Does Google and Facebook Revenue Depend on News? Quarterly Reports from Both Say “No”

One of the constant messaging from big publishing is that Google and Facebook depend on news to keep the money flowing. The data suggests otherwise.

You know you are a reporter when your idea of an afternoon well spent is pouring through quarterly reports of large companies you don’t directly invest in, but the life of a reporter is filled with all sorts of weird quirks like that.

Of course, there is a reason why we are pouring through such documents. Big publishing and large broadcasters have said for some time that platforms like Facebook and Google depend almost entirely on republishing news articles. This, of course, is the Big Media Big Lie which, lucky for you, responsible journalists such as us exist to set the record straight. Bluntly, the large media organizations lied to Canadians when they said this. More frustrating is the fact that since this is their own business we are talking about, so they all knew better than that, yet they pushed this lie anyway – all in an effort to sell Bill C-18.

Part of the Big Media’s Big Lie is the assumption they put forward that platforms are successful because of content they produce. Indirectly, the idea is that the only reason that large platforms are successful today is because their news, linked or otherwise, exists on their platform. Otherwise, who would use those platforms in the first place? The problem is that this assumption is absolutely false. What this does is grossly exaggerate the value news content provides to platforms when even the most basic research suggests that these platforms are successful for many other reasons.

This boomerangs back to the long standing conventional wisdom that publishers need platforms more than platforms need publishers. There’s many kinds of content on these platforms ranging from memes to basic level communications and the multitude of activities people undertake when they interact with these platforms. Do you know someone who is selling their old truck on the Facebook Marketplace? How about someone who posted a video of some wildlife they saw in their backyard? Did you Google a question about what the price is for a Playstation 5? What about looking up a guide on a specific part of Blender 3D? What about sending an e-mail through GMail? All of the above are uses of Facebook and Google that have nothing to do with news, yet are quite common uses for people to use such services.

Yet, the largest media outlets would have you believe that everything about these platforms revolves around them and the content they produce. For big media outlets, the messaging is clearly the idea that they made the platforms the success that they are today. For some less knowledgeable journalists out there, this can be an easy trap to fall into. After all, when you spend all day researching news articles, monitoring reports from other outlets, and trying to share your own work, it can be easy to assume that everyone else is as neck deep in news as you are. The reality is far from this thinking.

For those who insist that platforms like Facebook and Google are solely successful because of news, there will be the insistence of evidence. So, we decided to look at the quarterly reports of both parent companies: Alphabet and Meta. If platforms were really dependent on news for their revenue, then it would easily be reflected in their quarterly reports. However, the reports seem to suggest otherwise. For instance, Alphabet, in their quarterly report, lists plenty of sources for their revenue – none of those items make any mention of news articles published on their services:

We offer advertising by delivering both performance and brand advertising. We recognize revenues for performance advertising when a user engages with the advertisement, such as a click, a view, or a purchase. For brand advertising, we recognize revenues when the ad is displayed, or a user views the ad.

For ads placed on Google Network properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to Google Network partners are recorded as cost of revenues. Where we are the principal, we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers and is further supported by us being primarily responsible to our customers and having a level of discretion in establishing pricing.

Google Cloud Revenues

Google Cloud revenues consist of revenues from:
•Google Cloud Platform, which includes fees for infrastructure, platform, and other services;
•Google Workspace, which includes fees for cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and
•other enterprise services.

Our cloud services are generally provided on either a consumption or subscription basis and may have contract terms longer than a year. Revenues related to cloud services provided on a consumption basis are recognized when the customer utilizes the services, based on the quantity of services consumed. Revenues related to cloud services provided on a subscription basis are recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services.

Google Other Revenues

Google other revenues consist of revenues from:
•Google Play, which includes sales of apps and in-app purchases;
•hardware, which includes sales of Fitbit wearable devices, Google Nest home products, and Pixel devices;
•YouTube non-advertising, which includes subscription revenues from services such as YouTube Premium and YouTube TV; and
•other products and services.

We report revenues from Google Play app sales and in-app purchases on a net basis, because our performance obligation is to facilitate a transaction between app developers and end users, for which we earn a service fee.

This is hardly the picture of a company basing their whole success on the production of news content from third party. If anything, it’s almost as if there is more to Alphabet then just linking to news content – like the company offers other services that are used as well.

Of course, that’s just one of the two platforms that is being targeted under Bill C-18. What about Facebook? Well, Meta is Facebooks parent company. Like Alphabet, they have their own quarterly report and the picture is actually very similar:

Fourth Quarter and Full Year 2022 Operational and Other Financial Highlights

  • Family daily active people (DAP) – DAP was 2.96 billion on average for December 2022, an increase of 5% year-over-year.
  • Family monthly active people (MAP) – MAP was 3.74 billion as of December 31, 2022, an increase of 4% year-over-year.
  • Facebook daily active users (DAUs) – DAUs were 2.00 billion on average for December 2022, an increase of 4% year-over-year.
  • Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of December 31, 2022, an increase of 2% year-over-year.
  • Ad impressions and price per ad – In the fourth quarter of 2022, ad impressions delivered across our Family of Apps increased by 23% year-over-year and the average price per ad decreased by 22% year-over-year. For the full year 2022, ad impressions increased by 18% year-over-year and the average price per ad decreased by 16% year-over-year.
  • Revenue – Revenue was $32.17 billion and $116.61 billion, a decrease of 4% and 1% year-over-year for the fourth quarter and full year 2022, respectively. Had foreign exchange rates remained constant with the same periods of 2021, revenue would have been $2.01 billion and $5.96 billion higher, an increase of 2% and 4% on a constant currency basis for the fourth quarter and full year 2022, respectively.

The statement further offers this:

We report our financial results for our two reportable segments: Family of Apps (FoA) and Reality Labs (RL). FoA includes Facebook, Instagram, Messenger, WhatsApp, and other services. RL includes augmented and virtual reality related consumer hardware, software, and content.

Once again, this is hardly the picture of a company focusing entirely on news content appearing on their platform. If anything, it’s a picture of a company looking at how people interact with each other as well as a number of other services.

If you look at these quarterly reports, you really have to do a lot of mental gymnastics just to say that news content appearing on both services is even a feature of either companies business models, let alone jump to the conclusion that news content is the sole reason for their success. If anything, with Meta, the criticism might be that a large part of the companies business model revolves around sifting through highly detailed aspects of people’s personal lives and monetizing it. That would at least be a valid criticism for such a company. “Stealing” news content and monetizing it for their own financial gains? Not so much.

Once again, like so many talking points used to prop up Bill C-18, the facts simply do not reflect those talking points. Even the slightest stress test means that those talking points snap like a twig. If you want another reason to believe that publishers need platforms more than platforms need publishers, you can add this to the heaping pile.

Drew Wilson on Twitter: @icecube85 and Facebook.

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