By Gary Symons
TLL Editor in Chief
The Canadian government and Google have just reached a landmark agreement that will see the search giant paying for news content.
Canadian media outlets, including CBC News, are reporting today that Google and the federal government have resolved their dispute over the Online News Act, according to sources.
CBC reports the agreement would see Canadian news continue to be shared on Google’s platforms in return for the company making annual payments to news companies in the range of $100 million a year. CBC quotes an anonymous source with knowledge of the negotiations.
CBC also says the government of Prime Minister Justin Trudeau and Google agreed on the regulatory framework earlier this week, quoting a government source who spoke to its Radio-Canada division. Trudeau has made the deal a key part of his program to help support the Canadian news media industry, which has been hard hit as Google and various social media platforms have sucked up most of the advertising dollars in North America.
The program has been contentious, as social media giant Meta took the drastic step of banning all Canadian news from its Facebook platform. Google had threatened to do the same, but according to CBC, the tech giant has resolved its differences over both the value of the deal, and what it called “structural issues” within the Online News Act.
The federal government had estimated earlier this year that Google’s compensation should amount to about $172 million, while Google estimated the value at $100 million.
“Having taken this first step with Google is important,” said the CBC’s source, who asked to remain anonymous because they were not authorized to speak publicly. “It is one more solution to ensure the viability of the media and restore a balance between commercial platforms.”
Other than the value of Canadian news to Google, the other sticking point had to do with how Google would deal with media companies in future negotiations. Google has said in the past it doesn’t want to be forced into a mandatory model through which it would have to negotiate with each company separately, but rather wanted a single point of contact for those future talks.
Changes to the upcoming regulations will give Google that ability to negotiate with a single group, which will be charged with representing all news media, and in the process, also reduce Google’s risk of being hit with multiple arbitration cases.
According to CBC sources, those changes will be made in the new law’s framework, which should be unveiled in two to three weeks.
It’s also worth noting that under the proposed law, called Bill C-18, the Act would only apply to organizations with more than 20 million unique monthly users, and revenues of more than $1 billion, and only Meta and Google meet those criteria right now.
The Canadian Agreement Holds Major Ramifications for US and Other Democratic Nations
The new law is just one tactic being followed in Canada, as media companies have also filed an antitrust complaint with the federal regulator, alleging Meta in particular is using unfair tactics to crush competition in the advertising industry, which is the major source of revenue for most news media companies.
While media are also concerned about Google, they are even more worried about Meta throwing its weight around by banning the placement of news on its platform, rather than pay the licensing fees for Canadian news content.
“Meta’s anticompetitive conduct, which has attracted the attention of regulators around the world, will strengthen its already dominant position in advertising and social media distribution and harm Canadian journalism,” the applicants said in a statement.
Meta started blocking news on its Facebook and Instagram platforms for all users in Canada last week in response to Bill C-18, i an attempt to get Canada to back off its plan of requiring internet giants to pay for news articles.
Canada is just one of many countries trying to make large online platforms pay for the news they share online. Australia drafted similar legislation recently, leading the tech giants to instead negotiate their own deals with Australian news organizations. Other countries, including the United States, are watching carefully, as the US is even considering dismantling the tech giants over concerns they collectively own far too much of the current advertising infrastructure, and are thus stifling competition. Democrats in particular believe tech giants are causing the news media to crumble, and causing potentially irreparable harm to Western democracies which rely on the scrutiny of journalists to keep voters informed.
So, what is the real problem?
The first issue is that platforms like Google, Facebook, TikTok, Amazon and Instagram all offer advertisers a less expensive advertising product that is also better targeted toward consumers, thanks to social media’s ability to essentially conduct surveillance on their users’ reading and shopping habits.
By 2012 Google and Facebook alone were earning more ad revenue than all of the US print media combined. By 2017 those companies were earning a staggering 61% of all digital online advertising revenue, and 25% of the total global ad revenue. That number has since increased, as has the share of ad revenue for other tech giants like ByteDance or Amazon, for example.
However, in the case of Meta and particularly Google, there’s another issue.
Those companies are not primarily content companies; they are advertising companies, and because governments didn’t understand how their business model essentially took over the entire industry, they were allowed to construct a virtual monopoly on advertising because they essentially own the three critical tools that make the industry work.
Google and Meta have what is known as a ‘full stack’ platform that controls all parts of the advertising process, and since they control so much of the advertising, they can charge users whatever they want.
While everyone thought Google was building a search engine, they were actually building algorithms that surveil consumers to see what they’re interested in, and then deliver advertising to that person through directed digital ads. Those ads don’t just show up on Google or its various subsidiary platforms—they also show up on news media sites.
According to Corey Doctorow, a journalist and author who has studied the damage inflicted on the global news media by tech giants, media were attracted by the idea that Google and Meta, along with other ‘ad tech’ companies, would drop ads onto their website. The media companies didn’t have to sell those ads; they simply appeared, like algorithmic magic.
“Once, tech platforms promised that “behavioral advertising” would be a bonanza for both media companies and their tech partners,” Doctorow explained in a recent post. “Rather than paying commissioned salespeople to convince firms to place ads based on a publication’s reputation and readership, media companies would run ads placed by the winners of a slew of split-second auctions, each time a user moved from one page to another.
“These auctions would offer up the user, not the content, to an array of bidders representing different advertisers,” Doctorow explains. “What am I bid for the right to show an ad to a depressed, 19-year-old male Kansas City Art Institute sophomore who has recently searched for car loans and also shopped for incontinence pads? In an eyeblink, every ad-slot on the page would be filled with ads purchased at a premium by advertisers anxious to reach that specific user. And that user will like it! They will be grateful for the process and all the ‘highly relevant’ advertisements it dangled under their nose.”
But while the media did fill up their pages with ads, including all of that dreadful click-bait, they weren’t earning much money. In fact, for the most part, they are simply earning more money for the ad tech giants. That’s because those two companies own the three components of the so-called “ad-tech stack:”
- A “supply-side platform” (SSP): The SSP acts as the publisher’s broker, bringing each internet user to the ad market and selling their attention on the basis of their “behavioral” traits;
- A “demand-side platform” (DSP): The DSP represents the advertisers, consulting a wish list of specific behavioral traits that each advertiser wants to target;
- A marketplace: The marketplace solicits bids on behalf of the SSP, collects bids from DSPs, and then consummates the transaction by delivering the winning bidder’s ad to the SSP to be beamed into the user’s eyeballs.
“There are many companies that offer one or two of these services, but the two biggest ad-tech companies—Meta and Google—offer all three,” Doctorow explains. “That means that there are millions of transactions every single day in which Google (representing a publisher) tells Google (representing the marketplace) about an ad-slot for sale; whereupon Google (representing many different advertisers) places bids on that ad-slot. Once the sale is consummated, Google earns three different fees: one for serving as the seller’s agent, another for serving as the buyer’s agent, and a third for the use of its marketplace.
What’s more, Google is also a major publisher, offering millions of ad-slots for sale on YouTube and elsewhere. It is also an advertising agency, buying millions of those self-same ad-spots on behalf of its business customers.”
As a result, media companies lost their access to most of their advertisers, who generally used the advertising technology developed by Facebook (now Meta) and Google. It is that combination of owning the ad-tech stack and the advertising platform that has caused the United States government to look at breaking up the oligopoly.
CANADA ALONE CAN’T SAVE JOURNALISM, BUT THE US CAN
Ironically, Americans often accuse Canada of over-regulating the market, but in this case it’s the United States that is leading the way. Rather than putting a bandage on the problem, the bipartisan bill for the AMERICA Act is designed to break up those portions of Google and Meta (among others) that give them an unfair competitive advantage over the companies they claim are their customers.
Both the Republicans and the Democrats agree on the problem, as the bill was introduced by Republican Senator Mike Lee and Democrat Elizabeth Warren. It has broad support on both sides of the aisle.
Under the AMERICA Act, companies like Google and Meta would have to sell off or shut down their demand-side (buyer) platforms and their supply-side (seller) platforms.
The law would apply to any large ad tech company that processes more than $20 billion worth of ads per year, so no company of that size would be allowed to represent the buyers and sellers who used that exchange. Likewise, no buyer-side platform could operate a seller-side platform.
Smaller ad tech companies (under $20 billion annually) could still work both sides of the street, but the AMERICA Act establishes a duty to “act in the best interests of their customers, including by making the best execution for bids on ads,” and to maintain transparent, auditable systems so that buyers and sellers can confirm that this is the case.
As well, companies that represent buyers and sellers would need “firewalls” between the two sides of the business, with large penalties for conflicts of interest. In other words, those two sides of the ad business would have to act separately, as if they were in fact different companies, and would have to act in the best interest of their respective client.
Canada and other countries like Australia who have tried to deal with the issue are, of course, fully aware of the same issues, but they have little or no ability to come up with an AMERICA Act of their own, because Google and Facebook aren’t based under their jurisdiction. For that reason, the baton has been passed to the United States government.
In the meantime, however, Canada has created one model for other countries to use in returning some ad revenue to news media companies, essentially creating a regulated licensing scheme for news content.