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article imageOp-Ed: Facebook follows Google, won't pay ad revenue share in Australia

By Paul Wallis     Jun 15, 2020 in Internet
Sydney - As lousy ideas go, the Australian government’s initiative to try to make Google and Facebook pay a share of local ad revenue is looking worse than lousy. There are major issues with this idea and they’re not all about money.
The theory of paying for ad revenue on Facebook and Google isn’t at all new. The basic idea is to get a share of advertising revenue for Australian news media. Australia’s news media is in steep decline, thanks partly to the pandemic, but otherwise to cost issues.
It’s basically a dead issue elsewhere in the world. A decade ago, Rupert Murdoch railed against “news aggregators” when Google News first started, then went silent on the subject. Internationally, the most that happened was some ill-informed muttering, but no action, and no efforts to take revenue.
Policymakers, however, are trying to do something for the ailing sector, which is looking decidedly grim. Big job losses are happening across the board as corporations and broadcasters try to manage a changing mediascape. The pity of it is that this approach cannot possibly work, and there's a reason for that.
The switch to digital news caught Australian media flat-footed, as elsewhere, but in a relatively small market, they’ve had trouble managing the big transitions ever since. Old media business models didn’t do at all well, particularly print media, and many news magazines have also closed down.
Facebook has stated that it could survive without local news. That’s a very polite understatement. The infinitesimal fraction of Australian news on Facebook would have no impact at all.
Google hasn’t said much but to totally reject the whole idea, which has been costed, somehow, at $660m AUD. Google feels that its service actually helps Australian media to circulate, and says it earns very little (About $10m AUD) from Australian advertising in this sector.
On principle, also, Google and Facebook’s positions are understandable. Let one country get paid, and all the rest will want payment as well. There’s not much in it for them on any level.
Why it can’t work
Australia would be the only country on Earth where Google and Facebook had to pay a share of ad revenue, too. It’s not a viable position. There’s no real basis for believing that advertising revenue, which is mainly local market stuff anyway, can be all that lucrative for them.
How, for example, would you rate a basic business ad in an Australian news site as a revenue earner? The ad is paid for by the advertiser, either using a pay-per-click or a simple ad placed by the advertiser on the site like an ordinary ad.
Pay-per-click can be verified. The verification might not look too good. How many hundreds of millions of clicks would equate to $660 million on that basis?
Given that pay-per-click is at all kinds of rates, it’d be quantifiable, but it’d be a pretty messy picture. How much revenue would that earn Facebook or Google? Now, take away $660 million. Would it make any sort of sense, let alone AdSense, for them to do business in Australia on that basis?
The other problem is that these ads are placed with Google, not websites. The websites are effectively third parties, and advertisers have no say in where those ads are placed. How would charging Google to advertise help the advertisers? Not at all.
A bit of hypocrisy is rattling around, too. Many media sites use Google ads to earn revenue from online spaces, and until now, nobody’s bitched about it. Do news sites refuse the extra revenue? Short answer, no, they don’t.
As for ordinary ads, Facebook and Google have absolutely no input at all into these ads. There’s no involvement on their part, let alone any revenue base for them.
The logic of charging Facebook and Google simply cannot work. The theory that Google should pay for a service that earns revenue for news sites from their own Google ads is absurd. Facebook allows people to place news items on the site which increases hit counts, which is about all Facebook can do for them.
Lose the old revenue models!
News media have dug a very deep grave for themselves with their primitive revenue models. Instead of valuing their spaces properly, they’re still thinking in terms of what are effectively classified ads, just bigger ads.
Check out your average news site, and you won’t see any real added value for users or advertisers. No "special deals for our readers," etc. No promo codes, or very few. Certainly not enough to generate massive revenue for the advertisers or anyone else. No exclusives. No deals with advertisers to generate revenue for the websites, unless they’re just shy.
This is truly prehistoric. As far back as 1900, the “father of modern advertising”, Claude Hopkins, was advocating in his book Scientific Advertising[//url] (a must-read for all in marketing and advertising) on the subjects of tested ads, special deals, and above all, market relevance per product.
These are good, reliable advertising and sales techniques to this day. Online, they’re easy to put together. All advertisers have to do is watch margins and place ads properly targeting the right audiences.
It’s simple enough. If Australian news sites want to make money, just sitting around and expecting other people to throw it at them has to stop. Focus on good business, and you’ll get somewhere.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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