Many reasons to be concerned about the possibility of a Googlopoly

Are Google, Facebook and Apple the saviours of old media?


Dwayne Winseck - The Globe and Mail republished from http://www.ctv.ca/generic/generated/static/business/article2039744.html

As the prophets of doom circle about supposedly struggling traditional media, Google, Apple and Facebook increasingly appear to be potential saviours for legacy media players willing to convert to their ways of doing business.

The story is often overwrought, but there is no doubt that all media are in the throes of wrenching changes. And at the heart of these changes, several things stand out.

First, Canadians are and always have been extensive media users. We are the biggest Internet users in the world, spending on average more than 43 hours per month online – greater than the 33 or 36 hours per person in the U.S. and Korea, respectively. We are some of the biggest users of Google, Facebook, online video and generous contributors to Wikipedia, as well.

Digital media are growing and the profits and revenues of most media have done well, with the partial exception of newspapers and some debt-addled companies, notably Canwest, that have crashed and burned. Meanwhile, Google, Facebook and Apple have staked out a commanding place within their own domains and at the junction between new and old media.

The three digital behemoths are the corporate face of digital capitalism. They also embody a shift that has made the Internet more searchable (Google), sociable (Facebook) and mobile (Apple) over the past decade.

None of these entities creates much content, but Google audaciously wants to organize it all. Apple wants to make information available anywhere, any time, on any of its devices, while Facebook wants you to share as much of your life as possible.

These three firms compete with other media content companies and with one another. This is especially true with respect to Internet advertising (Google versus Facebook), which grew tenfold worldwide over the decade into a $66.2-billion (U.S.) business, and the massive information and communication technology domain (Google versus Apple) valued at roughly $1.6-trillion.

The shift to a more searchable, social and mobile Internet can be discerned in the evolution of Google. Its great innovation originally was to make the Web easily accessible and to help shatter the walled garden model of the Internet, where media giants such as AOL Time Warner and Bell Globemedia used their portals to direct people primarily to their own branded content.

Google has since spawned a ballooning suite of functions – search, GMail, Google Books, Blogger, browsers (Chrome), Docs, video (YouTube), operating systems (Android) – that aim to grab more of users’ time and to put more of the Internet on its own servers, or in the cloud as the industry jargon now puts it. Its unrivalled role as provider of the general search utility is also expanding in lockstep with the rapid growth in smart phones and mobile Internet.

This extensive range of services provides more reason for people to stick around, rather than just search and run. Consequently, Google dominates search – accounting for 65 (the U.S.) to 95 per cent (Australia) of all searches – in every country worldwide, except China, Japan, Korea, Russia and Taiwan. With revenues of $30-billion in 2010, nearly all of which came from advertising, it accounts for just under half of all Internet advertising revenue worldwide.

So far Google has consolidated its position by providing mostly utilitarian functions: search, scan (Google Books), link (Adwords) and store (YouTube). There are many reasons to be concerned about the possibility of a Googlopoly and some regulators are beginning to probe the company’s grip on search, advertising markets, privacy, and the recently rejected Google Books Agreement.

The fact that Google has forced wrenching changes upon the music, television, film and news industries has also bred a small army of enemies. This, in turn, has played into its growing rivalry with Apple and Facebook – for users, content, capital investment, and advertising revenues.

Rather than curbing its powers, however, many want to use Google’s colossal reach to make websites that encourage copyright infringement invisible to its search engine, as the Protect IP Act now before the U.S. Congress would do. Its refusal to play such a role is commendable. However, such instances also reveal one of the bad things about any big media company, including Google: they are easy prey for all manner of regulation.

Google has paid the price for its stance, with its plans to launch Google TV and a cloud-based music service hobbled due to a lack of access to big name media content.

In contrast, equivalent services offered by Apple have soared since the advent of iTunes for music in 2001, TV programs in 2005 and magazine and newspaper subscriptions for the iPad in 2010. On each occasion Apple has clashed with key players in all of these industries, but prevailed in terms of setting a standard price (99 cents per song; $1.99 pr TV episode), retaining 30 per cent of sales, and keeping control of personal information obtained through iTunes.

Apple now accounts for 25 per cent of all online digital music sales in North America. Its digital content revenue has grown from zero to $5-billion over the decade. As a result, Apple is now a dominant force in its own right. It looms large in any calculation of how newspapers, music, television, indeed, all media will fare in the future.

The traditional media, in turn, have gained a reliable ally in the fight against copyright infringement, an additional line of revenue, and a demonstration that people will pay for content under some circumstances. Even newspapers see Apple as a bright spot in terms of subscriptions amidst the clouds of doom and gloom.

While Apple plays the hero to Google’s villain, a subtle shift is also propelling mounting competition between the latter and Facebook: the rapid rise of the social web and social networking sites.

Time spent on social networking sites overtook e-mail in 2007. More telling, the chasm that once lay between Google and Facebook in terms of the number of unique Internet page views per month is steadily closing.

Social networks are the electronic water-coolers of the digital media era. Entertainment has always relied heavily on massive marketing and word of mouth for success, an idea given scientific heft by classic studies in communication by Paul Lazarsfeld & Elihu Katz in the 1940s and 1950s.

The links in the two-step social flow of information that they observed in small town America, however, have now been digitized and commoditized. This reality is welded into the constitution of Facebook; it is visible in many recent examples:

Facebook and Time Warner’s agreement that allows Facebook subscribers to download the Batman sequel, Dark Knight, for example, from its site for $3 a shot.

The New Yorker magazine recently made access to one of its essays contingent upon having a Facebook account and hitting its Like button.

Facebook is becoming a significant source of audiences for newspapers, still far behind Google, but important nonetheless.

Facebook and Spotify have a deal to sell the latter’s streaming music service to people outside the United States and Canada.

The upshot is that traditional media are being forced to adopt to new rules set by Google, Apple and Facebook. Sociality and audiences are becoming the central commodities of 21st century digital capitalism.

These changes are no doubt disruptive, but this is “what capitalism consists of and what every capitalist concern has to live with,” as the famous economist Joseph Schumpeter once said. However, unlike Schumpeter who viewed the flipside of the capitalist social bargain – democracy – with disdain, we should think carefully about how the clash of digital media titans will affect the digital free press in the years ahead.

With special thanks to friend and colleague, Chris Russill.

Dwayne Winseck is a communications professor at the School of Journalism and Communication, Carleton University in Ottawa. Prof. Winseck been researching and writing about media, telecoms and the Internet in one way or another for nearly 20 years. You can read more comment on his blog, Mediamorphis. His column will appear every second Tuesday.