Antitrust is an Answer—But Not for Journalism

Yes, the tech giants may be headed for legal trouble. No, it's not an answer to the business crisis of the press.

Welcome to the first edition of Second Rough Draft, a new newsletter about journalism in our time, how it (especially its business) is evolving, and the challenges it faces.

All of a sudden, there’s a lot of antitrust activity that seems to hold out hope for reversing the lack of advertising support for online journalism. Don’t be fooled. The antitrust arena is heating up, and the monopolists of online advertising may be about to take significant hits, but journalism is very unlikely to emerge as one of the winners.

Trump, Brandeisian

When Donald Trump first ran for president, one of the populist stances he took on the campaign trail was his assertion that companies could simply become too big, and that if they did, they should be broken up. It was one of the many paradoxes of 2015-16 that this was heresy in the Republican Party. Although few voters seemed to notice—largely because few reporters bothered to point it out—Trump flatly rejected the career-making views of former judge, Reagan Supreme Court nominee and GOP martyr Robert Bork, an antitrust specialist at Yale Law School for most of the Sixties and Seventies.

Instead, Trump seemed to champion the antitrust views of progressive hero and Supreme Court Justice Louis Brandeis, whose beliefs had been in eclipse in the world of antitrust for decades.

Trump probably had no idea how his musings on the evils of business bigness fit into 120 years of antitrust enforcement, and during his presidency, as in so many other areas, he got distracted and lost the thread.

Not one new investigation of possible monopolization was opened during the first two years of Trump’s presidency. Key relevant jobs across the government were late in being filled; some went unfilled altogether. When the administration did move against the AT&T-Time Warner merger, the Department of Justice made what many saw as a significant litigation error and lost the case.

Then, just two weeks before Election Day, as he was losing his battle for reelection and chronically annoyed at the tech platforms, Trump’s DOJ finally acted on a huge, longstanding antitrust issue, and sued Google for allegedly anticompetitive behavior in the online advertising market, in particular based on an allegedly secret deal with Apple. While this may have seemed to some to pick up the thread, it didn’t really. Bill Barr’s department didn’t seek to split up Google, for instance by forcing it to divest YouTube, which would be any Brandeisian’s goal. They alleged conduct that, if proved, even Judge Bork would have disfavored. The Federal Trade Commission, acting more than four weeks after Joe Biden was declared the winner of the election, took a much stronger Brandeis-like stand against Facebook, alleging its monopolization of social networking (including through another secret deal, this one with Google) and seeking its potential divestiture of Instagram and What’sApp. More than 30 states have joined the DOJ suit against Google; 40 are taking part in the FTC action against Facebook.

Publishers have also entered the fray, with first the Nation and the Progressive suing Google, and three of the leading newspapers in West Virginia more recently suing both Google and Facebook.

Winners and losers

There is no serious question that Google and Facebook have monopolized online advertising. Together, the two firms get more than half of all the advertising dollars spent online; when Amazon is added in the number grows to more than 60%.

And there is also no doubt that news organizations have been among the biggest losers as these behemoths advance, even as the winners have used the losers’ content to tighten their grip on consumers’ wallets.

Moreover, let me be clear: I actually agree with the Trump of five years ago that splitting up companies like these—forcing Google to surrender YouTube, Facebook to spin out Instagram and What’sApp, wresting AWS from Amazon—would be a good thing for America, and would be very much in the spirit of the antitrust laws enacted in 1896 and 1914.


Even if that happens, and even if particular anticompetitive behaviors are actually limited in the online advertising market, it’s hard to see how the legal system can mandate that journalism be among the big winners here.

Beyond the wasted half

To understand why, we need to acknowledge some critical realities about online advertising itself. The old saw about advertising came from retailer John Wanamaker’s observation that he knew he was wasting half of his advertising dollars, but didn’t know which half. Digital technologies promised to answer this, and, to a large extent, they have, tracking who clicks and who buys, where they came from and where they go, what else they do and who they are.

As a result, advertisers are ever more discerning about to whom they address their messages, microtargeting all the way, even for products and services marketed widely. The inevitable result is that the big winners in selling online advertising are those who can offer both the widest range of targets and the greatest depth within any given target. Translation: in the digital advertising business, there are enormous advantages to huge scale.

This supply problem also gave rise to a demand problem: the gigantic scaling of web advertising opportunities—which continue to grow substantially faster than the demand to take advantage of them—has yielded a secular decline in online ad prices, to which there seems no end in sight. That is, Facebook generates more new pages on which you can advertise, for instance, than the economy creates needs for advertising. As the prices for any given ad fall, the profitability gap between those with scale and those without seems destined only to grow.

Facebook, Google and Amazon were not the inevitable winners of this game. Those could have been MySpace, AltaVista and PeaPod. To the winners’ credit, they built better mousetraps than their competitors—and, to be sure, each of the winners was also ruthless on more than a few occasions.

Yet, even if you shear these firms of the appendages they bought or built—with the hope that, as with the break-up of the old AT&T phone monopoly 40 years ago, it will spawn new competitors and more innovation, as I and others think it likely would—the advantages of scale in internet advertising will persist. And the present winners, or a new set, will almost certainly emerge.

This will also be true if the current antitrust activity paralyzes Google and Facebook now, just as the government’s case against Microsoft for monopolizing the web browser did 25 years ago. Eventually you’ll get a new boss, just like the old boss. (Microsoft is an also-ran in the browser business today, but Google has half of the market, and it and Apple together exceed 80%.)

Journalism’s scale deficit

Which brings us back to journalism. There is no player in journalism who can conceivably aspire to the requisite scale. The New York Times, almost certainly the industry leader, hopes in four years to have seven percent as many subscribers to its news product as Amazon Prime does today. If the Times reaches this goal (10 million subscribers!), their core customer base will be less than one-twentieth of Facebook’s. The Times has been running ahead of expectations in recent years, the envy of the industry. Their advertising revenue has fallen three of the last four years.

It may be that the online advertising monopolists, particularly as they face antitrust litigators and possible congressional regulation, will throw a few bones to journalism—as they have occasionally been doing for years. And it may be that the bones will get a bit larger as the threats grow. (See this, for instance, from yesterday.) No one, however, is seriously proposing to somehow mandate that ad revenues run against the tide that scale mandates.

So watch these emerging antitrust developments with tactical interest, and root for the antitrust plaintiffs and the interventionist politicians if you like, but keep looking elsewhere for the salvation of journalism’s business model.

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