Dubai: Digital giants such as Facebook and Google have built up an impregnable business model on the idea of sharing, attracting millions of users every day who flock to the social media site to reveal a glimpse of their life, voice an opinion around the buzzing news of the day or simply share a cat video.
The detailed activity of each individual user gets shared for a fee – with anyone out there who wants to know more about such preferences.
Digital platform companies such as Google and Facebook are increasingly asserting their role as ‘frenemies’ of media, unduly profiting from the remarkable content generation abilities of media companies, and serving as content aggregators. The impact this has on content generation is the biggest challenge – and that is seldom addressed."
- Sunil John, founder of ASDA’A Burson Marsteller and president – Middle East of Burson Cohn & Wolfe
But when it comes to generating ad dollars for its business model that is strongly reliant on content from local media, Facebook has conveniently managed to bypass local advertising agencies and media buying houses in the UAE, endangering the revenue streams and even the existence of the robust and independent media publishing ecosystem in the country.
Accountability as tech or media firms?
There is a full-blown crisis in the UAE and the Gulf’s media industries that is threatening legitimate traditional and digital businesses — and it is due to Facebook and Google’s surreptitious business model where they masquerade as tech companies while operating and earning revenues as media behemoths.
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And this they manage to do without either being registered and recognised as media businesses in the UAE — or paying any of the licence and registration fees concerned that typical media companies in the country are obliged to pay to the regulators.
Since there is no question of registering as news companies, there is also no question of accountability over the news and content distributed by these digital giants.
“Digital platform companies such as Google and Facebook are increasingly asserting their role as ‘frenemies’ of media, unduly profiting from the remarkable content generation abilities of media companies, and serving as content aggregators,” says Sunil John, founder of ASDA’A Burson Marsteller and president – Middle East of Burson Cohn & Wolfe. "The impact this has on content generation is the biggest challenge – and that is seldom addressed."
"Indeed," John added, "Google and Facebook continue to gobble up the digital advertising market around the world, siphoning away revenue that once paid for the quality journalism. Thanks to their dominance over digital distribution, publishers can chafe at the paltry returns they receive from Google and Facebook, but are hardly in a position to do anything more."
In this war of the future, Facebook and Google do have all the advantages — even on the costs.
“It is no secret that online advertising is less expensive than traditional print or TV,” said Reda Raad, CEO of TBWA\Raad Group.
“Whether it is effective or not is a different matter altogether and depends on a multitude of factors, not least the quality of creative execution.
While you may have the ability to reach a mass audience at low cost, the ability to do untold damage is also greatly increased.
Google has had its own creative team in the region for a number of years, as has Facebook.
For clients to work with them directly — and effectively — requires the use of the tech giants’ own creative teams or their own in-house units.
“Is this the best way to approach communications? I’d argue no. [Ad] agencies provide competitive edge through work that is both disruptive and innovative. This requires bravery, the taking of risks, and a creative culture capable of consistently producing exceptional work.”
Publishers at their mercy
But not just the agencies, the UAE’s media houses and publishers are also at the mercy of Facebook and Google if they want to reach their audiences and be effective in the digital domain.
“As our annual ASDA’A Burson-Marsteller Arab Youth Survey has pointed out, social networks and online media sources are increasing being the first – and for many, probably the only – source of news, which, on the first hand, is generated by media companies that are being deprived of their share of recognition – in revenue,” says John.
“The rise of these platform companies and their increasing influence on media has led to large scale closures of media houses and resultant job losses. The impact this has on media companies must get the attention it deserves.
"A brief tweet or a snackable video might suit an increasingly attention-deficit, information over-loaded world but the value of an expert analyses, prepared by seasoned journalists, is irreplaceable,” John added.
Apart from the obvious financial damage inflicted, the other result is that genuine content starts losing out to “click-bait” headlines or risks going unseen in Google searches. It will only get worse as audience attention spans get ever shorter.
So are the bells ringing for any news or ad medium that cannot be fitted onto Facebook or a Google?
“We are living in the age of ‘first ofs’ and ‘last ofs’,” said Scott Goodson, Chairman of the branding consultancy StrawberryFrog, based in New York.
“The generation that was the first to experience a smartphone 1,000 times smarter than the 1990s personal computer, the first to have Facebook and so on.
"But we are also the last generation to read newspapers printed on paper. The last of the humans to experience news as the check and balance to the powers of government.
"As news becomes entertainment, it becomes a promotional vehicle — a talking advertisement benefiting someone. We will be fooled into believing that the person speaking like a newsperson is a newsperson. But the truth comes out eventually,” he said.
But for most advertisers, reaching target audiences at the least cost seems to be the sole consideration for now.
For instance, an advertisement campaign with a budget of Dh300,000 can last only a week or two if used in print or radio spots.
But the same budget can be stretched to two months on Facebook.
For small businesses in particular, these are all compelling reasons to move to digital.
But even bigger advertisers are seeking that always-on digital presence and taking their ad spends away from traditional media choices.
While print revenues continue to have a horrific run, TV commercials have endured a difficult two years but managed to record some gains so far this year.
Because of their sheer numbers, radio stations in the UAE with advertisers continue to have a hit-and-miss affair with advertisers. The outdoor advertising industry seems to be the only one putting up a decent fight against the digital onslaught.
The print media — the one that has been putting out news and informed comment over more than two centuries — is getting totally sidelined by a digital led onslaught unleashed in the last 10 years.
Even the digital spin-offs of newspapers are finding it difficult to cope with the pressures, as more content seekers prefer doing so on what Facebook collates from multiple news sources.
In a cost- and click-obsessed world, should clients and media companies even have other considerations beyond digital?
Should they bother about factors such as creativity or brand image as long as they can push out another tactical campaign for the cheapest dollar?
Print is most trustworthy
Satish Mayya, CEO of the media buying house BPG Maxus, wants to differ.
“Cost should be weighed against the effectiveness of that medium. In isolation it doesn’t mean anything. The fact that Facebook had to use a print medium to apologise on the Cambridge Analytica privacy breach — when they have a wider reach than most US and UK newspapers put together — says a lot.
"It possibly means print is still perceived as being more regulated and trusted by its readers.
"It is critical for an advertiser that his message is seen as credible for the message to gain acceptance. The value of what an advertiser gets is of priority - the cost or volume of it is a reflection of scale.”
The emergence of Facebook, Google and other similar aggregators as news distributors has also raised critical questions about truth and media.
According to the Reuters Institute Digital News Report 2017, only about 24 per cent of people thought social media was doing a good job in separating fact from fiction, compared to 40 per cent for the news media.
Users felt the combination of a lack of rules and viral algorithms are encouraging low quality and ‘fake news’ to spread quickly.
In an experiment tracking more than 2,000 respondents in the UK, the survey found that while most could remember the path through which they found a news story (Facebook, Google, etc.), less than half could recall the name of the news brand itself.
However, while many successful publishers around the world have been left ruing the rising cost of producing quality journalism and then losing the bulk of revenues to social media aggregators, Facebook itself has hardly anything to worry about from a revenue perspective.
Maya said that as with all other businesses, even in the media and ad industries there are those who will get into short-sighted approaches and temporarily damage all the good aspects of a product.
“The positive aspect of these occurrences — selling private data and manipulating online users — is that it helps in setting measures to ensure we plug the gaps,” he said.
Riding on content for free
According to John, that is what the UAE media and ad industries are losing out on, “with these tech giants snatching away advertising share even as they ride on content developed by media companies for free.”
“Platform companies, through their shrewd algorithms, own and mine data – and profit enormously in the attention economy that we live in," said John.
"So, what we need is a firm policy that forces platform companies to be accountable for the enormous profits they make by benefiting from the hard work of media companies.
"This could take the form of their contribution to a national media development fund, which will focus on supporting content creation and in nurturing new media talents both in the public and private sectors.
"Our national media are the true windows to our region; they understand best the aspirations and hopes of the community,” John said.
Media titans speak out against tech giants Back to top
The remedial measures that both companies have so far proposed are inadequate, commercially, socially and journalistically.
There has been much discussion about subscription models but I have yet to see a proposal that truly recognises the investment in and the social value of professional journalism…
If Facebook wants to recognize ‘trusted’ publishers then it should pay those publishers a carriage fee similar to the model adopted by cable companies. The publishers are obviously enhancing the value and integrity of Facebook through their news and content but are not being adequately rewarded for those services.”
Rupert Murdoch, Executive chairman, News Corporation
Mark Thompson, Chief executive, New York Times Company
Jonah Peretti, Buzzfeed founder and CEO
Jim Bankoff, Vox Media CEO
Reda Raad, CEO, TBWA\Raad Group
newspapers put together - says a lot. It possibly means print is still perceived as being more regulated and trusted by its readers. It is critical for an advertiser that his message is seen as credible for the message to gain acceptance.”
Satish Mayya, CEO, BPG Maxus
Scott Goodson, Chairman, StrawberryFrog
“Social media is essentially a virtual representation of people getting together to network in a physical world,” says Satish Mayya, CEO of BPG Maxus. “We are well aware that anything said or done in such a gathering is unlikely to stay private. Why is it that we expect anything different in social media space? We should be wary of the information being put out there and the possibility of misuse.”
These digital platforms want to police which media can be trusted and which cannot be. While companies like Google and Facebook have repeatedly claimed they don’t want to undermine real journalism and would rather support media companies, top media executives say there has been hardly any tangible action on that front.
“People still consume things they know to be nonsense. You can’t just blindly assume that consumers’ primary contact with content is via social media. It may be the case for news, but what about all other forms of content? It is when you come to the very serious issue of news, the virulent spread of misinformation, privacy, and the rampant abuse of power that trust truly matters. As Facebook is currently finding out to its cost.”
Satish Dave, senior director, consumer experience and digital at the research firm Kantar TNS, says some lessons have been learnt from the Cambridge Analytica fiasco. “I think the entire ecosystem – brands, advertisers, media agencies and publishers – will need to become more careful about targeting customers using social media. As per our global study on digital audiences, 40 per cent of people are concerned about the amount of information that companies have about them.”
At the end, it all boils down to trust. Will the new privacy policies put out by Facebook or Google convince users and advertisers that the tech-media giants have things back in control? There are no easy answers, and one can only keep an eye on the ad dollar revenues both report each quarter.
■ To ordinary users, Facebook or Twitter or Instagram look like free-to-use social networks. But their fundamental business model is the same as any media company: build a huge inventory of audiences and sell it to advertisers.
■ When businesses buy advertising space on Facebook, they are actually buying access to your attention.
■ But thanks to the massive data these tech giants have on you - the audience - they can sell tailored and targeted ads for a specific audience.
■ It’s the user data that makes a social account profitable: Facebook, for instance, calculates its profits based on average revenue per user (ARPU).
■ A typical Facebook account contributed $5.32 to its profits last year.
■ Thanks to its scale and database, Facebook can charge companies a competitive rate for advertisements – which traditional media or ad agencies can hardly match.
■ This economic imbalance leaves the media and its supporting ad industry at the mercy of these digital platforms.
■ It also directly threatens the endurance of quality journalism, which is expensive to produce, and under economic pressure as never before.
■ Like Facebook, Google and Twitter operate on broadly the same model.
Brussels: Google, Facebook and Amazon could be made to pay a “fair” share of tax under new European Union proposals on digital companies.
The European Commission has called for large technology companies to pay a three per cent tax if they make money from user data or digital advertising in a country, regardless of their bricks-and-mortar presence — primarily targeting social media companies that are making money through user data and content. European leaders have begun discussing the plans, opening a fractious debate about how to capture revenue from tech giants and digital firms.
France has led the charge for a digital tax, sometimes nicknamed the Gafa tax, after Google, Apple, Facebook and Amazon. The digital tax plans have been in the works for months, before regulators asked Facebook to explain a data breach affecting 50 million profiles.
The commission has rejected claims that the plan was targeting US companies.
“This is not an anti-American tax, this is not an anti-Gafa tax, this is a digital tax,” said Pierre Moscovici, the European commissioner for tax, who said 150 firms would be affected, including European, American and Asian ones. The commission believes the tax will generate €5 billion for European treasuries annually.
The growing dominance of digital companies is seen as a long-term threat to Europe’s tax base. The commission estimates that digital businesses pay an effective average tax rate of only 9.5 per cent, compared with 23.2 per cent for bricks-and-mortar firms.