Here’s the medium Google actually killed — and it’s not the one all the fuss is about

A detailed look at Australian advertising flows has answered the question: did Google kill old media? The answer? Yes — but not the one you think. No, not newspapers. It killed the old Yellow Pages — that analogue resource that used to land with a thud on your front porch once a year, jam-packed with paid-for listings. 

In pre-Google days, “Business Directories” like the Yellow Pages were one of the three big categories of advertising, along with display and classifieds. The least sexy of the trio — the least Mad Men — it turned over about $800 million in 2002; a large chunk into Telstra’s bottom line, or about 10% of the-then $8.9 billion Australian ad market. 

The Yellow Pages. Every household had one. It even brought its own form of “Search Engine Optimisation”: Start your business name with an “A” (maybe “Aardvark” or better, “AAA”) and you were guaranteed to come up top of your preferred category!)

Hard to believe that search turned out to be a better way of putting buyers and sellers together. Search, dominated by Google, ate the directories’ business and more than quadrupled its revenues to $3.6 billion by 2018, or about 22% of a much larger $16.6 billion ad market.

Newspapers, meanwhile, were shedding classified revenues: dropping from about $1.5 billion in 2002 to about $200 million in 2018, according to the AlphaBeta Media Landscape Trends report being released this weekend. (Most figures in this article are from this report which was commissioned by Google.)

This accounts for 92% of newspaper revenue declines over this period. Where did they go? To specialist online sites, the biggest owned by News Corp or Nine (as Bernard Keane wrote in Crikey on Wednesday).

Dubbed “rivers of gold” by Rupert Murdoch, classified ads were inseparable from the print newspaper product — and, so, inseparable from news. On the internet? Not so much. They have been in real long-term decline, with each recession or downturn since the 1970s taking a bite and each subsequent up-turn taking revenues to a lower real peak than the previous one.

The four key categories of classifieds have each found their own home online: property to realestate.com.au (62% owned by News Corp) and Domain (60% owned by Nine), cars to carsales.com.au, jobs to Seek and household trading to Gumtree, Ebay and Facebook marketplace (where it’s now largely free). The shift to the internet has seen volume boom, while prices have shrunk.

Still a good business. In June, UBS estimated that News Corp’s holding in the REA Group makes up about 88% of the value of its market capitalisation of about $10 billion. In that context, who owns whom? To avoid this sort of cannibalisation, Fairfax famously dodged investments in online classified companies like Seek in the early century. Great plan.

With regional and community closures, the final few million in print classified revenues are slipping away. After COVID-19, expect them to be all but gone.

The mastheads, meanwhile, have largely held on to their display ad revenues in nominal dollars, thanks to a shift to online ads. In 2002 they banked $1.6 billion, just about all through print. In 2018, it was $1.7 billion, $500 million of it digital. The AlphaBeta report estimates that this gives the mastheads about 29% of regular (that is, non-social) display revenues.

There’s a trap here: Mary Meeker’s Internet Trends report (from the US) has been warning for about a decade that, over time, advertising share correlates with attention. According to the ACCC Digital Platforms report last year, Australians spent about 2.3% of time online on news sites. What would Dickens’ Micawber say? Revenues 29%. Attention 2.3%. Result: misery.

COVID-19 is hurrying that misery along, with the vanishing of the travel display ads which seemed owned by the mastheads just last February.

Social media ads — a category that didn’t exist in 2002 — has exploded to revenues of about $1.5 billion, two-thirds of it to Facebook (and about a third of that to Instagram).

So, if Google and Facebook didn’t take the ads from newspapers, why are old media leaning on the federal government to shake them down for a share? Same reason robbers hit banks: that’s where the money is.