Canada needs to fix tech giants’ digital market domination

Regulation is a good start to helping creators like news organizations stay competitive

Facebook CEO Mark Zuckerberg. (Flickr/Alessio Jacona)

In 2020, News Media Canada released a report which calculated that for every dollar of ad revenue spent by digital advertisers through Google, only 51 cents go to the content publishers. The rest is eaten up by numerous fees that fund platforms in an “ad tax,” which mostly goes to Google, including an agency fee, a DSP fee, a demand technology fee, an SSP fee, and a supply technology fee.

Despite the fact that Google does not have to pay for any of the content’s creation, they still make almost half of the money generated by it’s ad attraction online, basically because they own the entire system that mediates the ads.

When the Australian government decided to introduce regulation that would require Facebook to pay for news content, the tech giant responded by removing access to news content across the platform.

Due to public and government pressure, Facebook later reversed its decision and agreed to pay Australian news agencies an amount of the ad revenue subject to new regulations called the News Media Bargaining Code. Now, countries worldwide are taking a look at similar regulation frameworks to save news businesses from being consumed by Google and Facebook’s stranglehold on digital advertising. Canada could very well be one of the next countries to commit to this, and it’s about time.

In 2011, Canadian newspapers reported a total of $3.55 billion in ad revenue to Stats Canada and the CRTC, which was 28.5 per cent of the advertising market share at the time. In 2019, that number had fallen to $1.4 billion, or 9.3 per cent of the total market share.

In that same time, internet advertising revenue rose from $3.08 billion (24.7 per cent of the market) to $8.76 billion (58.1 per cent) for all of the reported news outlets.

For comparison, in 2019, Facebook alone made $6 billion in advertising in Canada, and Google made $8.8 billion. That’s right, one single company made more money online than every news organization in this country combined. There isn’t anything especially wrong with companies making more money than others, but when they also control the revenue framework itself, while using their size and power to force other businesses to compete with them using that same framework, it can become a huge problem. Facebook deciding to unilaterally block out news content for an entire country is a worrying example of what giant corporations can do when they have this much power over the market, and it’s plainly anti-competitive.

Google and Facebook are able to dominate the market and make money off of ads displayed on other companies’ content without ever paying the costs associated with creating it. Their function in the transaction is to provide a medium for the content, like a printing press company.

When most people buy books, it’s not because they want to own a bundle of paper — it’s because they want to read the content printed on that paper.

If a printing company demanded 49 per cent of all ad revenue of a newspaper, news organizations could just switch to another company. Having that choice is one of the biggest reasons for protecting a competitive market, and it’s one of the most basic concepts of functional capitalism.

With Google and Facebook dominating the market share online, that choice has been taken away, and news providers are forced to either go along with the demands of these two companies, or make cuts to their expenses and close papers.

After Facebook blocked access to news in Australia, Canadian Heritage Minister Steven Guilbeault said, “If we ever needed a reason why these companies need to be regulated, Facebook just handed it to us on a silver platter.”

It’s a positive sign that Canada will take action to prevent Google and Facebook from drowning out news organizations that aim to serve the public interest.