1/ This op-ed by Matt Stoller frames the history of advertising & journalism in a fundamentally incorrect way:
2/ Stoller argues as if the ad-based business model for local journalism was the natural state of the world — upended only by the FB & Google "monopolies."
In reality, print newspapers had a monopoly on local info distribution due to the prevailing technologies of their time.
In reality, print newspapers had a monopoly on local info distribution due to the prevailing technologies of their time.
3/ Stoller says, “It’s tempting to blame the rise of the internet for [the crisis in journalism], but it’s important to recognize that technology is shaped by law.”
It’s so tempting because it is, in fact, true!
Newspapers were disrupted by the internet. Here's how...
It’s so tempting because it is, in fact, true!
Newspapers were disrupted by the internet. Here's how...
4/ First, why did newspapers have a local monopoly?
Mostly due to the high fixed costs & low marginal costs of newspaper production & distribution.
Fixed costs: printing presses, warehouses, reporters, delivery trucks, etc.
Marginal costs: paper & ink.
Mostly due to the high fixed costs & low marginal costs of newspaper production & distribution.
Fixed costs: printing presses, warehouses, reporters, delivery trucks, etc.
Marginal costs: paper & ink.
5/ Therefore it was very easy to dominate the local market with one newspaper bundle (news/opinion/sports/ads/classifieds/entertainment).
The monopoly rents were used to fund, among other things, the money-losing business of investigative journalism.
The monopoly rents were used to fund, among other things, the money-losing business of investigative journalism.
6/ The internet blew this arrangement to pieces.
No longer was owning printing presses and delivery trucks sufficient to charge advertisers and readers whatever you wanted.
No longer was owning printing presses and delivery trucks sufficient to charge advertisers and readers whatever you wanted.
7/ The newspaper bundle was unbundled by the internet (Google/YouTube, Facebook, ESPN/The Athletic, Craigslist/eBay & WordPress).
(image via @hosseeb)
(image via @hosseeb)
@hosseeb 8/ Craigslist, eBay and other free/low-cost digital classified ad services out-competed print classified ads:
9/ Google and FB entered the ad market with more efficient self-service platforms for advertisers.
Check out the chart below from @benthompson and @baekdal.
Note that newspaper advertising revenue peaked a few years *before* the rise of Google (and many years before FB).
Check out the chart below from @benthompson and @baekdal.
Note that newspaper advertising revenue peaked a few years *before* the rise of Google (and many years before FB).
10/ Stoller also exaggerates the extent of FB and Google’s market power by claiming they have “monopolized ad revenue globally.”
Actual data (2018) —
Global ad market: $540B
Google: $116B
FB: $55B
Google and FB market share: 32%
(chart by @benedictevans)
Actual data (2018) —
Global ad market: $540B
Google: $116B
FB: $55B
Google and FB market share: 32%
(chart by @benedictevans)
11/ And if you expand the market to include both advertising and marketing, as @benedictevans shows in the chart below, then Google and Facebook’s share gets cut in half.
12/ Stoller concludes by saying, “Advertising revenue should once again flow to journalism and art.”
But even if we break up all the big tech companies, your local newspaper will not magically have a profitable ad business again.
But even if we break up all the big tech companies, your local newspaper will not magically have a profitable ad business again.
13/ The money currently flowing to consolidated Facebook would go to the newly independent FB/Instagram/WhatsApp (or other digital services).
Internet platforms are simply more efficient at matching eyeballs with content than traditional newspapers are.
Internet platforms are simply more efficient at matching eyeballs with content than traditional newspapers are.
14/ If we want to “fix” journalism, it will require a new path forward (i.e., innovative business models).
We've tried radical protectionism before: In 1970, Nixon signed the Newspaper Preservation Act, which gave newspapers a special carve-out from the antitrust laws.
We've tried radical protectionism before: In 1970, Nixon signed the Newspaper Preservation Act, which gave newspapers a special carve-out from the antitrust laws.
15/ According to the NYT (in 1999!), it made no difference in the end:
“But in the world of 1999, does the loss of a newspaper matter as much as it did in 1970, when the scores of cable channels and hundreds of Web sites did not exist?”
nytimes.com/1999/08/16/bus…
“But in the world of 1999, does the loss of a newspaper matter as much as it did in 1970, when the scores of cable channels and hundreds of Web sites did not exist?”
nytimes.com/1999/08/16/bus…
16/ It’s *possible* policymakers could construct another protection for local media.
But it would entail massive state control that no one would be satisfied with.
Resurrecting the regional monopolies once enjoyed by local newspapers is both undesirable and unrealistic.
END
But it would entail massive state control that no one would be satisfied with.
Resurrecting the regional monopolies once enjoyed by local newspapers is both undesirable and unrealistic.
END
This thread was heavily informed by a few people. Check out:
This thread by @baekdal:
This presentation by @benedictevans: ben-evans.com/benedictevans/…
This article by @benthompson: stratechery.com/2015/popping-t…
This thread by @baekdal:
This presentation by @benedictevans: ben-evans.com/benedictevans/…
This article by @benthompson: stratechery.com/2015/popping-t…
@baekdal @benedictevans @benthompson I expanded this thread into an article for @techdirt.
Read it here 👇 techdirt.com/articles/20191…
Read it here 👇 techdirt.com/articles/20191…
