Audience revenue, social networks, and disinformation

In 2017, after the dust had settled on Trump’s election, I started a project to try to understand the cause and effect of the decline of local news. What resulted was a very long essay. Some parts of it hold up in my own thinking better than others; billionaires are not the best answer to this problem, reader revenue probably is an important part of any answer, but I no longer believe that there’s an economy of scale in employing journalists. Lede, Alley’s platform for journalism startups, is our answer to scaling the technology needed by news organizations.

My first take on the outcome of the 2020 election in the context of news production and dissemination is that Facebook and Twitter have shown themselves abjectly uninterested in supporting a healthy news ecosystem. Laying blame for disinformation in this cycle at the feet of the press is not a relevant criticism because social media has retained (and grown) so much power over the distribution of news and information to most casual news consumers (i.e., those with a low willingness to pay for hard news). Twitter’s bans and special notes are inconsistent and mercurial; Facebook’s actions have either been cursory or secretive, and Mark Zuckerberg announced that they would once again ease content restrictions after the election.

Given the choice between the two, I would rather Facebook’s actions to counteract disinformation be secretive than cursory, although I find their motives dubious. In the same breath that he announced that Facebook would ease restrictions after the election, Zuckerberg also noted that Facebook has a responsibility to “protect our democracy.” This suggests that Facebook views itself as a very special sort of referee in our society; sort of a corporate partner to the American experiment. I eagerly anticipate Facebook’s eventual reckoning with a new wave of antitrust regulators. No corporation should hold our democracy in its grasp.

2016’s disinformation has given way to 2020’s polarization. Facebook plays a key role in both, and its role in polarization is likely much more resistant to its preventative efforts — sub rosa or otherwise — because polarization happens when people affirm each others’ extreme viewpoints.

And since 2016, news organizations have widely embraced audience revenue — payments for memberships or subscriptions. This is not a matter of choice, rather, it is a natural response to the erosion of their ad revenue by none other than Facebook and Google, whose lack of a successful social network mostly shields it from criticism over disinformation or polarization, but hasn’t prevented a pretty thorny antitrust case. This was the main fact of the problems facing news media in 2016, but the challenges have not abated much since then.

This shift towards audience revenue has had two main effects — it’s made news harder to fake, in that a fake ad-ridden website carries less verisimilitude, but it’s also made serious journalism less accessible to news consumers who either can’t or won’t pay for news.

Local news organizations must accommodate casual readers. One way that local publishers might provide universal access might be in grants from community foundations, but these organizations typically are less willing to fund for-profit organizations. This, along with legacy cost structures and public market or private equity expectations, are major detriments to extant local news providers; even those that are digital-first, like Patch. Facebook and Google, in their own efforts to atone for their business model’s impact on news, have been somewhat more willing to fund other kinds of experiments, but reliance on these comparatively anemic resident programs of these goliaths is no solution to the broader issue.

And to the journalists, none of that logic matters in the least. Reporters working for publicly traded or private equity-owned conglomerates mostly cannot participate in the upside of a large firm, but they are certainly exposed to the downside in terms of layoffs, furloughs, and pay cuts, which have run rampant in the past four years.

On a local level in many markets, nonprofit news organizations make a ton of sense. They can accept both foundation funds and memberships that allow them to build a trustworthy news source for everyone in the community — not just subscribers. Clever for-profit and B-corp models may also be appropriate in some markets where local advertisers cannot gain traction on Google or Facebook.

Regardless, outside of broadcast television, which is subject to its own set of economic factors, local news organizations with high investor demand will find it very difficult to gain traction in their communities and also satisfy their owners between now and 2024. The present disadvantage to legacy firms is a clear opportunity for new entrants — with a healthy level of indifference towards Facebook, Google, and Twitter.

To learn more about how the Alley Group supports journalism startups and local news organizations, check out our platform Lede