On July 26, the Australian media market was changed irreversibly.
In the biggest media merger in Australia’s media history, Nine Entertainment and Fairfax Media agreed to a merger. The deal is roughly worth US$3 billion. The combined company will be the largest media company in Australia after News Corp, and it has television, newspaper, radio, and digital assets. As a consequence, Fairfax Media’s name will disappear, marking the end of 177-year history.
One of the reasons behind the merger relates to digital advertising. The combined company is regarded as more powerful against platform companies such as Google and Facebook. ABC’s business reporter Stephen Long points out many people don’t realise Facebook and Google control digital advertising space, and the power of these platforms “raises serious issues for the future of journalism.”
Currently, the Australian Competition and Consumer Commission (ACCC) is investigating what effects Facebook’s and Google’s domination has on the Australian advertising market, journalism, and journalistic content. ACCC’s head, Rod Sims, says. “The question of the impact of digital platforms on society is a vital one, for both Australia and the world.”
Recently, the two platform companies have encountered all kinds of problems, but these have nothing to do with the digital advertising market. At least not yet.
Facebook and Google have gobbled up the bulk of the digital advertising income in the matured news markets, and they continue to do so. I took a closer look at Facebook’s, Google’s, and Twitter’s second quarter 2018 results and their performance in the advertising market:
All three platforms increased their advertising revenue. From March to June 2018, Facebook’s advertising income rose 42% from the previous year. Google’s parent company, Alphabet, recorded a 24% increase in its advertising earnings. Twitter also gained 23% in advertising revenue. Together, the three companies earned almost US$42 billion in a single quarter this year.
Let’s put this into a context. In 2017, the Pew Research Center estimated the advertising revenue of U.S. newspapers was US$16.5 billion. So, in a single quarter, these three platform companies made 2.5 times more in advertising revenue than the U.S. newspaper companies in a year.
According to the research centre, in 2011, digital advertising made up 17% of the U.S. newspapers’ total advertising revenue. By 2017, digital represented 31% of newspapers’ total adverting revenue. It is fair to say news media companies have slowly and painfully gained in digital advertising revenue, but they are nowhere close to closing the gap between themselves and online platforms.
In April, fellow academic Viktor Pickard suggested authorities should implement a “public-media tax” for Google and Facebook to support independent journalism. He calculated if the two companies would pay 1% of their 2017 net income, this would generate US$285 million, which could be paid for a journalism trust fund supporting independent journalism.
Clearly, the two companies could afford to pay that.