Are publishers the David to Google’s Goliath in an unfair fight for ad revenues? Last week, Axel Springer CEO Mathias Döpfner launched an attack on Google in an open letter to the company’s chairman Eric Schmidt, claiming the company was using a monopoly position to create a digital “superstate” and operating what “in less reputable circles would be called a protection racket”.
He raises lots of important points about Google’s collection of data and its dominance of mapping and online video, and the capability it is developing in conected devices, robotics, driverless cars and now (along with Facebook) unmanned aerial vehicles.
But Döpfner isn’t speaking as a politician or theoreticican. His intervention comes as the head of Germany’s largest publishing company, and his claims have a lot more to do with perceived competitve disadvantage – and what regulators could do to curb it – than concerns over a concentration of power. And while many publishers may have good reason to hold a grudge against Google, Axel Springer has more at stake than most in its attempts to hamstring the giant.
Complaining with intent
As Jeff Jarvis has written, Döpfner’s open letter is only the latest move from German (and French) publishers designed to encourage regulators to weigh in against a company they still blame for the rapid decline of traditonal revenue streams in print, and their failure to replace them with online equivalents operating along very similar lines.
Google has been the primary driver and beneficiary of the internet’s swallowing of generalised classifieds revenue that has hit all newspapers (though in particular the sort of local titles that Axel Springer recently disposed of). Google search is simply a more efficent way of linking consumers looking for specific products and the advertisers who want to drive sales.
But Axel Springer has more to lose from Google’s dominance of this space than many others in publishing because more than half of its EBITDA from its digital operations comes from digital classifieds which is also its fastest growing segment. Classifieds is an area where Google is far less a friend and far more a huge competitor.
It is presumably a coincidence (though a very convenient one) that Döpfner’s comments came just hours after fresh reports that the digital classifieds business is preparing for an initial public offering. The Google services Döpfner accuses the company of promoting over rivals don’t compete directly with the content producing operations of newspapers or other publishers, but they are a much closer competitor for any kind of classifieds business such as Axel Springer’s.
Most publishers have lost as Google has gained, but Google thus far has shown no interest in creating content, or even in delivering the sort of premium advertising that can still be sold against it. At the low end its ad delivery services arguably compete, but at the high end it is still an important part of the funnel for both paid content and advertising.
The opportunity in lost trust
Döpfner also raises the issue of the state surveilliance exposed by Edward Snowden which Google has done as much as any major tech company to faciliate (knowingly and unknowingly).
But what he fails to mention is the opportunity that renewed skepticism about tech giants and by extension the online advertising industry and its IP-tracking and cookie-planting activities present for publishers.
Newspaper publishers have come out of the Snowden affair with reputations intact, or even enhanced. Using that trust to develop an open and transparent relationship with readers that offers content in return for closely guarded, but far more peronsalised, data on audiences can strengthen their position in the ad market.
The newspaper at the forefront of reporting Snowden’s leaks – the Guardian – is developing exactly that strategy through it’s attempts to move its audience from anonymised but tracked to “known”.
Politicians should be concerned about Google’s growing power, but publishers complaining about Google’s dominance of certain segments of the ad market seems increasingly futile. Even if regulators do target Google, it will be a tech company rather than publishers that steps in to meet the market’s demand for mass targeted advertising at scale.
Focusing on how to use Google to make money from the thing newspapers are better at – producing content and engaging readers – is a far more logical step if, that is, they still think they are in the business of publishing.
Image via Flickr user Robert Scoble used under a Creative Commons licence.