News Corp. CEO on Fake News, ‘Digital Duopoly’ and What Role Advertising Plays in All of It
The following is an edited transcript of a speech News Corp. CEO Robert Thomson gave recently at the Asia Society in Hong Kong. It’s a guest post posted here with permission. The title of the talk was: “The Fake, The Faux, The Facts, The Future.”From Barron's Tech Trader Daily, April 4:
It’s definitely an opportune moment to grapple with the fake and the faux, the flawed and the fallible — these are real issues and have been for a decade or more, but the faux has suddenly become real because the full scale of the changes wrought upon the integrity of news and advertising by digital platforms has become far more clear. The digital duopoly has rewritten the rules in a way that has written much journalism and integrity out of the script.
Google’s commodification of content, which knowingly, willfully undermined provenance for profit, and then followed by the Facebook stream with its journalistic jetsam and fake flotsam, have created an ecosystem that is dysfunctional and socially destructive.
Both companies could have done far more to highlight that there is a hierarchy of content, but, instead, they have prospered mightily by peddling a flat earth philosophy that doesn’t wish to distinguish between the fake and the real because they make copious amounts of money from both – for them, free content has been free money.
And depending on which source you believe, they have about 80 percent of the digital advertising market and, per one interactive advertising bureau related estimate, well over 90 percent of the incremental increase in advertising over the past year. The only cost of content for these companies has been lucrative contracts for lobbyists and lawyers, but the social cost of that strategy is far higher, as is becoming painfully and thankfully clear. It is risible, no, no, no, beyond risible, that Google/YouTube, which has earned, literally, hundreds of billions of dollars from other peoples’ content, should now be lamenting that it can’t possibly be held responsible for monitoring that content – monetizing yes, monitoring no. But, it turns out that free money does come at a price.
Obviously, we all have to work with these companies, to a gradual lesser extent, and we are hoping, mostly against hope, that they will finally take meaningful action, not only to allow premium content models that fund premium journalism, but also purge their sites of the rampant piracy that undermines creativity. Your business model can’t be simultaneously based on both intimate, granular details about users and no clue whatsoever about rather obvious pirate sites.
These are polarized and polarizing times, and this is certainly not intended to be a political treatise or per se a critique of the media – I’m still a reforming editor, having been escorted away from the editor’s desk at the Wall Street Journal to the chief executive’s desk. A desk that is, of course, in a resolutely trendy open plan office. But when outside America it is always worth reminding audiences that so much of the coverage of America is a caricature of America, and that has long been the case....MORE
...And then there are the recently launched Google snippets, which stylistically highlight certain search results as if they were written on stone tablets and carried down from the mountain. Their sheer visual physicality gives them apparent moral force. Of course they, too, are the result of algorithm tweaking and tugging, and so when you type in the eternal question: -Is Google a monopoly- you get the eternal answer elevated in semi-transcendent type:
Oh ye of little faith, how could you have doubted the digital deity.
The word Orwellian is flagrantly used and abused. But when it comes to the all-powerful algorithms of Google, Amazon and Facebook, otherwise known as GAF, Orwellian is unused. The institutional neglect has now left us perched on the edge of the slippery slope of censorship. There has been no tradition, as there is at great newspapers, of each day arguing over rights and wrongs, of fretful, thoughtful agonizing over social responsibility and the freedom of speech....
Amazon’s Invasion of Advertising May Clip Alphabet’s Revenue, Says BMO
BMO Capital’s Internet analyst, Daniel Salmon, today cuts his rating on shares of Alphabet (GOOGL) to Market Perform from Outperform to Market perform, warning that Amazon’s (AMZN) new business in advertising will “lead to a headwind” for Alphabet as it “ramps considerably.”
Salmon cut his price target to $880 from $1,005, while he simultaneously raises his Amazon target to $1,200 from $900.
Salmon believes Amazon’s advertising business “could be worth about $150 billion, or $300 per share” currently, which he arrives at by taking the estimate of free cash flow to be generated through 2024.
Bear in mind, Amazon is one of the biggest advertisers, he notes, spending $5 billion last year, including a lot of it on Alphabet’s Google.
Salmon cuts his Alphabet 2017 estimates to $107.83 billion in revenue and $33.28 per share in net income, down from $108.35 billion and $33.60 per share. He cut his 2018 numbers as well.
Amazon probably made $2.12 billion in revenue from advertising last year, he estimates, most of it in its “electronics and other general merchandise” retail segment, he believes. That includes “sponsored product ads,” display ads, video ads, etc....MOREAnd from FT Alphaville, April 3, the post that got me thinking about this stuff:
Why advertising substitution risk is out there
Earlier in March we noted that the advertising industry de facto funds ICT research and development.
The reasoning for this went something like this:
At the time of the post we noted a slowdown in Moore’s law could be the thing to blow the model apart. Notably, we rationalised, the soaring expense of R&D in smarter and faster computer processing techniques could make traditional advertising methods cost effective again, disrupting the economic fundamentals of the internet economy....MUCH MORE
- Advertisers like targeted ads because they’re supposedly cheaper and more effective than traditional ads.
- Huge amounts of personal data are needed for adtech strategies to be effective and personally curated.
- To gather that data cost effectively users must be persuaded to give that information away for free.
- This is most effectively done by attracting as many eyeballs to free social media platforms or websites.
- If these platforms had user costs, the amount of data collected would be significantly reduced.
- Attracting users to free websites, collecting their data, analysing that data with the latest big data techniques — and investing in hardware and software to improve that analysis — is currently very cost effective.
- Quid pro quo, advertisers fund and support ICT innovation, R&D.
- Since advertising is a zero sum game, techniques have to keep advancing for this model not to fall apart.