Guardian News & Media – written evidence (ADV0032)

Response to the House of Lords Select Committee on Communications Inquiry: The Advertising Industry

About Guardian News and Media

1. Guardian News & Media (GNM) is the publisher of theguardian.com and the Guardian and Observer newspapers. As well as being the UK’s largest quality news brand, the Guardian and the Observer have pioneered a highly distinctive, open approach to publishing on the web and has sought global audience growth as a critical priority. GNM is owned by Guardian Media Group, one of the UK's leading commercial media organisations and a British-owned, independent, news media business.

2. In March 2016, theguardian.com was awarded website of the year at the Society of Editors UK Press Awards, while Guardian Weekend was recognised as supplement of the year. The Guardian was awarded in Content Team of the Year, App of the Year and Product Team of the Year at the 2016 British Media Awards. Its journalistic excellence was also recognised when it became the first news organisation of non-US origin to receive the Pulitzer Prize for its investigation into NSA surveillance.

3. The Guardian is also known for its globally acclaimed investigations, including investigating the Paradise Papers, a leak of 13.4m documents shows the scale of the offshore empire and involves everyone from the Queen to Facebook. This investigation builds on journalism undertaken in relation to the Panama Papers, which involved reporting on the leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The Panama Papers coverage led to a huge number of proposed financial reforms across the world. In December 2016, the Guardian was awarded investigation of the year at the British Journalism Awards for this investigation.

Summary

4. Digital technology increasingly dominates how advertising is bought and sold in the UK. The latest data from the IAB suggest that the digital advertising market in the UK was worth £5.56 billion in H1 2017, up 13.8% on the same period in 2016.

5. Media analysts estimate that that since 2012, news organisations have lost £31 in print advertising, in return for a gain of the equivalent of just £1 in digital advertising.

6. The digital advertising market is increasingly built on the collection of personal data - rather than engagement within high quality content environments - as a means by which to sell advertising. The advertising industry plays a decreasing role in supporting a high quality, plural media environment.

7. Publishers, media owners, advertisers, media agencies and citizens will become increasingly reliant on a few, large digital intermediaries to trade and serve digital advertising. The concentration of dominant platforms has implications for:

1. The ability of new and existing businesses to secure venture capital investment in new business models
2. Citizens seeking a career in the advertising industry will have limited number of companies to potentially work for
3. Governments will become ever more reliant on a small number of dominant businesses to drive investment and jobs.
4. Innovation will be driven by dominant platforms, and in line with their aims and commercial models.

8. The lack of natural competition in the market will create a need for new levels of regulatory intervention to ensure a high level of transparency of transaction costs, and a spotlight on the terms and conditions that govern the market.

9. The programmatic advertising landscape comprises thousands of technology companies, creating a huge amount of complexity and very little accountability or transparency.

10. Digital advertising has become a crucial tool in democracy, enabling formal and informal actors to influence and direct the direction of political debate. Yet the debate about the role and influence of online platforms and political advertising on society are occurring in the absence of reliable data. In Facebook’s submission to the US Senate Intelligence Committee, it made clear that it had no idea about how its platform was being used, outside of the direct sale of political ads through its own dedicated political advertising teams.

11. A review of practices in the digital advertising market by an appropriate regulator such as the Competition and Markets Authority, could help to create greater openness and transparency around revenue flows in the digital advertising market. Ofcom should be given increased powers to investigate platforms, including algorithms and commercially sensitive data, in relation to its statutory to uphold media plurality.

12. A recent ASA case involving Money Saving Expert founder, Martin Lewis, demonstrated gaps in relation to the regulation of online advertising, including whether online platforms currently contribute to the funding of the industry self-regulator.

Introduction

13. We note that this focus of this inquiry is on how policy interventions could help to maintain the UK’s pre-eminent position as advertising and how it can continue to have access to the talent that it needs. The advertising industry is changing rapidly, in both the UK and globally, with some well respected sectoral commentators expecting significant change in the structure and make-up of the sector in the coming months and years.[1] We endorse the submission by the IAB on questions on skills and research, international advertising, clusters and entrepreneurship. This submission focuses on the changing nature of the digital advertising market in relation to its traditional role as a revenue stream that, in party, supports the production of high quality journalistic content.

14. The advertising industry is based on the engagement of the attention of citizens in order to persuade them to change their behaviour in some way as desired by the advertiser. That might be to persuade them to choose a particular good or service, or change their actions in some other way. The advertiser may be a charity, government department, private company or any variance in between. The very first edition of the Manchester Guardian, published in 1821, featured notices on its front page, advertising the value of a specific brand of steam powered lathes. While that might be an unlikely ad to be placed in either the print or digital editions of the Guardian in 2017, the Manchester Guardian’s ability to engage an audience of capital-rich industrialists in a geo-location and profession that meant that they would be likely purchasers of steam powered lathes, made a commercial relationship between the company advertising those lathes, and the Manchester Guardian, a logical fit.

15. Much has changed since the days of those early print adverts, with the opportunities to advertise products and services now expanded exponentially. The digital world increasingly dominates how advertising is bought and sold in the UK, and across the world. The latest data from the IAB suggest that the digital advertising market in the UK was worth £5.56 billion in H1 2017, up 13.8% on the same period in 2016. On 1st November, Facebook reported quarterly advertising revenue of $10,142 billion, up 49% year-on-year.

16. The world of digital advertising is increasingly built on the collection of personal data - rather than engagement within high quality content environments - as a means by which to sell advertising. Using personal data gained either as a result of direct input of users, or through the inference of browsing history or other activities online, online platforms can match audiences to relevant advertising.[2] As John Lanchester wrote recently of Facebook, “No company better exemplifies the internet-age dictum that if the product is free, you are the product. Facebook’s customers aren’t the people who are on the site: its customers are the advertisers who use its network and who relish its ability to direct ads to receptive audiences.”[3]

17. The nature of content that retains the attention of the end user (whether professional cultural output, product or service) is becoming less and less relevant to the success of a digital platform in matching audiences with relevant advertising. The ability of those platforms to collect personal data - and to use that data to sell advertising, or other products and services - is the key to those platforms receiving venture capital funding to build, grow and innovate around new products and services. As the digital advertising market becomes more concentrated in the hands of just a few online platforms, this has huge implications for the ability of other businesses operating in the same sector, or adjacent sectors, to build new business models, or seek to gain funding from traditional sources such as venture capital.[4] The ability to become a major player in the digital advertising market is now, in large part, a necessary corollary of being seen as an investable proposition. This has significant implications for the future direction of innovation online, and the type of innovation that emerges online.

18. The introduction of new regulations such as the General Data Protection Regulation - and the prospect of an enhanced ePrivacy regulation - are also impacting on appetite for investment in adtech that is not owned by the major online platforms. A study by the FT, published in January 2017, found that the “ number of global adtech venture financing deals will touch 343 by year-end, a 17 per cent drop compared with 414 deals in 2015… The data also showed a 33 per cent drop in the volume of funding in the past year, from $3.2bn to an estimated $2.2bn — comparable to 2013 volumes.”[5] Some of the reasons for the drop in this venture funding are positive. For an independent publisher such as the Guardian, the reduced appetite for investment in third party ad tech businesses has both positive and negative implications.

19. Over the last year, publishers, media owners and brands have raised concerns about a number of the practices that sit at the heart of the digital advertising market. Speaking at an industry event in October 2016, Guardian Chief Revenue Officer, Hamish Nicklin, revealed that GNM had conducted a series of tests to purchase its own ad inventory in order to understand where the money was spent across the entire supply chain. Through those tests, GNM discovered that in some cases, just 30 pence of a pound spent by an advertiser was received by the publisher. At the same event, Martin Brown, managing partner at consultancy Stack I/O, outlined how thousands of technology companies now operate across an increasingly complicated programmatic advertising landscape, creating a huge amount of complexity and very little accountability. Brown explained that this “makes life very difficult for marketers and we're getting to this stage now where less and less dollars are actually going on working media, and that's a major challenge because the idea is to simplify efficiency and effectiveness and we're actually going the other way."[6] In May 2017, Guardian News & Media took the decision to take one of its suppliers, Rubicon Project, to court.[7] That case is ongoing.

20. But the flight of capital away from ad tech businesses is also potentially negative for publishers, who often rely on third party ad tech to serve relevant advertising within their environments to provide a competitive dynamic against the services provided by dominant online platforms. Many independent publishers - already challenged as a result of a reduction in the value of print advertising, and a diminution in the value of mobile digital advertising - do not have the capital and resources to implement their own ad tech and systems. Some major European publishing houses such as Axel Springer,[8] and Schibsted[9] do have sufficient capital and resources, and have decided to pursue this approach, but they are the exceptions to the rule.

21. As a consequence of this consolidation in the digital advertising market, publishers, media owners, advertisers and media agencies will become increasingly reliant on a few, large digital intermediaries to trade and serve digital advertising.[10] Citizens seeking a career in the advertising industry will also be faced with a reduced number of companies with whom they might consider pursuing a career, while governments seeking to maintain high quality advertising sectors within key cities and regions will become ever more reliant on a small number of dominant businesses to drive investment and jobs. Innovation will come from those businesses, and be done on the terms of those businesses, and in line with their aims and commercial models.

22. UK policy makers therefore have an economic incentive to retain a strong UK presence by these dominant platforms, to ensure that the UK is supported in advertising and other key industries. We recognise the need to engage positively with platforms basing their operation in the UK, but are concerned that this overdependence could lead to regulatory capture, whereby the standards of openness and transparency, and the levels of scrutiny that they are prepared to exert, are primarily led by the platforms, rather than policy makers.

23. From the perspective of an independent publisher, the consolidation of the digital advertising market has the potential to squeeze the revenue share that publishers can expect to earn digital advertising that appears within their environments, as they become increasingly reliant on the terms and conditions determined by those dominant platforms. It would be wrong to assume that the fact of the digital advertising market being dominated by a small number of dominant online platforms will automatically lead to the abuse of that dominance. However, the lack of natural competition in the market will create a need for new levels of regulatory intervention to ensure a high level of transparency of transaction costs, and a spotlight on the terms and conditions that govern the market. Numerous instances in the last year highlight a lack of credible metrics emerging from Facebook.[11] Combined with its initial denial that fake news had appeared on its platform, this demonstrates that transparency across the social media giant’s suite of products and services is not currently a primary focus.[12]

24. Online advertising currently helps to fund a range of products and services. Currently, digital advertising revenues ‘leak’ out of the value chain - in between the buyer and seller of digital advertising sit an array of digital actors and functions that retain a portion of the money paid by the buyer, for a variety of purposes - legitimate or otherwise. We foresee the retention of a greater proportion of value by dominant platforms. This will mean that less revenue flows to professional content creators to invest in professional content.[13] This will not only reduce the amount of high quality journalism available to UK citizens, but could also impact on employment with the news media industry, and the wider creative industries.

25. The role of digital technology in advertising is not, in and of itself, a bad thing. But in the context of the Committee’s enquiry, it is important to recognise that the advertising industry plays a decreasing role in supporting a high quality, plural media environment, and an increasing role in generating revenues for platforms whose business model is based on the collection, and use of, personal data. The link between advertising and high quality content is beginning to break down. This has implications beyond the scope of this enquiry, but it is nonetheless, a trend of which the Committee should be aware.

The role of platforms and large digital players

26. Debates about the regulation of online platforms are often been brushed aside on the basis that the role of platforms as digital intermediaries mean that they should not be subject to ‘conventional’ forms of regulation. But as digital platforms move from being seen as plucky digital startups, to being highly profitable and valuable companies, that position is changing. As these platforms have grown organically, and purchased third party businesses, issues such as online bullying and abuse, free speech, the hosting and distribution of terrorism content, concerns around brand safety, and the distribution of content - paid for by agents of a foreign power - with the objective of influencing elections and referenda, have emerged as issues for public debate.

27. This debate is occurring in the absence of reliable data. In Facebook’s submission to the US Senate Intelligence Committee, the company made clear that it had no idea about how its platform was being used - outside of the direct sale of political ads through its own dedicated political advertising teams[14] - by foreign actors to influence domestic politics, noting that “we learned from press accounts and statements by congressional leaders that Russian actors might have tried to interfere in the election by exploiting Facebook’s ad tools. This is not something we had seen before, and so we started an investigation that continues to this day.”[15] It was the persistence of the press, not Facebook, which led to policymakers and the public at large gaining a partial understanding into the Facebook’s increasingly pivotal role in modern democracy. As the internet activist Wael Ghonim recently wrote, “The time has come to end the opacity and secrecy surrounding social media. If social media platforms are truly committed to being the productive, responsible and ethical force in society they have the potential to be, there are crucial steps they must take. Before anything else, we need far more transparency of the outputs produced by these algorithms so we can create an effective accountability mechanism. Data that social media companies currently share with researchers and other interested parties is inadequate, inconsistent and entirely at each company’s discretion. The recent steps by Twitter and Facebook to improve transparency certainly move in the right direction, but they do not go far enough. We are in urgent need of a broader strategy to address these challenges.”[16]

28. Concern about the power, scale and scope of online platforms - and the lack of openness and transparency of those platforms - has, in recent months, led policymakers across the world to consider a range of initiatives to regulate platforms.

1. The UK Government is consulting on an internet safety strategy that includes a new social media code of practice on bullying, intimidating or humiliating online content; an industry-wide levy so that social media companies and communication service providers contribute to raise awareness and counter internet harms​; and an annual internet safety transparency report to show progress on addressing abusive and harmful content and conduct.

2. Media organisations and publishers in the UK and Europe have primary legal liability for the content that they publish. This contrasts with intermediary platforms which are exempt from primary legal liability for content published on their platforms. This position is embedded in exemptions in the EU e-commerce directive, and incorporated into UK law.[17] However, policymakers are increasingly questioning whether this binary classification is correct, with Culture Secretary Karen Bradley suggesting that she is considering changing the classification.[18] The chair of Ofcom has also said she believes internet businesses such as Google and Facebook are publishers, raising the prospect that they could eventually face more regulation.[19]

3. The European Commission has taken action on the tax arrangements of online platforms. They have taken individual competition actions and are rewriting rules on the taxation of international online companies - a report published by the Commission found that a “digital business with international operations typically pays a 10.1% tax rate in the EU, compared with a 23.2% rate levied on traditional companies, said the report”.[20]

4. A number of member states have focused on the data policies of some of the biggest online platforms. Germany's Federal Cartel Office for instance, has said that it will publish the initial findings[21] of its investigation into alleged abuse of personal data by Facebook by the end of this year. The competition watchdog’s investigation, which kicked off in March last year, was triggered by concerns that users were not properly informed about how Facebook used personal data and that this could violate Germany’s data protection laws.

The political influence of advertising

29. Digital advertising is a tool for formal and informal political actors to influence and direct the direction of political debate. Political advertising is a lucrative subset of the advertising market as a whole. During a Q2 2016 results webcast, Facebook COO Sheryl Sandberg said that “While the political campaign obviously a lot of money is spent in ads; that's also true of an Olympics. It's also true of a World Cup. It's also true of a Superbowl.”[22] Marketing published by Facebook suggests that political advertising can have dramatic effects, using a case study of the election of US Senator Pat Toomey as proof. The marketing states that the “made-for-Facebook creative strategy was an essential component to Senator Pat Toomey’s re-election, as the senator won by less than 100,000 votes (of nearly 6 million votes cast).” To ensure that “its ads reached voters most likely to re-elect Senator Toomey, the team matched 8 first-party data files to Facebook using Custom Audiences.”[23]

30. Revelations about the lack of transparency and oversight of political advertising are a mirror image of broader problems that exist within the wider digital advertising market. There is one key difference: political advertising can influence the future form, shape and direction of our societies, as opposed to the brand reputation of a business or the trajectory of a revenue line. Journalists across the world have led a number of recent investigations into digital political advertising; from the platform data that they are able to obtain or that is leaked to them, we begin to build a picture of the influence of advertising on politics, piece by piece:

1. Russian interference. The Oxford Internet Institute’s computational propaganda project has found[24] that around the world, state sponsored cyber troops are perpetuating negative interactions including “verbal abuse, harassment and so‐called “trolling” against social media users who express criticism of the government. In many countries, cyber troops engage in these negative interactions with political dissidents.” On 7th September it emerged that Facebook ”had found that an influence operation probably based in Russia spent $100,000 on ads promoting divisive social and political messages in a two-year-period through May. The social media network said that many of the ads promoted 470 “inauthentic” accounts and pages Facebook has now suspended. The ads spread polarizing views on topics such as immigration, race and gay rights, instead of backing a particular political candidate, it said.” Neither the length of time it took Facebook to realise that Russian groups had been placing advertising on Facebook, nor the fact that they allowed it to happen are a surprise. As the Verge commented, “the people in the best position to answer this question work at Facebook, which alone has access to the relevant data. But Facebook’s inconsistent statements, its history of errors in reporting on its own ad platform, and its reluctance to share relevant data about Russian hacking have added to its credibility gap.” In its submission to the Senate Intelligence Committee, Facebook stated that it believed that “roughly 29 million people were served content in their News Feeds directly from the IRA’s (Internet Research Agency, a Russian company located in St. Petersburg) 80,000 posts over the two years. Posts from these Pages were also shared, liked, and followed by people on Facebook, and, as a result, three times more people may have been exposed to a story that originated from the Russian operation. Our best estimate is that approximately 126 million people may have been served content from a Page associated with the IRA at some point during the two-year period.”[25]

2. New forms of political advertising. In the final weeks of the 2016 election campaign, voters in swing states including Nevada and North Carolina saw ads appear in their Facebook feeds and on Google websites touting a pair of controversial faux-tourism videos, showing France and Germany overrun by Sharia law. Unlike Russian efforts to secretly influence the 2016 election via social media, this American-led campaign was aided by direct collaboration with and support of employees of Facebook and Google. They helped target the ads to more efficiently reach the intended audiences, according to internal reports from the ad agency that ran the campaign, as well as five people involved with the efforts.[26]

3. Fake news. The causal link between fake news and how people vote in practice is yet to be established. The data that could provide such a link is currently held by platforms themselves. However, the structure of social media platforms means that it is hard to understand how such content is distributed and monetised. As Enders recently pointed out, ‘Even with an easy way of categorizing fake news, this would be impossible to estimate even using Facebook’s internal data. Unlike Google which serves advertising tied in with specific search queries or YouTube videos, Facebook ad units are interspersed among the flow of “organic” i.e. non-advertising posts (with the minor exception of some experimental video ad units).’

31. In addition, the nature of the digital economy - powered by clicks that serve advertising against content undiscriminating of its quality - means that it is easier to monetise content on the basis of a catchy headline, rather than a high quality piece of long form journalism.

Consultation questions

Is the current digital media market fair, open and competitive? What legislative measures, if any, should be adopted?

32. In its report “News brands: rise of membership as advertising falls”, published on 15th February 2017, Enders Analysis set out how the commercial underpinning of national news organisations has been undermined by the flow of advertising revenue away from print advertising and towards Google and Facebook. The analysis shows that since 2012, news organisations have lost £31 in print advertising, in return for a gain of the equivalent of just £1 in digital advertising. The report confirms that Google and Facebook are capturing the vast majority of growth in both the display and mobile digital advertising markets.

33. Dominance in the digital advertising market does not in an of itself preclude a fair open or competitive market. However, the lack of natural competition in the market creates a need for new levels of regulatory intervention to ensure a high level of transparency of transaction costs, and a spotlight on the terms and conditions that govern the market. At a basic level, it is essential that publishers such as the Guardian can be sure that they are receiving a proportionate share of the money spend by advertisers on inventory owned by the Guardian. At the same time, it is vital that advertisers, such as the UK government, can be assured that they know they are gaining value for money for the money they spend on advertising, and be assured that they know where their adverts are ending up, and the nature of the products, services and content they are funding.

34. The Committee will be aware of an investigation by The Times[27] that focused on how well established household name brands, can end up funding porn, terror and hate content on digital platforms. The investigation found that adverts for hundreds of large companies, universities and charities, including Mercedes-Benz, Waitrose and Marie Curie, appear on hate sites and YouTube videos created by supporters of terrorist groups such as Islamic State and Combat 18, a violent pro-Nazi faction. Google has made significant steps to address these issues since the became the subject of public debate.[28]

35. In the context of the Facebook Audience Network, which is a service on Facebook that “lets brands extend their Facebook ad campaigns outside of Facebook, using the same targeting data as they use on it”,[29] some in industry have been critical of the poor tools and lack of transparency that exist within the Facebook ecosystem. ‘“On Audience Network, Facebook doesn’t have control or visibility into the content, which is an area we do have visibility into,” said Scott Knoll, CEO of Integral Ad Science.’[30] Facebook is working on developing a higher level of transparency (from a very low baseline) around its Audience Network, but is a long way behind the rest of industry in providing this transparency.[31] However, at the time of writing this submission, Facebook’s advertiser help pages suggest little interest in providing it: “[i]t isn't possible to receive a list of advertisers at any point, including in publisher reports. Ads running in publisher apps or mobile websites will be reviewed by Facebook and will follow Facebook's advertising guidelines. Learn more about our Advertising Policies.[32] Such tools are essential, not just in terms of enabling a level of comfort around brand safety, but also as they enable independent publishers to have transparency of brands that have chosen to advertise with an audience that also consumes Guardian journalism. This transparency would enable publishers to approach those brands with a view to building direct relationships with them to generate additional revenue and business in the future.

36. As outlined above, GNM has conducted experiments that show how much ‘leakage’ occurs - i.e. what proportion of money pays goes to the publisher. Some of this spend occurs with parties that add value to the advertising and some, GNM believes, does not. In worst case scenarios, for every pound an advertiser spends programmatically on the Guardian only 30 pence actually goes to the publisher. This means a host of adtech businesses operating within the supply chain are extracting up to 70% of advertisers' money without being able to quantify the value they provide to the brand. Given the size, scale and complexity of the programmatic advertising landscape, leakage out of the value chain is perhaps unsurprising.

37. In an op-ed for Campaign magazine, GNM’s Chief Revenue Officer, Hamish Nicklin challenged the industry to do more to restore faith in programmatic advertising, calling for an “industry-wide agreement on a set of programmatic standards that are based on creating a clean and fair system that adds value proportionally to contribution. We need more transparency along the value chain and a set of guidelines to which everyone can adhere: advertiser, ad tech, agency and publisher. Buyers, sellers and intermediaries have an obligation to demonstrate responsible behaviour because no one is getting what they need from programmatic at the moment”.

38. In terms of potential action in this area, a review of practices in the digital advertising market by an appropriate regulator such as the Competition and Markets Authority, could help to create greater openness and transparency around revenue flows in the digital advertising market. In addition, Ofcom should be given increased powers to investigate platforms, including algorithms and commercially sensitive data, in relation to its statutory to uphold media plurality.

39. A further suggestion, raised by US academics Barry Lynn and Matt Stoller, of the Open Markets Institute - the aim of which is challenging concentrations of power in democracy - is that regulators should “put a hold on all future mergers and acquisitions by Facebook – and potentially Google and Amazon. Such a ban on mergers would leave many big problems answered. It would not fix the Facebook and Google’s duopoly over online advertising, nor would it prevent foreign actors from using the company’s network to manipulate American voters.”[33]

40. This view is also held by the technologist and author, Ben Thompson, who wrote on his Stratechery blog as to why Facebook should not be allowed to complete the acquisition of teen focused social media app tbh. Citing the OFT’s previous judgement in relation to Facebook’s purchase of Instagram, Thompson wrote recently that “As Mark Zuckerberg frequently explains, there is a formula for monetization: first grow users, then increase engagement, next attract businesses, and finally sell ads. Just because Instagram, at the time of this acquisition, was still in Stage 1, did not preclude the possibility of Stage 4; the problem is that the Office of Fair Trading simply had no idea how this world worked. The issue is straightforward: networks are the monopoly makers of the Internet era. To build one is extremely difficult, but, once built, nearly impregnable. The only possible antidote is another network that draws away the one scarce resource: attention. To that end, when it comes to the Internet, the single most effective tool in antitrust regulation is keeping social networks in separate competitive companies. That the FTC and Office of Fair Trading failed to do so in the case of Instagram and WhatsApp is to the detriment of everyone.”[34]

What is the future of television, print, radio, out of home and other forms of non-digital advertising?

41. Print advertising continues to decline for both national and local publishers. Following the decision by the UK public to leave the European Union, Enders’ Analysis published analysis which predicted a reduction in advertising spend across all sectors apart from the internet economy. Enders’ Analysis predicts print advertising spending will reduce by of 20-25% in each of the next two years.[35]

42. Enders’ view on the future of local news print advertising is more pessimistic, stating that “[a]ccelerating print advertising declines in 2016 are placing pressure on local newspaper publishers to deliver faster online growth. However, digital growth is being supported yet compressed by Google and Facebook; we estimate SME expenditure on Google is roughly 2x the local press, and we expect SME spend with Facebook to match local newspaper advertising revenues in two to three years.”[36]

43. GNM is focused on diversifying its revenue streams to reduce our reliance on all forms of advertising. David Pemsel, chief executive officer, Guardian Media Group, has said, “Despite the challenging market conditions faced by all news organisations around the world, our three-year strategy is well on track to achieve its financial goals and to secure the future of the Guardian. We are reducing our costs, growing new reader revenue streams, and developing our businesses in the US and Australia. We have grown our digital revenues, and we are achieving strong growth in membership, subscriptions and contributions.”[37]

Is there any role for the Advertising Standards Authority or other regulators in respect of digital advertising?

44. In its response the Senate Intelligence Committee, Facebook sets out new measures to restrict ad content on its website, saying “We hold people on Facebook to our Community Standards, and we hold advertisers to even stricter guidelines. Our ads policies already prohibit shocking content, direct threats and the promotion of the sale or use of weapons. Going forward, we are expanding these policies to prevent ads that use even more subtle expressions of violence.”

45. In the UK, a recent ASA case involving adverts paid for on Facebook, that suggested that they had been endorsed by Money Saving Expert founder, Martin Lewis, demonstrated gaps in relation to the regulation of online advertising. In response to the ruling, Martin Lewis said that “the real problem here is Facebook. It accepts these adverts with seemingly no care, attention or quality threshold. It allows everyone and anyone including criminal scammers from overseas to advertise on its site. Then, even though it’s taking their shilling, it takes no responsibility, leaving the burden on someone like me whose image is being ripped off, or on vulnerable people being scammed, to fight it. As Facebook isn’t an advertiser the ASA can’t rule against it. There is a gap in the rules in this country. It’s about time Facebook took its duties as a paid publisher seriously and faced consequences, as so many times it has breached them.”[38] Furthermore, it is unclear whether online platforms currently contribute to the funding of the industry self-regulator.

46. The issue of brand safety is one that has been mentioned throughout this response, and will be familiar to the Committee. A form of self-regulation exists in relation to brand safety in the form of JICWEBS (the Joint Industry Committee for Web Standards). This JIC was created by the UK and Ireland media industry with the aim of creating independence and comparability of measurement on the web. Publishers and media owners have expressed concern about whether JICWEBS scheme genuinely achieves brand safety in its current form. The IAB recently published a gold standard letter which aims to improve standards in the UK digital advertising market. That letter referenced the need for work “with JICWEBS to ensure that the Display Trading Standards Group (DTSG) Brand Safety Principles are valuable, applicable and continue to evolve with market expectations”[39]. The Guardian, in common with all other major UK news publishers, is not currently a member of JICWEBS, but this work to improve the JICWEBS standards would be pursued with a view “to becoming certified signatories”.             

November 2017