How Facebook and Google are looting the media economy

The media business is in the toilet. Despite the relatively strong economy, thousands of journalists are being laid off every year — and the alternative press has been especially devastated, as Alex Pareene writes in a brilliant article for The New Republic. The "rude media" — alt-weeklies, blogs, and websites like the late Gawker and Deadspin, who directed acidic skepticism towards wealthy, powerful people like Jeffrey Epstein and Bill Cosby when stuffy traditional press would not — is all but dead.

The culprits are familiar, by this point: On the one hand the internet, which basically destroyed local classified ads and thus hundreds of local papers, and on the other Facebook and Google (plus Amazon to a lesser extent), who have between them monopolized an ever-growing share of the online ad market.

But there is another part of the online ad duopoly that has contributed to the destruction and has yet to be fully grasped: fraud.

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Craig Silverman has an excellent story at BuzzFeed News diving into a report from Social Puncher, a consulting firm that studies online ad fraud. The report examines two websites, the Albany Daily News and the City of Edmonton News, that racked up eye-popping amounts of traffic for several months earlier this year. Only it turns out these were fake websites: "The Albany and Edmonton sites have not been updated in months, have no employees associated with them, and list no larger corporate entity. Their homepages are filled with bland, out-of-date rewrites of local stories first reported by real news outlets," writes Silverman.

It was all a "digital ad fraud scheme," he writes. The scam probably worked like this: buy traffic from some kind of automated click farm, register with Google's AdExchange sales network (and others), then sell faked ad impressions to advertisers who don't know any better. Rake in the cash for as long as you can until someone catches on, then shut down the website (and presumably, start the next one).

This story tracks with one of Silverman's previous investigations which found a massive fraud scheme on the Android app marketplace. The fraudsters bought dozens of cheap apps so they could harvest user behavior data, which they then used to program click farm bots that could behave convincingly enough like actual people to get past algorithmic fraud detection.

The big difference this time is that these fake news websites were comically lazy about avoiding detection. They had no new content, no social media profiles, and only a couple articles that were even slightly related to the cities they were supposedly covering. An actual person would have been able to detect the scam in moments — and conversely, a half hour of work a day from one of the fraudsters would have made it look close enough to survive at least cursory scrutiny (especially given the dire state of actual local news publications).

That implies that whatever anti-fraud measures the ad monopolists have, they aren't at all effective. No one can say for sure, but perhaps $20 billion in yearly online ad spending is lost to criminals.

This problem has existed for years, and Facebook has it just as bad. A few months ago the company sued two Asian app developers for allegedly infecting phones with malware that created fake ad clicks in the Facebook app. In yet another story, Silverman reported that "black hat marketers" took advantage of lax Facebook enforcement to use the platform to trick people into buying subscriptions to scam products with deceptive ads.

The lesson here is that not only have Facebook and Google monopolized the online ad market, they have also corrupted it. Their platforms are so massive that it is nearly impossible to properly police them, and in any case neither company evinces much interest in doing so, since it would require hiring tens of thousands of actual people to look carefully at millions of websites. It is much cheaper to get programmers to write some anti-fraud script, claim to advertisers that they are doing all they can to stop scams, and rake in tens of billions in profit.

In reality, it is quite clear that neither of these companies cares that much about ad fraud, and they don't have much incentive to do so either. Google and Facebook get their cut even if it's only racks of phones "looking" at the ads. And after all, where are advertisers going to go? The duopolists already either bought up much of the competition, or drove them out of business.

The good old days of fat journalism profits from classified ads are never coming back. But it would certainly be possible to run at least a modest local news website in a city the size of Albany if Google and Facebook hadn't both cornered the market on online advertising and allowed criminals to run riot inside it. If we want even a semblance of local media — or if Walmart, Home Depot, General Motors, and other companies want their ads to be reliably seen by actual human beings — it's time to break up and regulate the platform monopolists.

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