Google and Facebook together accounted for 99% of the online advertising industry's growth last year, according to the Canadian research firm Pivotal Research.
The figure, reported by The Wall Street Journal along with the latest quarterly results for Facebook - whose profit shot up by 71% for the second quarter - is staggering.
And it raises the question: both Google and Facebook live off an industry that is collapsing: journalism. How long will it be before the parasites kill the host?
Neither Facebook nor Google will admit that they are media companies, the former to a greater degree than the latter. Both benefit from the naivety of the newspaper industry which, for the most part, put its content out there on the Internet beginning in the mid-1990s, available to all and sundry, and thought that the money would come magically.
{loadposition sam08}It was only much later that paywalls started figuring in the thinking of newspaper industry bigwigs but by then the damage had been done. Web users had acquired the habit of reading what they wanted without paying and if one site put up a paywall, they went elsewhere.
A parasite needs a host to survive.
The material on the Web needed to be found by users – and how would they find it without a search engine or some site where ordinary users shared material? Enter Google and Facebook. Facebook has two billion users – and one billion users get onto the site every day. Google has more than 90% of the search market and even more of the mobile search market.
As Senator Nick Xenophon put it during a recent hearing of the Senate select committee on the future of public interest journalism: "A common complaint that's been put to me by large and small media organisations is the power of Facebook and Google and their ability to control the data. What some are saying to me privately is, 'Well, we have to do business with them even though it's not on favourable terms, because we're pretty much stuffed unless we use their search engine'."
Both Google and Facebook have used tactics bordering on anti-competitive to build up their businesses and become the huge monoliths that they are today. It is thus not surprising that Google was recently hit with a US$2.7 billion fine by the European Commission for alleged abuse of its search engine.
More fines are said to be in the pipeline, over how Google pays and limits mobile phone providers who use the search company's Android mobile operating system and app store, and a third investigation, into Google's Adsense advertising service, may also bring a fine; the EC is said to have made a preliminary determination that Google has abused its dominant position.
But that will not solve the problem that the journalism industry faces. Journalism, especially the investigative variety, is a costly enterprise. Until the digital era arrived, the trade was sustained by advertising, both display and classified.
But as more and more publications migrated online and as classifieds followed suit, the bottom line started to look rather bad. More and more firms started seeing red ink appear. Staff cuts followed and that has become a vicious cycle.
Today, the situation is dire. The Australian inquiry was sparked after Fairfax Media cut 125 staff earlier this year in what has become almost something of an annual exercise for that company. But how much can you cut and still create content?
So far we have seen no recognition from either Google or Facebook that they are living off the media and contributing nothing back. Despite the fact that the heads of these companies are claimed to have some of the sharpest minds in the tech industry, nobody seems to realise that when the host dies, the parasite dies too.
If there were no content, what would people search for? Or what would people share on Facebook? News consumption has never been at the levels it is today. Yet, it is just two parasites who take practically the money.
Many publications are kept going by philanthropists – but for how long? It is a sobering thought than a decade down the track, we may be seeing little walled gardens and a whole graveyard of what were once thriving news sites.
Then what will Google and Facebook do? Money will not create journalism unless it is paid to the right people. And structures that are destroyed cannot be built overnight. A culture is slowly dying, but the parasites who are choking the life out of it appear to be turning a blind eye.