Nieman Foundation at Harvard
Living with two preteens, I get almost daily requests to approve new apps. My standard response is to ask my kids to describe the app, why they want it, and how it makes money. The last question is important, and not just to avoid in-app charges: Understanding the forces that drive the online economy is crucial for consumers, and increasingly for citizens. Even when they seem to be free, all the new tools we access come at a cost.
How technology companies make money is a good question for digital media users of any age. It lies at the heart of the Australian Competition and Consumer Commission’s inquiry into the power and profits of Google and Facebook, the world’s two most ubiquitous digital platforms. The competition watchdog’s job was to look at how search engines, social media, and digital content aggregators wield power in media and advertising, how that undermines the viability of traditional journalism (print in particular), and what can be done about it.
How Australians spend time online, from the Australian Competition and Consumer Commission’s Digital Platforms Inquiry final report.
Its final report makes a set of recommendations to limit these platforms’ market dominance and use of personal data. One example: requiring devices to offer consumers a choice of search engine and default browsers. Google now requires the makers of most Android phones to pre-install Google’s apps, which feeds a “default bias” that contributes to it being used for 95 percent of Australian searches. Another: reforming Australia’s privacy laws to address the digital environment. Platforms’ “take it or leave it” policies now give consumers little choice on having their data harvested.
But on the area of concern central to the inquiry’s establishment — the decline in journalism — the recommendations are relatively minor:
The reality is that there is little that governments can do to reverse the technological disruption of the journalism business. The internet has made it clear that news organizations aren’t primarily in the journalism business. The stories they produce play an incomparable social role — but their business model is to deliver an audience to advertisers.
How Australian ad dollars are spent by format and platform, from the ACCC.
Social media and search give advertisers better tools to target messages to more precise groups of potential consumers. It is a phenomenally better mousetrap.
Traditional advertising is expensive and inefficient. An advertiser pays to reach a broad audience, most with no interest in what is being advertised. Search allows advertisers to pay to reach people precisely when they are looking for something. Google knows what you are interested in, and serves up advertising accordingly. In the last quarter alone, advertising in its properties (Search, Maps, Gmail, YouTube, Play Store, and Shopping) generated US $27.3 billion in revenue.
Social media platforms have a different model, but one no less damaging to the old newspaper business model. It’s a bit more like traditional mass media advertising — selling the attention of users to advertisers — but in a far more targeted way. To the extent Facebook, Instagram, Twitter, and so on capture your attention and effectively monetize content made by others through sharing, they also undercut traditional news businesses.
No regulation can fix this. As the competition watchdog’s report notes, Australian law does not prohibit a company from having substantial market power. Nor does it prohibit a company “from ‘out-competing’ its rivals by using superior skills and efficiency.”
No one — not even the tech companies — is necessarily to blame for the technological innovation that has disrupted traditional news organizations. To see that, as with my kids understanding how their apps make money, it’s just a case of following the money.
Amanda D. Lotz is a professor of media studies at the Queensland University of Technology and a fellow at the Peabody Media Center. This article is republished from The Conversation under a Creative Commons license.
