Online ad market faces investigation over competition concerns

The Cairncross Review into the future of the UK news industry has called on the Competition and Markets Authority to investigate the efficiency of the online ad market, which is dominated by Google and Facebook.

Facebook and Google

A government report has urged the competition watchdog to investigate the online ad market over concerns about the dominance of Facebook and Google both in terms of ad revenues and their increasing control of publishers’ online distribution.

The Cairncross Review, which looked into the future sustainability of the UK news industry, found that online publishers face a growing threat from Google and Facebook. And it has urged the Competition and Markets Authority (CMA) to investigate the online ad market “to ensure fair competition”.

In particular, the review recommends the CMA looks more closely into the position of different players, their roles, costs and profitability with the aim of identifying how efficiently the online ad market is working and if any action is needed.

According to the review, which includes a report into online advertising in the UK, Facebook and Google accounted for 54% of UK online ad revenues in 2017, while digital advertising accounted for 48% of total UK ad spend. By comparison, digital ad expenditure with the press was £487m, less than 5% of total online ad spend and failing to make up for the decline in print ad revenue, which fell from £7.6bn in 2007 to £2.7bn in 2017, according to AA/Warc figures.

Even where brands are spending on publishers, they do not receive all the investment. The report points out that on average 62p of every £1 spend on programmatic advertising goes to the publisher, although this ranges from 43p to 72p.

“Few print publishers imagined how dramatically their share of the advertising market would shrink, or how little online advertising revenue they would capture,” says the report.

The investigation into the online ad ecosystem is just one of a range of measures recommended by the report to safeguard the future of quality journalism. The review also suggests new codes of conduct to rebalance the relationship between publishers and online platforms.

READ MORE: Government targets Facebook and Google with digital ad tax

That recommendation comes amid concerns that with so many publishers reliant on Facebook and Google for traffic to their websites, a change in their terms or algorithms can have a huge impact. “Because of their position, these platforms can impose terms on publishers without needing to consult or negotiate with them,” the report explains. “This could threaten the viability of news publishers’ online businesses.”

Key recommendations also include regulatory supervision of online platforms’ efforts to improve the news experience; an exploration of the market impact of BBC News by Ofcom; new forms of tax relief to encourage people to pay for online news content (currently digital publishing is subject to VAT where newspapers are not); the launch of an innovation fund to improve the supply of public interest news; and the development of a media literacy strategy alongside Ofcom, the industry and key stakeholders.

The government is now considering the recommendations in more detail. However, the culture secretary Jeremy Wright will immediately write to the CMA, Ofcom and the chair of the Charity Commission to open discussions about moving forward.

Wright says: “A healthy democracy needs high quality journalism to thrive and this report sets out the challenges to putting our news media on a stronger and more sustainable footing, in the face of changing technology and rising disinformation. There are some things we can take action on immediately while others will need further careful consideration with stakeholders on the best way forward.”

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