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Here's why the EU's war against Google and Facebook could fail (GOOG, GOOGL, FB)
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As part of an attempt to level the playing field against Google and Facebook, the European Commission (EC) is exploring a proposal that would grant publishers exclusivity over their content, The Guardian reports.
The proposal would extend the same copyright laws that protect performers, record labels and broadcasters from having their content duplicated – so called "neighboring rights" – over into the publishing industry.
Content exclusivity could enable publishers to charge licensing fees to Google and Facebook. Publishers want these copyrights to live for 50 years, but the EC is considering a window of one to five years due to the transience of news content. The proposal would also mandate video platforms like YouTube, Vimeo and Dailymotion into sharing revenue with all who upload videos to their platform, including everyday people.
The proposal touches upon an issue that has long tormented publishers about who wields the power in the publisher-platform relationship. Is it publishers who create the content that largely populates platforms, or is it platforms whose massive captive audiences can be channeled to publisher sites? The answer to this question has more or less been settled now, and is intimated inthis excellent New York Times article.
As it stands, Google and Facebook exert an inordinate influence in the digital realm.Virtually every percentage point of growth in global online advertising last year (outside of China) went to the two companies, says Pivotal Research analyst Brian Wieser in the Economist. In Q1 2016, both companies received 85% of all spend in online advertising, according to Morgan Stanley analyst Brian Nowak in the Times. Google and Facebook's vast oversight on the digital space is further evidenced by their ownership of the 10 most prevalent trackers across the internet, providing them with a sweeping set of eyes on peoples' browsing activities.
It goes without saying that threatening Google and Facebook with content levies is a dangerous play. Instead of acquiescing, the companies could respond by stemming the supply of audiences to publishers' sites. Google and Facebook delivered about 40% of traffic to publisher sites, each, based on a study on more than 200 publishers by the audience insights company Parse.ly. The next greatest source of referrals for publishers is Yahoo, accounting for less than 5% of total traffic.
There is also precedent of Google and Facebook overpowering publishers in the past:
Google flexes in Europe. Previous attempts in Spain and Germany to strong arm Google into paying were summarily squashed, as the Guardian recounts. When Spain introduced a mandatory content levy, the country's version of Google News was shut down. Meanwhile, in Germany, publishers backpedaled on plans to charge Google for content after they popped under pressure from sharp declines in traffic.
Facebook filters it out. We saw publisher content get affected this summer when Facebook adjusted its algorithm to promote personal posts and curtail clickbait. Meanwhile, Facebook's predilection for moving image is deflating the currency of textual content, causing publishers to rush into video productions.
In recent months, European publishers have formed united fronts to attenuate the digital duopoly. These consortia share inventory, user data and advertiser relationships, and we understand that they are connected to the EC proposal.
Project Juno. The parent companies of The Daily Mirror, The Telegraph, The Guardian, The Sun, The Daily Mail and Metro, and the Daily Express and Daily Star have joinedforces to counteract the digital duopoly. This alliance was announced earlier this month.
German unity. In June, Axel Springer (BI Intelligence’s parent), Der Spiegel, Gruner + Jahr, the Bertelsmann Group, and a few other publishers revealed they were pooling data from nearly 1,000 combined properties. This collaboration consisted of eight of the 10 biggest publishers in Germany.
Pangea alliance. Formed a little earlier in March 2015, and spearheaded by London-based The Guardian with neighbors Reuters and Financial Times as founding partners (along with transatlantic friend CNN), and fellow compatriot the Economist also chipping in its ad inventory.
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