In the post-truth era, producing quality journalism without paywalls in defence of truth and democracy is not only a luxury, it’s a battle for economic sustainability, against a backdrop of declining advertising revenue, a shrinking news industry and the rise of digital behemoths such as Facebook and Google that profit off the media, without paying a fair share to help support its work.

These factors have given rise to market failure in the media, which prevents the industry from thriving and ultimately threatens democracy, Daily Maverick co-founders Branko Brkic and Styli Charalambous told the Competition Commission’s Media and Digital Platforms Market Inquiry on Friday.

They said when Daily Maverick was founded in 2009 as a purely digital media business, they had envisioned an environment that would allow them to operate a sustainable business model that could compete in a fair marketplace, as legacy print advertising started to move online.

By focusing on providing high-quality feature-length journalism to online audiences and newsletter subscribers, all their efforts were in digital technologies and platforms. But they soon realised that, due to technological disruption and economics, the market was skewed in favour of social media platforms that were unaccountable, amplified sensationalism and untruths, dominated advertising spend and failed to compensate media houses for their work.

This undermined the very meaning of truth, Branko said.

“We believe that truth is at the centre of every healthy functioning society. If you can’t differentiate truth from lies, you can’t maintain your value system. The Fourth Estate underpins every democratic society, which is basically crumbling right now.

“Make no mistake: Facebook, Twitter and others are a massive threat, which is undermining our democratic system and values. If you don’t know what’s true, you don’t know what’s right and you don’t have a society,” Branko warned.

When asked by acting deputy commissioner and chief economist John Hodge about wrong incentives, a lack of regulatory oversight and a code of practice, Brkic said Daily Maverick did not object to the social media platforms’ business model and the service they provided to their audience, but believed they needed to be treated the same as the other players in the market and subject to the same regulations as publishers.

“Social media should not have the freedom to amplify messages without any consequences,” he said.

Fight for survival

For most of Daily Maverick’s almost 15-year existence, it had been a battle to keep the organisation afloat, Charalambous noted. This was the result of a market failure of journalism forcing the media house to adapt from a for-profit model with an emphasis on advertising and sponsorship to its current status as a hybrid organisation with diverse revenue streams.

“Our response to this market failure has been to start a non-profit arm to fund efforts like our investigative journalism, our citizen reporting and our climate journalism.

“We turned to readers for support with a voluntary membership programme, instead of putting up paywalls, because even the philanthropic side of our efforts wasn’t enough to sustain us,” Charalambous said.

This allowed Daily Maverick to keep journalism accessible to all, regardless of their financial means, while still gaining support from readers.

News publishers compete for advertising not only against other news publishers, but also against big tech because the attention economy is set up to incentivise engagement, which is fuelled by strong emotions in the news and information space, or bad actors presenting themselves as news organisations which push extreme views because of the financial incentives.

“The other side of the coin is that as news and quality journalism have become harder to monetise, less and less is being invested in boots-on-the-ground journalism, which in turn made it less attractive to support through reader revenue efforts,” Charalambous said.

Opaque ad tech practices

The digital landscape, while initially promising for advertising revenue, has presented unforeseen challenges, due to the rise of Google and Facebook, whose opaque ad tech practices boost misinformation, disinformation, the misuse of advertising tools and the erosion of public trust. This has enabled bad actors to profit and caused a collapse of advertising for the media, while the social media platforms lack accountability, are resistant to combating problems and put further strain on newsroom resources.

Because of a lack of quality controls by tech platforms, bad actors have not only proliferated, they operate with impunity. Since the attention economy is focused on engagement and often driven by extreme views, the news sector has suffered from a decline in trust, worsened by the impact of Covid-19, which saw journalist numbers dropping by around 50%. These bad actors have influenced elections and eroded trust in the democratic process.

Click fraud

Social media platforms have the power and the tech to combat click fraud, which depletes competitors’ ad budgets or artificially inflates revenue for the website posting the ad. They should be using fraud detection mechanisms, including following and analysing click-through patterns, detecting anomalies and IP addresses, and employing machine learning algorithms to distinguish legitimate from fraudulent ad click patterns.

Some studies say the prevalence of ad fraud is $1 in every $3 spent on digital advertising. For publishers, this means even more reduced ad revenue and potential penalties from ad networks for fraudulent activity, even if unintentional, while advertisers lose trust in the digital space.

“One has to question the lack of progress in clamping down on ad fraud. This may be because as the owners of the entire channel, they still make the same amount of revenue, whether fraudulent ads are run and clicked on, as opposed to real ads,” Charalambous said.

Expensive and risky

Daily Maverick has invested heavily in investigative journalism, which is expensive and risky for journalists’ safety and puts the media house under constant threat of legal action.

Charalambous said the economic value of investigative journalism did not align with the substantial societal benefits it provided, even though it was essential for a healthy democracy.

“The decline of governance and service delivery in cities is attributed to the diminishing role of journalism, emphasising the interconnectedness of journalism, democracy and public institutions.

“Our view is that policy interventions and reforms are the only thing that can save the media from collapse.”

How to fix a broken system

Daily Maverick has proposed the following state interventions to allow the media industry to thrive in South Africa:

• Introduce tax incentives to encourage support from public businesses, investors and the state. These incentives would reward quality journalism and those who contribute significant societal value. Examples include zero-rating reader revenue for VAT — which would make subscriptions and membership contributions tax-deductible — depreciation allowances for media investors, zero-rating data charges on mobile devices for news publishers and compensating whistle-blowers and investigative media with a percentage of recovered assets.
• Advertising rebates for businesses supporting journalism, making donations tax-deductible regardless of public benefit organisation status, and promoting tax efficiency for news publishers. Press Council membership in good standing would be a prerequisite for these benefits, enhancing the value of such membership and supporting the regulatory role of the council.
• Compel tech companies that have benefited from questionable practices to pay a remedial “tax”. Rather than employing copyright laws or payments, this could be akin to an environmental rehabilitation framework, which imposes a levy on corporations for activities that damage natural resources.

Critical interventions

Pointing to the US, Charalambous said the media industry in the world’s largest economy was suffering mounting job losses and publishers were collapsing. “They are truly facing the consequences of the failed market and one that was identified over a decade ago. It’s a position that has only been made worse by the practices of big tech, a lack of adequate policy measures, and a lack of support from the public and business sectors.”

If social media platforms were brought to the media’s level of responsibility, Branko said they would not exist. “We are talking about failure on many sides to actually understand what’s going on here and to understand the difference between a utility and being a publishing company.

“Until that playing field is levelled and until there is a clear understanding and fairness is brought back, we have a really tough picture in front of us.”

The commission’s hearings are scheduled to run until 25 March. This week, the SABC, Google Search, Primedia, Reuters, Microsoft, Caxton, Independent Media and others will make their submissions. DM