - happily or grudgingly - pay top money for agency news sprinkled with some local stories and the odd investigative article.

    No longer. There is still money to be made with news - but nowhere near the obscene profits publishers enjoyed at the end of the last century. Until publishers accept that, more newspaper are going to die. Not because of Google and Facebook, and not because of the internet.

    Because publishers are like junkies, who will die rather than kick their addictions.

    reply to this | link to this | view in chronology ]

  • icon
    Federico (profile), 27 Oct 2019 @ 1:54pm

    Local and community radio

    Is local radio still a thing in USA?

    Chomsky in this books in the 1990s kept saying that where there is one the community is much more tight-knit and whatnot because they're only accountable to locals and not to some distant shareholder. I hope they did not all get bought out by Sinclair or other.

    Radio still has the advantage of a very low marginal cost coupled with pervasiveness.

    reply to this | link to this | view in chronology ]

    • icon
      Thad (profile), 28 Oct 2019 @ 8:30am

      Re: Local and community radio

      Is local radio still a thing in USA?

      Not really.

      Chomsky in this books in the 1990s kept saying that where there is one the community is much more tight-knit and whatnot because they're only accountable to locals and not to some distant shareholder. I hope they did not all get bought out by Sinclair or other.

      In radio it's Clear Channel, but same idea. '90s deregulation devastated radio.

      reply to this | link to this | view in chronology ]

  • icon
    Mike Gale (profile), 27 Oct 2019 @ 3:57pm

    What do we do now (if we care)?

    Thanks for that. I personally was fooled by the Google/Facebook killed the papers narrative.

    I especially appreciate the article at this time. (I'm in the process of withdrawing from a years long test immersion in Social Media and News Media. I'm now certain that these things degrade cognitive performance.)

    Given the quality of discussion in this place, I'll look around a bit to see what solutions (to Internet-derived-brain-degradation) people around here have adopted (and how they're working out).

    reply to this | link to this | view in chronology ]

  • icon
    Steve Stone (profile), 28 Oct 2019 @ 5:06am

    How to kill a news paper

    Local newspaper craves readership. Editor goes on a mission to make sensational news the main topic, turning the paper into a tabloid like the National Enquirer instead of concentrating on local news. A few years later Editor leaves paper, paper reduces blood guts and ax murder coverage bringing back a little local news but cuts local staff, sub contracts out delivery, reduces physical size of the paper, makes every page more ads than content, raises prices. Paper changes hands a few times, mostly large national media holding companies. Paper has very little local content, most articles are stale, days old Associated Press articles and a few freelancers. Still more ads than content. Today. Sub contracted out paper delivery crashes and burns in spectacular ways. Home subscribers report not receiving paper many days a weeks, a few have no delivery for multiple weeks at a time. Weekday paper most time no more then 30 or 40 pages. Impossible to contact customer service except via e-mail with long response delays. Annual paper subscription soars to over $400 per year. Paper artificially raises rates by including outsourced "special sections" that aren't much more than advertising inserts in some Sunday editions that they charge extra for.. Residents giver up and look elsewhere for local news. Local Radio Local radio station with long history and following gets bought out by holding company. Everyone fired. Turns into lights out satellite fed service. First Disney Kids for a year, then Spanish only, then oldies. Then comes back for a short time with popular local morning DJ. Then drops DJ for more central studio canned crap. Nothing local available from station. Definitely not serving the community. Not sure how they bring in enough money to pay to keep the transmitter on the air. ~The End !

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 28 Oct 2019 @ 6:49am

    ad-based business model

    There's no such thing unless the company is the ad-based model, such as Google.

    What this merger analysis omits, however, is that the vast majority of these were vertical mergers, meaning the acquired company wasn’t a direct competitor with the acquirer. In other words, Google is not dominant in search today because it engaged in killer acquisitions of rival search engines.

    Google performed mergers which were in direct competition. The purchase of DoubleClick was a direct-competition buyout, as well as the other 33 ad and distribution companies Google bought.

    The reason no one viewed these as anti-competitive, monopoly-inspired acquisitions is because people think Google is a "search engine" company.

    This information is misleading:
    In 2018, the global ad market was about $540 billion. Google’s revenue from advertising was $116 billion; Facebook’s was $55 billion. That’s a combined 32 percent market share.

    The $171 billion is the amount based on revenue made in the United States only, meaning the 32% is not correct.

    In order to correct this information, either the US total needs to be displayed or Google and Facebook's global ad revenue should be incorporated.

    I guarantee, regardless which is correct, the number is going to be far higher than 32%.

    This will show what many already know: between Facebook and Google, the oligopoly exists.

    Any business would be hard pressed to compete against FB and Google, if they're not bought out first.

    reply to this | link to this | view in chronology ]


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