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More than a century of bad news

Bill Gates recently tweeted the image below, commenting that he is “always amazed by the disconnect between what we see in the news and the reality of the world around us.”

https://pbs.twimg.com/media/D8zWfENUYAAvK5I.png

Of course, this chart and Gates’s observation are nothing new – there has long been an accuracy gap between what the news covers (and therefore what Americans believe is important) and what is actually important. As discussed in one academic article on the subject:

The line between journalism and entertainment is dissolving even within traditional news formats. [One] NBC executive [] decreed that every news story should “display the attributes of fiction, of drama. It should have structure and conflict, problem and denouement, rising action and falling action, a beginning, a middle and an end.” … This has happened both in broadcast and print journalism. … Roger Ailes … explains this phenomenon with an Orchestra Pit Theory: “If you have two guys on a stage and one guy says, ‘I have a solution to the Middle East problem,’ and the other guy falls in the orchestra pit, who do you think is going to be on the evening news?”

Matters of policy get increasingly short shrift. In 1968, the network newscasts generally showed presidential candidates speaking, and on the average a candidate was shown speaking uninterrupted for forty-two seconds. Over the next twenty years, these sound bites had shrunk to an average of less than ten seconds. This phenomenon is by no means unique to broadcast journalism; there has been a parallel decline in substance in print journalism as well. …

The fusing of news and entertainment is not accidental. “I make no bones about it—we have to be entertaining because we compete with entertainment options as well as other news stories,” says the general manager of a Florida TV station that is famous, or infamous, for boosting the ratings of local newscasts through a relentless focus on stories involving crime and calamity, all of which are presented in a hyperdramatic tone (the so-called “If It Bleeds, It Leads” format). There was a time when news programs were content to compete with other news programs, and networks did not expect news divisions to be profit centers, but those days are over.

That excerpt feels like it could have been written today. It was not: it was published in 1996. The “if it bleeds, it leads” trope is often attributed to a 1989 New York magazine article – and once introduced into the popular vernacular it grew quickly in popularity:

Of course, the idea that the media sensationalizes its reporting is not a novel observation. “If it bleeds, it leads” is just the late-20th century term for what had been “sex sells” – and the idea of yellow journalism before then. And, of course, “if it bleeds” is the precursor to our more modern equivalent of “clickbait.”

The debate about how to save the press from Google and Facebook … is the wrong debate to have

We are in the midst of a debate about how to save the press in the digital age. The House Judiciary Committee recently held a hearing on the relationship between online platforms and the press; and the Australian Competition & Consumer Commission recently released a preliminary report on the same topic.

In general, these discussions focus on concerns that advertising dollars have shifted from analog-era media in the 20th century to digital platforms in the 21st century – leaving the traditional media underfunded and unable to do its job. More specifically, competition authorities are being urged (by the press) to look at this through the lens of antitrust, arguing that Google and Facebook are the dominant two digital advertising platforms and have used their market power to harm the traditional media.

I have previously explained that this is bunk; as has John Yun, critiquing current proposals. I won’t rehash those arguments here, beyond noting that traditional media’s revenues have been falling since the advent of the Internet – not since the advent of Google or Facebook. The problem that the traditional media face is not that monopoly platforms are engaging in conduct that is harmful to them – it is that the Internet is better both as an advertising and information-distribution platform such that both advertisers and information consumers have migrated to digital platforms (and away from traditional news media).

This is not to say that digital platforms are capable of, or well-suited to, the production and distribution of the high-quality news and information content that we have historically relied on the traditional media to produce. Yet, contemporary discussions about whether traditional news media can survive in an era where ad revenue accrues primarily to large digital platforms have been surprisingly quiet on the question of the quality of content produced by the traditional media.

Actually, that’s not quite true. First, as indicated by the chart tweeted by Gates, digital platforms may be providing consumers with information that is more relevant to them.

Second, and more important, media advocates argue that without the ad revenue that has been diverted (by advertisers, not by digital platforms) to firms like Google and Facebook they lack the resources to produce high quality content. But that assumes that they would produce high quality content if they had access to those resources. As Gates’s chart – and the last century of news production – demonstrates, that is an ill-supported claim. History suggests that, left to its own devices and not constrained for resources by competition from digital platforms, the traditional media produces significant amounts of clickbait.

It’s all about the Benjamins

Among critics of the digital platforms, there is a line of argument that the advertising-based business model is the original sin of the digital economy. The ad-based business model corrupts digital platforms and turns them against their users – the user, that is, becomes the product in the surveillance capitalism state. We would all be much better off, the argument goes, if the platforms operated under subscription- or micropayment-based business models.

It is noteworthy that press advocates eschew this line of argument. Their beef with the platforms is that they have “stolen” the ad revenue that rightfully belongs to the traditional media. The ad revenue, of course, that is the driver behind clickbait, “if it bleeds it leads,” “sex sells,” and yellow journalism. The original sin of advertising-based business models is not original to digital platforms – theirs is just an evolution of the model perfected by the traditional media.

I am a believer in the importance of the press – and, for that matter, for the efficacy of ad-based business models. But more than a hundred years of experience makes clear that mixing the two into the hybrid bastard that is infotainment should prompt concern and discussion about the business model of the traditional press (and, indeed, for most of the past 30 years or so it has done so).

When it comes to “saving the press” the discussion ought not be about how to restore traditional media to its pre-Facebook glory days of the early aughts, or even its pre-modern Internet gold age of the late 1980s. By that point, the media was well along the slippery slope to where it is today. We desperately need a strong, competitive market for news and information. We should use the crisis that that market currently is in to discuss solutions for the future, not how to preserve the past.

As the Google antitrust discussion heats up on its way toward some culmination at the FTC, I thought it would be helpful to address some of the major issues raised in the case by taking a look at what’s going on in the market(s) in which Google operates. To this end, I have penned a lengthy document — The Market Realities that Undermine the Antitrust Case Against Google — highlighting some of the most salient aspects of current market conditions and explaining how they fit into the putative antitrust case against Google.

While not dispositive, these “realities on the ground” do strongly challenge the logic and thus the relevance of many of the claims put forth by Google’s critics. The case against Google rests on certain assumptions about how the markets in which it operates function. But these are tech markets, constantly evolving and complex; most assumptions (and even “conclusions” based on data) are imperfect at best. In this case, the conventional wisdom with respect to Google’s alleged exclusionary conduct, the market in which it operates (and allegedly monopolizes), and the claimed market characteristics that operate to protect its position (among other things) should be questioned.

The reality is far more complex, and, properly understood, paints a picture that undermines the basic, essential elements of an antitrust case against the company.

The document first assesses the implications for Market Definition and Monopoly Power of these competitive realities. Of note:

  • Users use Google because they are looking for information — but there are lots of ways to do that, and “search” is not so distinct that a “search market” instead of, say, an “online information market” (or something similar) makes sense.
  • Google competes in the market for targeted eyeballs: a market aimed to offer up targeted ads to interested users. Search is important in this, but it is by no means alone, and there are myriad (and growing) other mechanisms to access consumers online.
  • To define the relevant market in terms of the particular mechanism that prevails to accomplish the matching of consumers and advertisers does not reflect the substitutability of other mechanisms that do the same thing but simply aren’t called “search.”
  • In a world where what prevails today won’t — not “might not,” but won’t — prevail tomorrow, it is the height of folly (and a serious threat to innovation and consumer welfare) to constrain the activities of firms competing in such an environment by pigeonholing the market.
  • In other words, in a proper market, Google looks significantly less dominant. More important, perhaps, as search itself evolves, and as Facebook, Amazon and others get into the search advertising game, Google’s strong position even in the overly narrow “search” market looks far from unassailable.

Next I address Anticompetitive Harm — how the legal standard for antitrust harm is undermined by a proper understanding of market conditions:

  • Antitrust law doesn’t require that Google or any other large firm make life easier for competitors or others seeking to access resources owned by these firms.
  • Advertisers are increasingly targeting not paid search but rather social media to reach their target audiences.
  • But even for those firms that get much or most of their traffic from “organic” search, this fact isn’t an inevitable relic of a natural condition over which only the alleged monopolist has control; it’s a business decision, and neither sensible policy nor antitrust law is set up to protect the failed or faulty competitor from himself.
  • Although it often goes unremarked, paid search’s biggest competitor is almost certainly organic search (and vice versa). Nextag may complain about spending money on paid ads when it prefers organic, but the real lesson here is that the two are substitutes — along with social sites and good old-fashioned email, too.
  • It is incumbent upon critics to accurately assess the “but for” world without the access point in question. Here, Nextag can and does use paid ads to reach its audience (and, it is important to note, did so even before it claims it was foreclosed from Google’s users). But there are innumerable other avenues of access, as well. Some may be “better” than others; some that may be “better” now won’t be next year (think how links by friends on Facebook to price comparisons on Nextag pages could come to dominate its readership).
  • This is progress — creative destruction — not regress, and such changes should not be penalized.

Next I take on the perennial issue of Error Costs and the Risks of Erroneous Enforcement arising from an incomplete and inaccurate understanding of Google’s market:

  • Microsoft’s market position was unassailable . . . until it wasn’t — and even at the time, many could have told you that its perceived dominance was fleeting (and many did).
  • Apple’s success (and the consumer value it has created), while built in no small part on its direct competition with Microsoft and the desktop PCs which run it, was primarily built on a business model that deviated from its once-dominant rival’s — and not on a business model that the DOJ’s antitrust case against the company either facilitated or anticipated.
  • Microsoft and Google’s other critic-competitors have more avenues to access users than ever before. Who cares if users get to these Google-alternatives through their devices instead of a URL? Access is access.
  • It isn’t just monopolists who prefer not to innovate: their competitors do, too. To the extent that Nextag’s difficulties arise from Google innovating, it is Nextag, not Google, that’s working to thwart innovation and fighting against dynamism.
  • Recall the furor around Google’s purchase of ITA, a powerful cautionary tale. As of September 2012, Google ranks 7th in visits among metasearch travel sites, with a paltry 1.4% of such visits. Residing at number one? FairSearch founding member, Kayak, with a whopping 61%. And how about FairSearch member Expedia? Currently, it’s the largest travel company in the world, and it has only grown in recent years.

The next section addresses the essential issue of Barriers to Entry and their absence:

  • One common refrain from Google’s critics is that Google’s access to immense amounts of data used to increase the quality of its targeting presents a barrier to competition that no one else can match, thus protecting Google’s unassailable monopoly. But scale comes in lots of ways.
  • It’s never been the case that a firm has to generate its own inputs into every product it produces — and there is no reason to suggest search/advertising is any different.
  • Meanwhile, Google’s chief competitor, Microsoft, is hardly hurting for data (even, quite creatively, culling data directly from Google itself), despite its claims to the contrary. And while regulators and critics may be looking narrowly and statically at search data, Microsoft is meanwhile sitting on top of copious data from unorthodox — and possibly even more valuable — sources.
  • To defend a claim of monopolization, it is generally required to show that the alleged monopolist enjoys protection from competition through barriers to entry. In Google’s case, the barriers alleged are illusory.

The next section takes on recent claims revolving around The Mobile Market and Google’s position (and conduct) there:

  • If obtaining or preserving dominance is simply a function of cash, Microsoft is sitting on some $58 billion of it that it can devote to that end. And JP Morgan Chase would be happy to help out if it could be guaranteed monopoly returns just by throwing its money at Bing. Like data, capital is widely available, and, also like data, it doesn’t matter if a company gets it from selling search advertising or from selling cars.
  • Advertisers don’t care whether the right (targeted) user sees their ads while playing Angry Birds or while surfing the web on their phone, and users can (and do) seek information online (and thus reveal their preferences) just as well (or perhaps better) through Wikipedia’s app as via a Google search in a mobile browser.
  • Moreover, mobile is already (and increasingly) a substitute for the desktop. Distinguishing mobile search from desktop search is meaningless when users use their tablets at home, perform activities that they would have performed at home away from home on mobile devices simply because they can, and where users sometimes search for places to go (for example) on mobile devices while out and sometimes on their computers before they leave.
  • Whatever gains Google may have made in search from its spread into the mobile world is likely to be undermined by the massive growth in social connectivity it has also wrought.
  • Mobile is part of the competitive landscape. All of the innovations in mobile present opportunities for Google and its competitors to best each other, and all present avenues of access for Google and its competitors to reach consumers.

The final section Concludes.

The lessons from all of this? There are two. First, these are dynamic markets, and it is a fool’s errand to identify the power or significance of any player in these markets based on data available today — data that is already out of date between the time it is collected and the time it is analyzed.

Second, each of these developments has presented different, novel and shifting opportunities and challenges for firms interested in attracting eyeballs, selling ad space and data, earning revenue and obtaining market share. To say that Google dominates “search” or “online advertising” misses the mark precisely because there is simply nothing especially antitrust-relevant about either search or online advertising. Because of their own unique products, innovations, data sources, business models, entrepreneurship and organizations, all of these companies have challenged and will continue to challenge the dominant company — and the dominant paradigm — in a shifting and evolving range of markets.

Perhaps most important is this:

Competition with Google may not and need not look exactly like Google itself, and some of this competition will usher in innovations that Google itself won’t be able to replicate. But this doesn’t make it any less competitive.  

Competition need not look identical to be competitive — that’s what innovation is all about. Just ask those famous buggy whip manufacturers.