A continuing concentration of advertising on platforms like Google and Facebook is the primary reason for the newspaper industry’s economic collapse, according to a new report by the American Economic Liberties Project.
The organization’s “The Courage To Learn” report provides an overview of how our antimonopoly laws and other current antitrust policies have contributed to what the authors refer to as a “corporate concentration crisis” in the U.S.
Specifically, the report details what effects under-enforced economic competition policies have had on the news publishing industry, as well as how Google and Facebook were allowed to amass power by essentially monopolizing the online advertising market and siphoning away the revenues that once flowed primarily to newspapers.
Traditionally, advertisements used to be purchased directly from news outlets or through third parties such as ad agencies. Once America’s media landscape began shifting online, however, ads were increasingly bought and sold in an automated third-party market controlled by Big Tech, which severed the relationship between publisher and customer and allowed entities such as Google to take an increasingly larger share of every ad dollar spent.
That practice has effectively taken over the media buying market, and now comprises 86 percent of the online advertising space bought and sold, presenting serious economic challenges for newspaper companies.
At the same time, Google and Facebook, which both benefitted from the 2008 financial crisis that savaged ad markets as well as the Internet’s shift from desktop to mobile, have relied on “an explicit strategy of monopolization” and took advantage of a lax FTC merger policy environment, with Google acquiring more than 150 companies between 2009 to 2016 and Facebook acquiring more than 50 companies (including Instagram and WhatsApp) during this time period.
The result? Google and Facebook are now two of the largest corporations in the world, effectively controlling 77 percent of local newspaper advertising revenue. Google is easily one of the world’s largest sellers of ad space, accounting for nearly $22 billion in advertising last year, more than any media company on the globe. Facebook owns more than 70 percent of the social media market share, with ad revenue of nearly $70 billion in 2019.
Meanwhile, advertising revenue for the U.S. newspaper industry, which peaked at about $50 billion in 2005, has since been in a free fall, standing at an estimated $14 billion in 2018.
The report also blamed newspapers’ demise on an increase of buyouts by predatory investment companies, strip-mining local news ecosystems of their remaining assets and giving rise to “news deserts,” or communities in the U.S. without access to a local paper. Private equity firms routinely purchase news companies, slash operations and lay off staff until these publications are profitable and then sell them, a process akin to flipping houses. A University of North Carolina at Chapel Hill study last year found that more than a quarter of the country’s newspapers have disappeared in the last 15 years, accounting for a loss of about 212 daily titles and 1,943 non-dailies since 2004.
The American Economic Liberties Project, which launched last year, is an organization dedicated to addressing the increased concentration of corporate and economic power in the United States.