Will the Online News Act level the advertising playing field?

Trying to directly regulate Google and Facebook's hold on the ad market would be legislatively difficult for the government, so Bill C-18 seeks fairness in other ways. But does it go far enough?
Stack of Newspapers next to Open Laptop. News on Paper Pages or

By H.G. Watson

For over 100 years, publishers got every dollar from every ad that ran in their newspapers.

But things changed rapidly around the dawn of the 21st century when Google and Facebook started selling ads. Their tools got more sophisticated, beyond what any publisher could hope to mimic across the entire advertising supply chain. With astonishing speed, the advertising model the news industry was based on was decimated, while Google and Facebook became multi-billion dollar companies. Today, most media companies get only small sums from advertising that runs with their stories online — the technology itself is backed by these tech giants.

In Canada, a new bill introduced in April is going to try to tackle this disparity. The Online News Act would force digital media companies to negotiate deals with Canadian media outlets for reusing their content. It doesn’t explicitly regulate advertising revenues, but it does address the loss of them by trying to even the playing field.

The word “advertising,” or any related term, doesn’t appear in the text of Bill C-18; instead, it attempts to regulate “communications platforms” that act as “digital news intermediaries” by making news available to Canadians and, subsequently, monetize that access. That’s despite the fact that a big part of the unfairness news publishers have lamented is that Google and Facebook’s control over the online advertising supply chain lets them take an outsize portion of revenues from all parts of it – including ads that appear on a new outlet’s own website.

But legislation directly regulating digital advertising would be much more challenging to enact. The horse has left the barn, in a sense: breaking up the duopoly would likely take the cooperative work of legislators in multiple countries.

However, Taylor Owen, associate professor at McGill’s Max Bell School of Public Policy, notes that there are measures governments could enact to address some of the concerns around targeted advertising.

“It should be in some ways regulated. And I personally think it should be by mandatory ad archives and tracking transparency,” says Owen – but that’s not this bill. In a statement provided to Media in Canada, Heritage Canada said as much, noting that the bill does not aim to capture all activities of large tech companies. It also acknowledged that if a company no longer acted as an intermediary for news – as Facebook previously threatened to do in Australia – it would no longer be subject to the regulation, leaving their hold on ad revenues un-touched.

Why the bill is focused more on content than ads

According to Ryan Adam, VP of strategic operations at Torstar, the issue this bill is trying to tackle is that most of the tech giants aren’t producing their own content: they are using content made by media outlets to help sell their own advertising products. On Facebook, for example: after News Feed was introduced in 2006, people were reading part of news articles – or sometimes just the headlines – there, rather than on the news site itself. Since more eyeballs were on Facebook, advertisers spent more money here. Because of the large amount of data Facebook collects on users, it could also target potential customers with surgical precision that a newspaper could never match.

It could be argued that Facebook and Google drive large audience numbers to media websites. “There is an increase of traffic we see as a result of our interactions with those two companies,” says Adam. “But at the end of the day, 80% of the advertising [revenue] on the internet goes to Facebook and Google.”

Therein lies a few issues. First, it’s not clear how much of the billions in ad revenue the companies make specifically off of, for example, The Toronto Star or The Globe and Mail. Given how many other adtech companies and intermediaries are in between the advertiser and the publisher, the publishers themselves are limited in how accurate of a guess they can make. But to negotiate fair deals, one would have to know that, as well as how much they stand to make in the future.

“There should be a level of transparency about what Google or Facebook knows about the monetization of your content, that creates a level negotiating field or a negotiating table for both parties,” says Adam. “That is not included in the bill, but is something that we should push for in terms of additional clarity.”

Second, the mysterious algorithms that underpin our Facebook news feeds or in Google searches can greatly impact what you see. This leaves small and local news organizations at a distinct disadvantage, both in digital advertising revenue and bargaining power, because they can’t match the interaction level or digital know-how a larger media organization can throw at its content to make sure it plays well with Facebook’s interaction-weighted algorithm, or Google’s labyrinthine combination of keywords, relevance and quality.

“There’s an uneasy relationship between platforms and publishers, I think because the platform has done an excellent job not only of capturing the ad revenue, but also keeping audiences on their platform,” says Jeanette Ageson, the publisher of The Tyee, an independent outlet that covers news and politics in British Columbia. “What the publishers need to survive is for people to come to our platforms.,” but the nature of finding readers in 2022 means publishers have to do this with social media.

Is the playing field being leveled enough?

The act also presupposes that tech giants are willing to play ball. Some already have been: both Facebook and Google Canada have signed deals with the likes of The Globe and Mail, Black Press Media, Narcity, Village Media and the Winnipeg Free Press on various programs that would send more revenues and audiences to news outlets.

However, history has proved that tech giants are willing to throw their weight around to influence the terms of legislation. In Australia, where similar legislation was introduced in 2021, Facebook blocked all news content, a decision that was reversed after the Australian government amended the law. Similar to what happened in Australia, Google has publicly said the bill would “break” its Search product.

Even though the “Australia Model” is often referred to as a way for news publishers to get back some of the revenue from Google and Facebook, Owen says the Canadian legislation is stronger than the Australian one. “I think they took many of the critiques of the Australian bill seriously, and many of them are addressed,” he says. Bill C-18 allows private deals between publishers and tech companies. Decisions will be made by the independent CRTC, rather than by ministers, something Paul Deegan, president and CEO of News Media Canada, says agrees will ensure fairness. And the act defines what platforms and outlets the law applies to.

“We’re in a place now where there are millions of dollars flooding in an entirely unaccountable and untransparent way from platforms to a small number of publishers,” adds Owen. “I think this bill sort of corrects for that – it allows more publishers to get access to these funding and it provides some democratic oversight, accountability and transparency to those funding deals.”

Yet many smaller publishers remain in a precarious position. A coalition of over 100 small and independent news outlets signed an open letter calling on the government to make four key changes to the legislation: compensation based on a percentage of editorial expenditures; lower employee thresholds (the act currently calls for the outlet to regularly employ two or more people); no exemptions for tech companies that have already made a deal with a media company, and a transparent, fair funding model.

The coalition is calling for a universal funding formula that should be applied consistently and  publish which organisations are getting funding—the concern is that the bill as written could make it easy for media outlets and tech companies to sign “backroom deals” – like the ones previously mentioned, the terms of which have remained private and leave smaller outlets in a poor bargaining position.  “If you don’t have that transparency piece or the fairness piece, people will just naturally band together with who the most powerful players are,” says Ageson.

Over the next few weeks, the Heritage Committee will begin hearings about the Online News Act. Deegan hopes that it will be passed before Christmas.