Tech giants increasing grip on advertising in Canada: report

While the total amount of advertising money flowing to Canadian media has largely sustained a flat trajectory over the years, internet giants Alphabet Inc.’s Google and Facebook Inc. have increased their share of internet ads — and consequently the overall advertising market in the country, according to a new estimate. “Most of the gains, if not all of the gains plus some, that took place in the last year in internet advertising revenue seems to have all gone to just those two companies,” Carleton University communications professor Dwayne Winseck said in a phone interview. Winseck is behind the Canadian Media Concentration Research Project (CMCRP), whose latest report was released last week. It calculates that Google and Facebook took up an estimated 72 per cent of Canada’s $5.5 billion internet advertising market in 2016, which is an increase from just below approximately 66 per cent in 2015. But it’s not just that they are increasing their share of internet ad spend. These numbers come in an environment of flat growth in overall advertising spending in the country that has hovered around the $12-billion mark over the last five years, the CMCRP report notes. So when measured on a per-capita basis for the entire media economy, advertising spending as a whole declined from $380 per person in 2012 to $347 in 2016, taking inflation into account. The report derives its supporting data from the revenues reported in Google’s and Facebook’s annual reports, extrapolating it to the population of Canadian users of those services. It also uses data from marketing and research association ThinkTV and the Interactive Advertising Bureau of Canada. To be sure, numbers published by ThinkTV in September showed that internet advertising was one of just two categories — with billboard advertising — that saw revenue growth since 2013. Every other category, including television, newspapers, magazines and radio ad revenue fell in each year since. For the CMCRP, even though internet-based ad spending has increased, it is still unknown if it will make up for the drop in overall advertising spending. That means if Canadian media organizations want to succeed in this new world, they may need to look elsewhere for a viable economic model. That’s creating some angst, according to Winseck. While the report notes that complete solutions to the issue have yet to be determined, it points to potential alternative models. These include subscription-based services, which the report says can be a double-edged sword because they may also introduce unequal access to information; and governments stepping in and subsidizing general news services under the guise that they are a public good. “It’s time for government to start to step up and say there are certain things in a society that we just can’t go without,” Winseck said in the interview. “We need to bite the bullet and we need to talk about subsidies.” Winseck pointed to policy positions found in studies like The Shattered Mirror, published early this year by the Public Policy Forum (PPF), as approaching the problem incorrectly. According to the report, the PPF advocated to increase support for traditional ad-supported media, which will suffer the most in an industry where there’s less ad money. The PPF report explored applying or reforming Section 19 of the Income Tax Act so internet-based advertisers are included as part of a level playing field. The idea of equalizing tax obligations for foreign-based companies was picked up by the House heritage committee in a June report. “They've devised a number of measures that are explicitly targeted at trying to encourage advertising spending on Canadian-based media companies,” Winseck said in a follow-up interview. “And to divert it away from, as , the ‘vampire squids of Silicon Valley.’” Last year, appearing in front of the House of Commons’ heritage committee, Google representatives claimed that the internet giant was “grabbing nothing from no one.” Richard Gingras, Google’s vice-president of news, told the committee in November 2016 that 70 per cent of digital ad revenue went back to the publishers. These developments have occurred despite relatively recent observations that suggested a trend of advertising moving away from digital and back to traditional television. Broadcaster Corus Entertainment Inc.’s CEO Doug Murphy said in a conference call earlier this year that the company has noticed a shift in that money spend back to traditional television. Duncan Stewart, director of technology, media and telecommunications research at Deloitte Touche Tohmatsu Ltd., also saw that trend. And he went so far to say that U.S. TV advertising being flat in 2017 is actually the “new up,” considering all the hoopla about a “sharply negative trend of other traditional media.” TV “remains a completely important and legitimate way to reach large audiences in a cost-effective way,” Stewart concluded. But BCE Inc. CEO George Cope still noted the need to keep up with the times in a conference call earlier this month, suggesting the company needs to do more with advertising technology to help both itself and content providers get in front of advertisers. Yet bringing back advertising revenue to traditional media outlets may not be enough. The report notes that the industry is largely evolving to address this issue with the rise of “pay-per” subscription models. The data included with the report shows that subscriptions and direct purchases of media exceeded advertising spending by a five-to-one ratio in 2016. “If advertising is approaching a ceiling, if not already there, and it's making less and less a portion of the overall media economy,” Winseck added in a phone interview, “maybe we're looking through the wrong end of the telescope.” — With reporting by Bryson Masse at bmasse@thewirereport.ca and editing by Ahmad Hathout at ahathout@thewirereport.ca

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Tech giants increasing grip on advertising in Canada: report

Broadcast | November 21, 2017

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