Ad problem shifts from newspapers to Facebook

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Facebook is a new media company staring down a very old advertising problem. For a long time newspapers grew fat and happy on the largess of advertisers. Those days are gone as brands and local businesses moved to digital platforms like the around $660 billion social network.

But newspapers could potentially gain their first upper hand in a long time – thanks to a new law working its way through Washington – flipping media’s advertising woes on its head.

A bipartisan bill co-sponsored by Senate Majority Leader Mitch McConnell will, if passed, allow newspaper publishers to collectively negotiate with the likes of Facebook. That could cause problems for the social network. Facebook benefits from journalism – more than 40% of American adults get their news from Facebook, according to the Pew Research Center – but mostly doesn’t pay for it. This law would enable newspapers to say en masse that Facebook needs to cough up for the content rather than deal individually as did News Corp’s Wall Street Journal. It will especially help local news outlets.

Though antitrust concerns could still get in the way, newspapers have a pretty strong hand to play. The entire U.S. newspaper industry is expected to reap a bit more than $8 billion in advertising revenue this year, according to Group M, the media arm of ad giant WPP. That’s less than half of the ad revenue analysts are expecting Facebook to report in the second quarter alone, due out Thursday, according to Refinitiv.

Allowing publishers to deal directly with digital distributors as a group won’t save the industry, but every little bit helps. Like Spotify Technology, which pays music labels like Warner Music, or Comcast, which pays ViacomCBS, news organizations could finally find another bucket to collect some cash from as advertising goes away.

Meanwhile Facebook gets nearly all of its revenue from advertisers, and the newspaper business is a reminder that can be fleeting. At its peak in 2006, the industry pulled in almost $50 billion in advertising, according the Pew Research Center. An advertiser boycott of big brands such as Walt Disney stings, and a the near-collapse of small businesses, which account for roughly half of Facebook’s ad haul, could inflict lasting damage. If the newspaper business turns up the heat in a way that gets Facebook’s users to be less engaged, advertising may find its next victim.

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