Online exclusive
If Google’s past relationships with media outlets had some thinking it could be persuaded to entertain the government’s proposed media bargaining regime, they should think again.
As widely reported, Google has rejected the Fair Digital News Bargaining Bill, which would require it to negotiate commercial agreements with media outlets to allow it to continue running snippets of news outlets’ content in its search results.
Google has paid outlets in the past on a voluntary basis but sees the move to regulate such payments as a “link tax”. It is threatening to pull the plug on featuring news articles in Google search results if it proceeds.
“We’d be forced to stop linking to news content on Google Search, Google News, or Discover surfaces in New Zealand and discontinue our current commercial agreements and ecosystem support with New Zealand news publishers,” Google’s New Zealand country director Caroline Rainsford said.
We expected Meta to take this approach, as it has done in Australia and Canada, but another factor explains Google’s hardline attitude here: Its search monopoly is slipping anyway and might be about to disappear altogether.
The Amazon effect
While Google still has about 90% of the global search engine market - Bing is the only other real competitor of note - it’s a different story when you look at search-related advertising - the ads sold around search results across the web in general.
The Wall Street Journal this week reported data from research firm eMarketer, which suggests that Google’s share of the US search advertising market will drop below 50% next year.
Amazon.com is making big inroads against Google, expected to claim 22.3% of the search-related ad market this year, up 17.6% from last year. Google has a 50.5% share, representing 7.6% growth. Amazon’s e-commerce website is a digital juggernaut in the US because a staggering 180 million shoppers are estimated to use the Amazon Prime service, which includes free shipping for a monthly subscription fee.
It means that Prime members spend a lot of time searching on the Amazon site, being shown adverts alongside the results. Many of them are starting their product-related searches on Amazon, rather than Googling information, because they are likely to buy the product via Amazon if they can, to take advantage of free shipping and other loyalty benefits.
We don’t have the same fixation with Amazon in New Zealand, because Prime membership is not on offer here (Prime Video is offered separately) and the selection of products via the Australian store available to ship here isn’t as extensive as in other Amazon stores. I can’t remember the last time I searched the Amazon website for anything other than ebooks; I even surf Temu more often.
Perplexing search results
But Amazon is just one of a growing cohort of Google rivals, Temu included, eating into its search ad market share. TikTok, the video-sharing platform with 1.93 million adult users in New Zealand, according to its parent company ByteDance, is also a major search engine in its own right and has started allowing advertisers to target ads at users based on their searches.
Then there is the generative AI boom. Perplexity is a very good AI assistant. I pay US$20 a month to ask as many questions as I want. Extensive answers are served up complete with sources and with no adverts. It’s an excellent service, all black minimalism and authoritative answers, which I am increasingly using instead of doing simple Google searches.
But Perplexity knows that few people are willing to pay that much for an AI assistant each month, so is about to launch an ad-supported version. That could get annoying very quickly for “freemium” users, as they will have ads for products and services delivered with answers they’re seeking.
But this is just the start of the GenAI search advertising deluge. Soon they will all be doing it, representing the biggest existential threat to Google that it has encountered since its fledgling days as a start-up.
The reason media outlets were stripped of digital advertising revenue with the rise of Google and Facebook is that the Big Tech companies delivered better bang for the buck, with their ability to identify web users’ needs and wants. Now, TikTok, Perplexity, Temu, Bing, Amazon and others can do that with increasing sophistication.
An increasingly irrelevant Bill?
Google is still sitting pretty in the search ad market and has begun adding AI-generated answers at the top of its search engine. Adverts are also being rolled out as part of its AI Overview summaries, though I haven’t seen any appear in my Google results yet.
New Zealand is a particularly Google-centric market, where the company generates about $1 billion in mainly advertising-related revenue. So it may take longer for search-related advertising to fragment here.
However, the rapidly increasing pressure on Google from competitors adds a new wrinkle to efforts to force Google and other Big Tech companies to prop up ailing mainstream media outlets.
The bigger existential threat to media companies is now the harvesting of their content for much more extensive use in AI assistants like Perplexity, where entire archives of articles can be scraped from the web to serve up answers to users.
John Terris, president of the non-profit activist group Media Matters, fumed in a recent statement blasted out to media outlets that “Meta, Facebook Google, and their ilk, far surpass anything Rober (sic) Maxwell or Rupert Murdoch might have dreamed up, by helping themselves to ordinary Kiwis’ personal data and then, without any respect for the well-established conventions of International Copyright Law, proceeding to use cheap advertising streams to sell our news back to us and amassing immense private fortunes in the process.”
By “their ilk” he could and should be referring to OpenAI, Anthropic, Perplexity and numerous other multi-modal AI assistant creators spitting out text, images and video clips using large language models trained on the contents of the internet, including thousands of news websites.
But the Fair Digital News Bargaining Bill as written doesn’t include provisions for generative AI content, which could see it rendered largely irrelevant if it makes it into law. A rare effort in New Zealand to hold Big Tech to account could be scuppered by a tech-driven shift in the market.
Then we have US Government efforts to break up Google’s search monopoly, with the US District Court for the District of Columbia ruling in August that Google illegally monopolised the online search and text ad markets. A different federal lawsuit is taking aim at its display advertising business, too.
No wonder Google is mounting a vigorous defence in little old New Zealand. The cash cow it has milked for more than two decades is under threat like never before.
