South Africa

MARKET INQUIRY

We don’t rake in profits off news, Google tells Competition Commission

We don’t rake in profits off news, Google tells Competition Commission
(Photo: Pixabay / Simon Steinberger)

News queries accounted for less than 2% of search queries in South Africa, resulting in only about R35m in revenue in 2022, the search giant claims — despite assertions that it made around R11bn from its various products.

The Competition Commission has welcomed Google Search’s participation in its media inquiry — represented by an all-women team — saying its presence shows that the corporation respects the commission’s jurisdiction and the importance of issues around the media in South Africa. 

However, during the discussions, commission chairperson James Hodge accused the search engine’s representatives of being overly defensive and evasive in their responses to questions around privacy concerns, its tech, how much information it stored on users and the profits it gleaned off the media.

The commission’s Media and Digital Platforms Market Inquiry kicked off on Monday last week. It continues this week in Pretoria.

The executives told the inquiry that Google Search’s features aimed to enhance the user experience and trust in search results, such as a dedicated carousel for local news and improved ranking algorithms, and also partnered with the news industry by investing in the sector and fostering a sustainable and diverse news ecosystem through the Google News Initiative. 

In South Africa, the initiative supports independent news publishers through training programmes, partnerships and commercial engagements.

Constant innovation

Sulina Connal, managing director of News Partnerships EMEA, told the hearing that technology was developing rapidly, so it required constant innovation. 

“It’s a complex environment for all parties to operate, publishers, platforms, which requires constant adaptation.”

She said Google built products to serve a diverse array of reliable information, including news, to its news users, which drove traffic to publishers.

“This is at the heart of the product design – the constant effort to look for reliable signals fighting misinformation.

“Search and discover are not news aggregators. They provide links in response to people’s queries or their anticipated interests, and direct them to the original sources.” 

Connal said news comprised a relatively small part of the vast volume of content that people sought and discovered on the internet, which was why Google invested in products, programmes and partners. 

It shared and encouraged innovation through the Google News initiative through numerous bespoke joint initiatives with publishers, broadcasters and civil society around the world.

“Google is one of the leading private funders of journalism globally. We have a deep respect for the difficult and very important work of journalism but don’t think that the answer lies in short-term transactional solutions, which result in publishers becoming financially dependent on payments from private companies. All stakeholders, including the government, need to work together.”

Expanding team

Google had maintained an office in Johannesburg for 15 years with an expanding team to meet its growing business needs, said Abongile Mashele, head of government affairs and public policy in sub-Saharan Africa (SSA).

“Our focus has largely been on identifying the opportunity technology provides for the economy and improves the lives of our users. In South Africa, we have the 2030 National Development Plan which places a significant emphasis on the role of the tech sector in driving economic growth and development. 

“The plan identifies the tech sector as an opportunity market, requiring investments in infrastructure, skills, new technologies and research.”

Google’s presence in South Africa went beyond products; it also focused on how to enable digital transformation, growth and competitiveness, she said. 

“Our investment approach is anchored on … digital infrastructure investment, digital skills, new technologies and product localisation.” 

‘Misunderstandings’

Erin Simon, senior counsel for knowledge and information, gave an overview of Google’s products to clear up “some misunderstandings or misconceptions” heard over the past few days of presentations at the hearings.

She said Google’s search operations, including crawling and indexing, query understanding and ranking algorithms helped optimise search results. 

“Fundamentally, that is what the search engine does. We seek to display a diverse set of reliable relevant results to the user. And those results are primarily links. We don’t host content from the web. We give users a path to find that content where it lives on the website or the publisher’s website.” 

But Google search, while it included news content, went far beyond news content, she stressed. 

“It is not a news aggregator. It is a general purpose service.”

The service was at risk of attracting bad actors eager to exploit its algorithms, which is why Google – while combating spam and trying to provide the best ranking and the best results for its users – had to be judicious about how much transparency it gave about its ranking algorithm. 

Simon said they understood the need for publishers to have some visibility into that because it was important to them to be able to perform well in search, but “we want to make sure that they, like everyone on the web, are focused on making the best content possible for users, and not just on building to the signals that we tell them we look at”.

Since Google first launched in 1997, Google Search had innovated to be a better, more robust, more varied and more interesting search engine, and to meet users where they were. 

Diverse news ecosystem

Marianne Erasmus, news partner lead for SSA, said that fundamentally, Google intended to build durable partnerships with the news industry that would foster a sustainable, resilient and diverse news ecosystem, as opposed to engaging with the news industry through purely transactional relationships. 

“We already make substantial and tangible investments into the news both globally and locally. And we urge policymakers and regulators to acknowledge these investments as they look into the relationship between Google in the news.”

She denied that Google reaped substantial revenue from news. 

“In 2022, news queries in South Africa accounted for less than 2% of people’s search queries in South Africa. The ads placed on those pages resulted in less than R35-million in ad revenue for Google.

“In contrast, Google sent 600 million free referral clicks to South African publishers from Google Search and Google News, that publishers could then in turn monetise on their websites through advertising or subscriptions.”

In 2018, the company launched the Google News initiative to support the global news ecosystem, including products and programmes to help publishers better monetise, such as Google Analytics, Subscribe with Google and Google News showcase, a $1-billion product licensing programme for publishers. 

“To achieve our shared goal of connecting users to relevant and credible news, we need to work closely with journalists and musicians. And that’s why for the last decade or more, we’ve been developing products, training and a set of mutually beneficial partnerships to anchor our relationship with this industry.”

Citing other examples, she said Pinpoint was a tool that journalists could access free, helping sift through enormous datasets to aid investigative reporting. Journalists could also use the suite of fact-check tools free, including Factcheck Explorer and Image Verification.

“And across our products, Google services independent fact checks six million times a day. And publishers benefit from free referral traffic sent to them from searching news traffic, which they can in turn monetise.” 

State of SA media

Questioning whether Google was aware of the state of the media in South Africa, in which an estimated 700 journalists were unemployed, committee chair James Hodge said Google’s latest financials indicated the company made nearly $283-billion in revenue. 

It had expenses of $208- billion and a net profit of $71-billion before tax (about 25% of revenue).

“But I think what’s interesting is if you look at Google Services, which is Search, YouTube and ad tech, and take out some of the ‘other bets’ and cloud which are losing money, that accounts for the bulk of the revenues of $254-billion in operating income… profit of $87-billion or a 34% profit margin.”

Last week, Media24 CEO Ishmet Davidson told the inquiry that Google, not the government, was the biggest threat to media freedom in South Africa

News24 was unprofitable, which was an indication of the unsustainable business model of SA news media organisations, Davidson said, while estimating that Google made R11-billion in profits in South Africa.

Citing statistics from the Independent Advertising Bureau, Davidson said Google and Meta were “absolutely dominant with 97% market share, leaving publishers with the crumbs”.

Google’s representatives declined to comment on those estimates, saying they did not disclose certain information publicly. 

Davidson said: “What’s particularly concerning is that in 2015, publishers had an 8% market share, which by 2022 had declined to 3%. On the other hand, during this time, Google’s dominance grew from 67% to 78% of the digital advertising market (with close to 100% of the search market).”

On Friday, 9 March, Daily Maverick CEO Styli Charalambous told the inquiry that Google dominated the advertising marketplace, playing multiple roles and owning the ad tech stack almost entirely used by publishers and media buyers.

“Underlying these practices is a notoriously opaque marketplace. In multiple tests run by publishers, when buying units of advertising on their site, it was found that just 30% of the spend ends up with the seller. Google does not disclose who profits from the leakage, so further investigation is impossible.”

He said the relationship between news publishers and digital giants like Google was often complex, acknowledging that the Google News Initiative (GNI) stood out as a signal of Google’s recognition of the vital role news played in society and, by extension, its business ecosystem.

“Through GNI, Google has committed itself to bolstering the news industry by funding innovation projects and developing tools to enhance news organisations’ operational capabilities.

“As a recipient of two Google News innovation grants, Daily Maverick has firsthand experience of such support’s positive impact on a news publication’s offerings and overall sustainability.” DM

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Comments - Please in order to comment.

  • Geoff Coles says:

    Why is the Competition Commission even involved…..
    James Hodge overreach yet again

  • Greeff Kotzé says:

    “In 2022, news queries in South Africa accounted for less than 2% of people’s search queries in South Africa. The ads placed on those pages resulted in less than R35-million in ad revenue for Google.”

    This needs to be interrogated further before being accepted as fact. How does Google define a “news query” in a measurable way, since it could take so many different forms? One can’t discuss this as a metric without understanding what, exactly, it represents.

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