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Select Committee on the Future of Public Interest Journalism
Impact of search engines, social media and disinformation on journalism in Australia

ALMEIDA, Mrs Alice, Private capacity

SANGSTER, Ms Jodie Alexandra, Chief Executive Officer, Association for Data-Driven Marketing & Advertising

SCHULZE, Miss Jane, Managing Director, Australia/New Zealand, Standard Media Index

WHITFIELD, Mr Timothy, Director, Technical Operations, GroupM


ACTING CHAIR: I now welcome witnesses appearing together as part of a panel. Information on parliamentary privilege and the protection of witnesses and giving evidence to Senate committees has been provided to you. I now invite you to make a short opening statement. At the conclusion of your remarks, I'll invite members of the committee to ask questions.

Ms Sangster : I'll give you a very brief background on who we are. We're an industry association representing around 650 corporations in Australia—mainly the larger end of town corporations that are involved in marketing. That will be from the brand side, so your banks, insurance companies, retailers et cetera, the suppliers to the industry and, also, the agencies. Our role is advocacy, education, thought leadership research et cetera.

I want to make a brief starting statement before I pass over to my colleagues. What I'm really representing here is the marketing and advertising industry and the behaviour of advertisers, which has changed quite dramatically probably in the last 10 years. We're realising that marketing and advertising play a massive role—a substantial role—in paying media channels, which then, in turn, produces journalists and quality content. There has been quite a change in how marketing and advertising has been approached in the past 10 years. There are three key areas that I will touch on. I will touch on, firstly, the changing media landscape, secondly, how brands now approach advertising and why that's changed and, thirdly, what advertising actually is these days and why that's important.

Firstly, the media landscape has changed. If I look at how it was 10 years ago, marketers and advertisers had limited channels to reach their audiences, so they were reliant on TV, radio, newspapers et cetera. With the advent of digital, the number of channels that are now available to reach consumers has substantially changed. Secondly, anybody can publish, so that has fuelled the number of channels available. Thirdly, how organisations go about marketing has changed. They're trying to be more relevant and targeted, rather than doing broad mass advertising.

Taking into account that changing media landscape, the second thing that has changed is brands' approaches to advertising and how they go about it. Whereas previously—10 years ago—it was very much about getting a mass message out there and using the traditional channels to do so, now, with data, that has changed a lot. Brands are trying to understand their audiences—what makes them tick and what they're interested in. They are looking to find out where their audiences are—so how they can reach their audiences. An example of that may be: a few years ago there was a campaign that was run by a travel insurance company who made the assumption that people watching Getaway on TV would like to buy travel insurance. But, actually, looking at the data and the analytics behind it, that's not where their audiences were, because people watching the travel shows were people who wanted to go on holiday but perhaps couldn't. The people who would buy travel insurance—

Senator XENOPHON: That's why I watch it.

Ms Sangster : That's why I watch them too. But those people are not necessarily the purchasers of insurance. Using data, they're seeing that their audience is actually somewhere else, and there's a lot of work that goes into that now.

A brand will also look at the messages that work. They will test a lot more—have large campaigns and more testing campaigns—and they'll use the channels and the media that reach those audiences. It's not about putting a mass message out there. It's about less budget or less spending driving higher returns on investment and trying to find channels that cut through the clutter. That's what's driving brands now in how they're doing their advertising. What does this mean? It means that they'll use the channels that are working for them. When we're talking about something like Facebook or Google, there is such a huge shift over to those channels because they can microtarget, they understand their customers and they can reach them a lot more easily.

The last area I want to briefly cover is: what is advertising and what has changed? Previously, 10 years ago, it was very clear you were watching an advertisement—you'd have a TV ad, and it was very clear that's what it was. You'd have an advert in a magazine that said 'advertorial' at the top. You might have a page in a newspaper. But the lines are now blurred because we've moved into a world of content marketing. Brands are themselves becoming publishers, and they are putting out content that is relevant, helpful and valuable to their customers. There's now a middle point as well in this line between advertising and journalism. Brands are becoming involved in that. I should say it's not just brands; it's also individuals. Anyone can now become a publisher and take on the role. The lines have really blurred and you're starting to see some journalists come into the marketing sphere. You'll start to see some advertisers move over as well into that middle ground, which is what we call content marketing.

That's an outline from me. There's one other thing that is worthy of mention. I feel that there is a need for consumer education and awareness on this, because there is probably quite a low understanding out there in the consumer field around what is happening here, both in terms of the role that journalism plays and also the role that marketing plays. There is a need for that, and that's something that we do as an organisation. We are happy to continue to do so, but it probably needs to be broader than just us. Thank you very much.

Mr Whitfield : I don't know if I can beat that, but I'll give it a go. I am the director of technical operations at Australia's largest media company, GroupM. We have a RECMA value of $2.84 billion, and we represent 197 clients across multiple verticals, such as travel, auto, finance et cetera. We've got clients like Amex, NAB, Westpac, Jetstar and a hundred or so other clients in those areas.

My job is to look at all the technology that exists in the Australian marketplace and understand how that technology is best used for different clients. I'm a little bit like a switchboard operator, where I see clients at one end and technologies down the other end. I connect the two together. To make it nice and simple, one of our clients might be in the fast food business and they want to be able to advertise to clients as they walk past the store with a message that says on their phone: 'Would you like to go in the store and purchase our product? It's on sale.' That requires a lot of technology in the back end to make that work, and my job is to understand the technology in the marketplace in Australia and how that is changing.

One of the key themes in this is the growth of an area called programmatic. Programmatic advertising is the automatic buying and selling of media by computers at superfast speeds. It's very similar to the way that high-speed trading of shares works. All the large publications sell their media, and all the large agencies buy this media at ultra-fast speeds.

The point I'd like to try and present to the committee today is understanding how much of the media dollars are passed through to protecting the integrity of journalists. If I was to take you through a hypothetical but fairly accurate assessment of how media laws could be passed through, it would work thusly. Assume that there is a campaign for a client x that is for roughly $100,000. That client would want that $100,000 to be passed through to finding new customers for their product. Unfortunately, some of that money is used for technology—the buyers and sellers of these programmatic fees. A typical rate for a programmatic buyer could be anything up to 40 per cent of the value of that media. So that means, of that $100,000 campaign, $40,000 is lost straightaway just to one technology vendor. But on average there are up to 10 technology vendors producing one particular ad so, in total, it is not just 40 per cent which is lost; in some cases it is up to 60 per cent. They did some test cases over in London whereby a publisher purchased their own inventory and found that only 37 per cent of what they were selling made it back to them, the publisher, whereas a whopping 63 per cent was lost by tech. In this market, it is very similar; the lion's majority of fees are taken up by technology.

Most of these technological companies are not domiciled in Australia. Of the portfolio of 250 companies that I follow, the vast majority have headquarters either on an island or in Tel Aviv or in America, and a lot of those company taxes that are paid go overseas. Of the 40-ish percentage that is left of that $100,000, not all of that makes its way to media either. Before that gets to media, we have to take into account fake news, click farms, non-human traffic—

Senator XENOPHON: For the record, could you please explain click farms in 30 words or less.

Mr Whitfield : The goal obviously for the advertiser is to have their product shown to humans who may be in the idea of going and purchasing the product. So if it is Ford, am I interested in going and buying a Ford Klueger? That money is eroded by many things, one of them being click farms. Click farms would be in two different categories, either human or non-human. A human click farm could be a large group of people working together in a factory, in very much a sweatshop styled factory, where they are paid to click on ads to artificially drive up the price and make it look like they are real humans.

Senator XENOPHON: So like a call centre but a click centre?

Mr Whitfield : Exactly.

ACTING CHAIR: And is this happening in Australia?

Mr Whitfield : When it comes to the internet, I would like to say that most of these issues are global and none of them are specifically targeted to foreign versus domestic; this is a global issue.

Senator XENOPHON: Where are the click farms? Where do they tend to be?

Mr Whitfield : If I was able to locate exactly where they are, they would change. There are a lot of sophisticated ways to be able to hide the true locations. But there are also other companies out there designed to find them. These are real issues. Fake news is another issue that erodes this money. Instant articles is another one of these issues that erodes the money. So that 40 per cent goes down and down. The actual amount that, I think, goes towards funding journalism, paying for journalists in this market can be as low as between 10 and 20 per cent of that media spend. If the total digital spend in Australia was roughly $2 billion then a very small percentage of that is actually going towards paying journalists at the moment and that is the type of thing that I would like to be presenting to the inquiry today.

M is s Schulze : I would like to say we are very lucky to have Tim here today because he is the expert on that whole programmatic trading technology. It is such a crazy world; it changes so fast. Even though I am involved in this industry every day, I cannot keep up and I have to read him on LinkedIn to know what the latest thing is. Many thanks to the committee for the opportunity to appear here today. I probably come from a unique background because, for more than 15 years, I was a print journalist, and for the last three years of that, I was a media editor at The Australian.

It was my time as a journalist list that triggered my business journey because, before 2009, it was impossible to get any accurate ad spend data and, as a business journalist specialising in media, I and the whole industry were blind to any ad spend trends so, as a direct consequence, my business partner and I created Standard Media Index.

Just as background, our business now publishes highly accurate ad spend data, which is sourced directly from the media agencies that buy corporate Australia's advertising each month. Just to make that clear, we represent corporate advertising in Australia—the top 400 advertisers, essentially—not the small businesses and the mums and dads that buy advertising. For the past eight years, I have been tracking the ad spend of newspapers and other media affected by the growth in the digital media and it is clearly not a happy story.

Back in 2009, newspapers attracted 20 per cent of all advertising out of media agencies and for digital the share was about five per cent. Today, newspapers secure about seven per cent of total agency bookings and digital has about 27 per cent of the total spend out of media agencies—so it is inversed. At the same time, Australia's newspaper groups have been leading the world in terms of monetising their content online. SMI now produces data for the US, UK and New Zealand market and we can clearly see that relative to these other countries Australia's news media industry is gaining more revenue from selling ads around their newspapers' websites than in any other country. Last year, the digital sales teams of News Corp, Fairfax, the old APN and Western Australian newspapers sold to media agencies advertising worth more than $200 million—and that is excluding the programmatic bookings that Tim spoke of, so the figure is actually going to be slightly higher. As a result, digital now represents 23 per cent of total agency revenues to the news media industry which highlights the huge progress the industry has made to transform what was once just a print-only industry.

Despite such progress, traditional news media publishers continue to face more and more challenges. It is a common mantra in the media world that a newspaper ad that once sold for the equivalent of one dollar a CPM has an equivalent digital value of 10c. But that value has now decreased further, as per what Tim was saying, with most estimating to 3c to 4c, as this new form of digital trading called programmatic buying has taken off. In this world of online advertising auctions fuelled by computer algorithms, the amount of money returned to the publishers who actually created the content is even less.

At SMI, we can see that programmatic is the fastest growing area of digital media. This calendar year to date, that market has grown by 40 per cent from the same five months last year and now represents 18 per cent of all money agencies are spending on digital. But this area can also be controversial as there has been concern raised globally that these computers inadvertently place ads for well-known brands on unpalatable websites, which has the unintended consequence of damaging the brand being advertised. As a result, we fully expected more digital money to shift back to quality news sites but that is yet to happen. What is worse, news media publishers are not even getting their share of the programmatic market.

Last year, SMI and the news media's peak body NewsMediaWorks created the first database to show actual ad spend for news media's print and digital assets. It is called the News Media Index and this time the data came not just from media agencies but also from all the small business advertisers as well. But when we released the NMI Q3 data in May, we were surprised that, despite all the brand safety issues swirling around programmatic advertising, these quality news sites still did not get their share of programmatic spend. Indeed, their share of total programmatic spend was less than 10 per cent of the total.

The other major market challenge is competition from large digital organisations that do not produce any content but use the content of news media publishers to fuel their business without paying for it. Google and Facebook have obviously become distribution platforms that distribute not only user-generated content but also the content of news media producers. In the process, they are taking the lion's share of digital ad spend coming from media agencies. These two companies, just the two of them, in the 2016 calendar year attracted 40 per cent of all digital advertising coming from media agencies. So that is 40 per cent of all corporate Australia's digital advertising.

I do not have a magic solution as to how this can be fixed, but I would simply note the following. As a former journalist, I am a member of the Copyright Agency and every few months or so this independent body deposits about $10 into my bank account, which reflects my portion of payments made by libraries and similar organisations who have photocopied or used stories that I wrote in my previous journalistic career. My question is: how do large online companies manage to evade Australia's copyright laws? I'm not a lawyer, so I don't know the answer. Is it simply that the law has not kept up with the digital age? Why are there no copyright payments in the digital world?

Secondly, SMI also has product category ad spent data and, as such, we can see the combined ad spend for all of Australia's local, state and federal governments. Further, we can see that, across all tiers of Australian governments, a full 30 per cent of all digital budgets are spent on search and social media. I would simply suggest that, if our governments want to foster a healthy, local media industry with strong news-gathering resources, surely it would be in the public interest to only buy digital advertising from companies employing local journalists. Thank you.

ACTING CHAIR: Thank you, Ms Shulze. Mrs Almeida.

Mrs Almeida : Congratulations on pronouncing my surname correctly—it's my husband's, and I'm still getting it wrong. Thank you for your time today and thank you for allowing me to the opportunity to voice my opinion. I currently work for a global marketing intelligence company that I am not representing today; I am representing myself with my 16 years of media research experience and insight. I've worked for some of Australia's largest publishers such as Fairfax and news and also TV networks Seven and Nine. My specialty is around media measurement and media consumption, and I am a consumer and brand specialist.

There has been quite a lot of discussion around Google and Facebook and, whilst I agree that they are big beasts and a lot of work that needs to be done with them, I think that a lot of publishers wouldn't be where they are without the support of the likes of Google. Just to highlight that: last year Google contributed 35.5 per cent of traffic to the news and media industry. When you think about your own media consumption habits—when I heard of the Grenfell fire in London, the first thing I did was go to Google and type it in. Whatever publisher came up is the article I read. This behaviour we are starting to see across all different Australians—from young to old. Publishers need Google to work with them for that reason.

The other thing is that a lot of the traffic is being driven from social, as we have touched on before. Facebook is not just a social network where you hear about what your family and friends are doing and all the thousands of baby pictures that seem to be coming in a newsfeed; it is now also becoming a news and content feed. A lot of publishers are now tapping into audiences by putting their news and articles within Facebook. I know that a lot of the time I visit certain websites that I wouldn't have visited purely because I saw an article on Facebook or Google.

The other issue that I want to talk about is—and it's something that I feel quite passionate about—the clickbait and propaganda articles that seem to be out of control at the moment. When I worked at Fairfax many years ago, we were one of the dominant publishers online, and there was probably one other competitor at that time. These days they are one of six or seven different major competitors. They are competing for the same audience and they are competing aggressively—and I am not speaking on behalf of Fairfax now but on behalf of all of them. They are getting dirty with their tactics on how to get the audience across. The one way that some publishers are doing this is by sensationalising articles and putting headlines which are completely misleading and representing.

An example that I want to showcase—and this only highlights one of many, many examples; I could sit here for five hours and talk about all of the latest articles in the past month—is the announcement of the latest census results. This is something that I got incredibly frustrated about. A particular publisher in Australia published a headline that said: Muslim population soars … as religion becomes the second-biggest in Australia.' It is a 77 per cent jump.

That kind of headline only incites anger, hate and angst in the community. Having a look at the e-comments within that article, every single one was negative towards Islam or Muslims in Australia. It was a complete attack on them, and the only reason the publisher did this was because they know that it would drive clicks. We are starting to see this happen more and more. The fact of the matter is, technically, it is kind of true, if you have a look to see how they have done it: what they did was clump every single form of Christianity into one group, which equated to 52 per cent and then Islam is at 2.6 per cent. So they have been creative with the results from the census and misrepresented the actual findings of this article. This is becoming more and more common when they're fighting for audiences. This is something that I think needs to be considered seriously, and these publishers need to be held accountable for the damage they're doing to journalism in Australia.

Another area that I want to touch on is: publisher loyalty is on the decline, as well as brand loyalty, in Australia. People are becoming less loyal even in relationships—divorce is on the rise. But I think it's something that we're starting to see with publishers in particular. No longer do you sit down and read a particular newspaper or, every morning, logon to a particular website. Because everyone picks up their mobile device in the morning and looks to see what people are actually reading on Facebook or Google, they're being suggested articles based on their online behaviours. That in itself is another topic that we can also touch on, because publishers are now starting to recommend articles based on online behaviours. But my online behaviours don't really represent the kind of content that I want to seek out online. I'll park that one as well.

Another area that I want to touch on is: I think it's up to the government. I think that you play the most crucial role in fostering a culture that encourages public interest journalism. I've got numerous friends who are journalists, and they are restricted in particular areas of content that they want to write on. You all hear the stories of journalists who come out of university and are passionate about writing the big-hitting stories, but then they start at a publisher and they're not allowed to write anything. This is where I really appreciate the opportunity to talk today. As I said, I am a consumer specialist, and one of my areas is to track how people are consuming content online and what devices they are actually visiting from.

ACTING CHAIR: Thank you to all of you. I'm learning so many new words for my lexicon today with 'freemium', 'programmatic' and 'click farms'. I might start with you Mr Whitfield. Let's talk about this programmatic advertising. What does it mean for the news media industry? I ask that because obviously our focus is on public interest journalism. What I'm interested in is: do the problems with programmatic advertising underscore the strength of the traditional media in that sense?

Mr Whitfield : That is a very good question. Maybe a good way to try to understand that is to just dig a little bit deeper into programmatic and understand how Australia is evolving in its programmatic journey in comparison to overseas countries and the growth of programmatic in terms of where the dollars are and the alignment between programmatic and the media. If I can touch on those points, that might help. I can give you a really quick analogy about programmatic, if you like. Is that okay?


Mr Whitfield : Do you remember the movie Ferris Bueller's Day Off?


Mr Whitfield : There was a scene where they go to the Chicago exchange—

Senator XENOPHON: That movie always reminds me of Sam Dastyari!

Mr Whitfield : They go to the Chicago exchange, and they're buying and selling and yelling and screaming on the floor. The right hand indicates whether you're buying or selling and the left hand indicates how many units you want to buy—so whether it's frozen orange juice or pork belly. These days, if you go to the Chicago exchange, it's whisper quiet because it's computers buying and computers selling stocks at high-volume trading. The same thing has happened in media over the last 20 years. If you wanted to go and buy the home page of the Sydney Morning Herald 20 years ago, you'd jump on the phone and ask: 'Can I go and buy it? Yes or no? What's the rate? Is it available?' Now, it's whisper quiet as two computers buy and sell.

They trade inventory, which is what we call it, online. Around 30 per cent of the Australian inventory is traded programmatically. The top part will always be done by people buying and selling media. They say, 'I want the home page of the Sydney Morning Herald; I'll just go and buy that.' Programmatic, generally, is where you're buying an audience—where you're buying people who are interested in news, sports, weather, travel or finance. It's certainly on the rise. In this market here, we find that most of the programmatic spend is currently domiciled in Australia. So most programmatic dollars are bought by News Corp, Fairfax Media, Yahoo!, MCN and Mi9—so the top five programmatic media companies.

There is a minority, but it is still in high double digits, of programmatic media which goes overseas. That could be going anywhere. There are 264 different sellers of this media globally. We were alluding to this earlier. When you buy media, you buy an eyeball—you buying a person programmatically. You do not know which country they are from, you do not know the website they are visiting and it is very hard to generate the audience. We spoke about brand safety. That could be on one of the three main categories for brand safety, which is terrorism, illegal downloads and adult content. All of those are available to buy programmatically and we need to stay away from them to keep brands safe.

So there is a very strong link between the growth and the reliability of Australian journalists and the digital and programmatic media as that grows—more data, better targeting and more sophistication to really find a person who is in the market for a holiday or the next credit card or the next home loan, at the right time and in the right mood. That is the role of programmatic. We summarise it as: right user, right time, right message. Does that make sense?

ACTING CHAIR: Yes. I am digesting it.

Miss Schulze : The trouble is that it is lower yielding for the publishers. That is the trouble. It is a great solution for advertisers and all the rest, but, from a publisher perspective, because of what Tim was saying before about ad tech, there are all the different funnels that the messaging goes through. There are overlays of so many bits of data to find the right person who does want to go on that holiday. By the time it ends up at the publisher, there is hardly any money left and it is certainly not enough to compensate what is being lost from print and it is further eroding the overall margins for publishers in the digital media as well.

ACTING CHAIR: How does programmatic deal with premium audiences? What sort of premium would the front page of a trusted news site look like?

Mr Whitfield : Maybe a good way to look at this would be by price. Programmatically, generally we have three tiers of inventory. The first tier might be wanting to buy specifically just the home page of a large premium website. I am not picking on TheSydney Morning Herald here for any particular reason; it is just the first website that comes to mind. This is not sharing their rate cut. Hypothetically, the price might be around $20 CPM. CPM stands for 'cost per thousand'. That means that, for every thousand visitors that go to TheSydney Morning Herald homepage, you pay $20. Then, if you want to look somewhere deeper inside their website—news vertical, travel et cetera—you might go down to $8. And then you could soak up programmatically just all the remnant inventory—things that they could not sell by having a sales force. One of the other things about programmatic is that, because it is a computer selling it, you do not need to employ as many people. There are fewer taxpaying journalists out there or sales people out there in programmatic. That might go for $2. The sales funnel would be $20 down to $8 and down to $2. That would be a very typically styled sales funnel: premium to vertical and then to remnant inventory inside programmatic.

ACTING CHAIR: With something like Google and Facebook, do you think they provide advertisers and marketers with the right tools to target the right audiences properly?

Mr Whitfield : Absolutely. Facebook has two very key products in their market. One is called Custom Audience, CA, and the other one is called FBX. With Custom Audience, every time you click on 'like' or 'share' as a consumer, or you comment, you add your own most valuable bit of information, your data, to their database. They can then use that information to target to you a message you would be interested in: travel, a holiday—a vertical. You might have clicked on a friend's picture in Phuket, and they will use that to put you in the category of someone who is interested in going to Phuket and they will target that to you. They are very good at creating very customised databases.

Senator XENOPHON: Can I just ask a few questions in relation to that? You said in your opening statement, Mr Whitfield, that about 10 to 20 per cent of that digital spend goes back to journalism. How do you work that out? It seems to me to be a lot less than that, or are you saying that that that goes to traditional media—The Sydney Morning Heralds, the News Corp websites? Is that what you meant?

Mr Whitfield : Yes. Let me try to elaborate on that. Apologies if I have not made that clear. What I meant to say is: assume that Brand X have a $100,000 campaign and they would hope that the majority of that money would go to media to try to present a—

Senator XENOPHON: It's a very reliable brand, Brand X!

Mr Whitfield : Then, when they have got that $100,000, first of all they have to pay 10 different technical companies in order to be able to make that one ad appear on your phone or on your computer. There are a number of wheels working in the background to make that overall mechanism work. The amount of money that actually goes to the publisher is the minority. It is closer to 40 per cent. But that number is actually further eroded by things such as viewability, whether the ad is seen or not seen; human or non-human traffic; and whether it is on a brand-safe or a non-brand-safe website. The total sum of all of those—viewability at the moment is roughly around 50 per cent in market, so half the ads are not seen. And this market is moving towards trading only on viewable ads. So, if you go to a website and hit 'page down' 10 times and your ad is at the very bottom of the page, you don't want to pay for it. If you are driving down a freeway and there is a billboard and the billboard is facing into the forest, you don't want to pay for it. About half the ads are not viewable on the internet, so that 40 per cent has an effective value now of 20 per cent. Then ad fraud in this market and brand safety concerns represent about 4.5 per cent.

Senator XENOPHON: What do you mean by ad fraud and brand safety?

Mr Whitfield : Ad fraud is the overall term for non-human or click farm traffic. There are 11 subcategories inside that, but click farms are certainly one of them—data centre traffic, spiders, robots. These are all terminologies for computers that are automatically downloading ads. There are some things that the Senate could recommend which are some very simple methodologies to eliminate this. If, for example, we have got click farms, they all have to operate under certain IP addresses, certain constraints. We are able to identify those fairly easily. The one recommendation to the Senate would be to put forward an open list, a black list, of known click farms, known robots and known spiders.

Senator XENOPHON: I am transfixed by all this!

Mr Whitfield : Sorry.

Senator XENOPHON: Why are you apologising? It takes a lot to transfix senators on anything!

ACTING CHAIR: I want to know who comes up with these terms!

Miss S c hulze : Advertising has just changed so much in a given space.

Senator XENOPHON: I am just trying to understand this from a public policy point of view, because this is, in a sense, one of the things that is driving revenue away from traditional media. It is hurting public interest journalism. It is hurting news content. In a sense, it can cannibalise off the existing media outlets. It is like a double whammy. If you have a blacklist of these click farms, presumably they will keep changing their IP addresses but presumably you can work out an algorithm to identify the click farm. Is that right?

Mr Whitfield : Spot on. That is exactly right. It would be very simple to build on the good work that some of the Australian councils have already put together. There is the IAB, the Interactive Advertising Bureau. Some of the other councils that people are here from today have done some work in identifying these click farms. At the moment, the difference is that these are just best efforts of individual companies; there is no gravitas associated with it, because the government may not have been aware, obviously—without any criticism—and therefore not put them on a blacklist. But, if it was endorsed and it was said that these are known click farms and known robots and spiders, it would represent a reinvestment into the community of around—rough numbers—$200 million, which is obviously a very—

Senator XENOPHON: What do you mean by a 'reinvestment'? It means that advertisers will not be blowing $200 million.'

Mr Whitfield : And that money would be reinvested back into good-quality advertising, which would include Facebooks and Googles but also include the News, Fairfax, Yahoo, MSN et cetera.

ACTING CHAIR: Where do you come up with $200 million?

Mr Whitfield : My job is to look at the 197 clients in our business. I have a data centre of about six billion rows of data from GroupM. When we look at that data at an aggregate level, we have identified that the number we are seeing from our sample size that around 4.7 per cent of overall numbers of ads shown fall into these black lists. Our job is to manually steer away from them. By identifying them and categorising them as wrongdoers, all advertisers can get behind this initiative and therefore reinvest that money towards good advertising that would normally be wasted.

ACTING CHAIR: Doesn't that show that the Googles and Facebooks do not provide the right tools for advertising, that through this programmatic system the content is ending up on these wrong sites?

Mr Whitfield : To some degree, yes, but it is not based on any lack of effort from anyone's part; it's just lack of direction—being able to focus beyond a singular vision. I think everyone is working on it independently.

Senator XENOPHON: Given that Google and Facebook have changed their metrics a number of times, and we have heard that from a previous witness, to what extent can they deal with these issues to work out what real people are looking at compared to click farms or computers opening up these ad links, which inflate their advertising figures? If they had the will to do so, could they be part of the solution? In other words, have Google and Facebook got the capacity to deal with these issues with some urgency and to deal with it effectively?

Mr Whitfield : I think all of the publishers, including Google and Facebook, have the ability to do so. I think that everybody needs to have a seat at the table in order to try and find a solution.

Senator XENOPHON: But they have chosen not to do so—haven't they?

Mr Whitfield : No, I don't think I can say that. I don't feel that anyone has been any better or any worse than anyone else. I don't think this is a reflection of any malice or anyone being disingenuous. The landscape is changing very quickly here and everybody is struggling to keep up. I will try and put that into perspective—and I will finish on this and then hand over to my colleagues. I am actually an engineer from Macquarie uni and when I got into this space 17 or 18 years ago, there were I think three or four different pieces of technology in play. Now, in the current version of the mediascape that you would have heard of before, there are upwards of 5,000 pieces of technology in play. That proliferation of technology that is exploding becomes very hard to try and keep up with.

Senator XENOPHON: Perhaps I might step back a bit. I am not suggesting anyone is doing this deliberately. But Google and Facebook or, indeed, other organisations do have the wherewithal to be able to tackle this head-on if they had the will to do so or if they were directed to do so—is that right?

Ms Sangster : There is one additional point I think we need to make here. We have to look at the advertisers. Programmatic is quite a new approach to advertising, so it is in its infancy. What we have seen probably in the last year is a lot of pushback because I don't think the advertisers or the marketers were aware that their advertising either wasn't appearing or was appearing in the wrong place. Now, you are seeing the organisations—your Procter & Gambles et cetera—stand up and say, 'Hold on a second, we've got to make sure that our advertising dollars are being seen, that we're not being put next to brands that don't align with our values' et cetera. They are playing a role in correcting the market and they shouldn't be spending their advertising dollars on marketing or advertising that can't be seen. So I'm not 100 per cent sure it needs to be a regulated outcome. No company should be spending advertising dollars if they don't know where those dollars are ending up. I think that's an important point to make.

Mrs Almeida : Going back to Google and Facebook, my understanding is that both organisations are looking at ways to combat—'like' farms are like click farms, because obviously with campaigns on Facebook, the more likes they get then the more success they think they've achieved. I know that Facebook, maybe two or three years ago, were looking at ways to combat that. With regard to Google and fake news, I've seen something recently that they are working on an algorithm to come up with content that is deemed fake and they are putting that at the bottom of the search filter. I know both organisations are looking at combating these two different areas. I know I sound like I'm in the Facebook and Google camp, and in ways I am because I do see that they're a huge benefit to advertisers. Yes, I see that they take money away from publishers and everything, but I come from a consumer perspective and a brand perspective. These two platforms deliver huge audiences, and this is what the brands and the consumers want.

Touching on what we mentioned before with programmatic, a lot of programmatic is done on tracking people's online behaviours and then serving them content or ads that they think this person is in the market for. This can be incredibly useful or incredibly frustrating. Some companies are doing it really well, some companies are doing it really badly or really poorly. An example is: I recently purchased a holiday to Hawaii and then, the next day, I was served an ad to the exact same place that I'd just booked a lot cheaper. As a consumer, of course I was frustrated. As a research and analytics person, I thought, 'There are algorithms to prevent this, why aren't brands implementing it?'

There are a lot of organisations that are doing really good things, and there's obviously a lot of—one of the biggest challenges with the digital industry is we need to standardise so many different areas. I was part of the IAB measurement research council when they came up with the preferred measurement provider, which is Nielsen. The reason they did that was because there were about six different measurement providers in market, and any publisher would go to market stating the results from a measurement provider that they were deemed the best, so there had to be a standardisation for that. I see that there needs to be standardisation rolled out in many different areas, and programmatic is one of them because, as I said, some are doing it well and some are doing poorly.

Senator PATERSON: You have all worked either with or for advertisers, so I am interested in asking or seeking your views on some questions I asked of Darren Woolley on the previous panel, which some of you were in the room for and some of you weren't. I will briefly summarise it. Advertisers used to inadvertently fund journalism because that was the only way of reaching their market: you had to go through a newspaper or television station or a radio. Maybe advertisers felt good about the fact that they were supporting journalism, but that wasn't the purpose of why they were advertising through those means. Now they have other alternatives available that might be better suited to their business purposes. My question is: is it a role for government to ensure that the revenue that inadvertently funded journalism before continues to fund journalism in the future? Should government effectively put a tax on advertisers, whether it is through Facebook or through Google, in order to ensure that that revenue that used to be there remains there.

Ms Sangster : I will make a very brief comment on this. As Tim mentioned earlier about Facebook and Google, the reason a lot of advertisers have swung over there is because they have got products that are highly targeted and really do deliver to an audience. Advertisers can make quite a small spend but reach the people who are really going to buy their products. What has not happened in the media—they've been stuck with quite an old business model, which was, 'I'm going to take advertising and push that out to everybody', and they've been a little late to the game in understanding their audiences, investing in data, investing in all of that rich information that sits behind it that could allow them to do something quite similar with that, but maybe on a smaller scale.

I don't know if it's necessary that the government needs to start stepping in here, because some of it is a commercial reality that they need to be looking at new revenue streams and new ways to harness that audience so that they too can provide advertisers with deep information about their audience. There is that part to take into account too. I am not 100 per cent answering your question; it's just another lens that I think we need to look through.

Senator PATERSON: Sure.

Miss Schulze : To that point, News Corp has done a deal the Quantium, where they are selling the—

Ms Sangster : It's only just started, a year ago. If you think about Facebook, it's a digital platform that was digital from day one. They were collecting data from day one. I am not saying it is right or wrong, I am saying that you're not starting from the same starting point. Facebook has been doing this for however many years it has been doing it for. Coming in late to the game are the more traditional players, who are now trying to play catch-up and look at new ways of generating revenue. It's quite a hard thing to do, but they do need to do it; it's a commercial reality that they need to do it.

Miss Schulze : I would just raise what I said before about the Copyright Agency: there's copyright as an existing body of law; there's an existing independent body that oversees distribution payments to the authors of content. I just do not understand, personally, why the online world doesn't apply in copyright land. What is it that if someone in a library photocopies a story I wrote in The Australian 10 years ago I get two cents, but if someone puts it on Google, I get nothing.

Senator PATERSON: Funnily enough, I'm also a member of the Copyright Agency from a previous life, and occasionally I get payments. I guess the reason is because Google is directing traffic to the person who owns the copyright, for example, The Australian, and The Australian gets the benefit of that advertising revenue from Google directing that traffic to them. Google hasn't taken it from The Australian website and republished it on their own website in a way that's taken away that copyright from the original owner. There would be nothing to pay because they haven't reproduced it. When I photocopy a newspaper and I distribute it to my class if I'm a lecturer or some students in a class, I've taken it out of its original context. I've taken away the advertising around it. There's no way they can monetise it. You've broken the paywall, effectively.

Mr Whitfield : I would like to rephrase your question to whether there should be more of a level playing field when it comes to advertising. I just want to underpin the size or the quantum of the difference of the playing field. I did a little bit of research before I came here and I looked at the difference between how large social media channels, such as the ones you are thinking about, are working in Australia versus how a traditional media, such as Fairfax, works. I had a look at their numbers. Fairfax is a large company. In 2016 it generated, if my memory serves me correctly, about $1.3 billion and it employed circa 5,100 people. This generates a revenue per head of around $233,000 per person. Now some people at Fairfax will be earning way more than that, some people under that, but they have to generate a profit and generate good quality journalism based on that number.

If I look at the same ratio for that social media channel, it is my understanding that they generated in the vicinity of $700 million and have 70 employees; therefore, it has a revenue per head of $10 million. I think that underpins the difference between the two different ways that media is consumed and the two different ways, in the back end, that one can have much deeper pockets and can work a lot more tax effectively. The other way to look at that same thing is that if it was a level playing field, then that social media company wouldn't have 70 employees, it would have 3,000 employees all working here paying tax.

The other way to look at it, and the other pressure that senators should think about, is actually the NBN. I understand this is a step sideways, but please hear me out on this. In my previous role as a chief technology officer of one of these ad tech companies I had to set up four different data centres: Sydney, Singapore, Stockholm and Atlanta, Georgia. The price per gigabyte for these data centres was the same in three of those four places. All over the world, whether it is America, Europe or Asia, it was at that stage—it was a few years ago—$5 per gig. That same data to buy here in Sydney was $50 a gig; it was price prohibitive. It was simply because we just didn't have and still don't have the infrastructure in place at the moment to support fast internet. So of the 250 ad tech companies, 90-plus per cent of them are all domiciled in Singapore or overseas. The traffic has to go overseas to come back, so when you open your phone and you read content, all of that traffic from your phone goes overseas and comes back. If you happen to be travelling overseas and you find that your phone and your websites are working much faster, it's because the infrastructure works much better. One suggestion to the senators to help would be to allow Australian domiciled companies to have something, whether it be tax breaks or other incentives, to encourage them to have servers located in Australia—in Sydney, Melbourne, Perth—rather than having them go overseas, like Telstra, which is currently putting in more systems over in Singapore.

ACTING CHAIR: Mrs Almeida, going back to what you were talking about earlier, do you agree that the traditional media—TV, radio, news—are now in a kind of symbiotic relationship with the Googles and Facebooks of the world? Do you think it is simplistic to argue that the Australian media are simply competing with them? Do you know what I mean? Is it more symbiotic?

Mrs Almeida : I do not want to overcomplicate the answer here, but whenever you look at something like this you have to look at the different generations, because they are acting very, very differently. However, you also have to look at the generational shift, because although predominantly online is, say, 50 and below, it is starting to infiltrate to the older generation, and they are becoming a lot more reliant on online.

In relation to whether they are working side by side, there is a constant battle that seems to be playing out—and I do not know whether these guys will back me up on this. Professor Mark Ritson from Melbourne is constantly questioning the value of digital measurement and the credibility of it. I have worked in TV measurement and I have worked in digital measurement, print and outdoor. I have worked across all the different areas. Although digital is the most accountable and the most recordable, there are still some holes that need to be filled in. However, when you look at the other media, the measurement methodologies behind that are very questionable and never seem to really get questioned.

One thing I am looking at is that each medium has its place and they are all starting to work together. So, what we are seeing is that when people are watching TV they are picking up their mobile phone during the ad break and are on social media, or they are watching the program and are tweeting or snapchatting or whatever it is that they are doing on their mobile device. So, we are seeing that the two mediums, particularly TV and digital, are working very closely together. Print is where I see the biggest kind of breakaway from digital, because it is very rare to find a segment of people who do both. And if they do both, it is just on the weekends, when they might buy a newspaper. But predominantly from Monday to Friday a lot of people are digital. And when you look at the hourly access data to particular new websites you see that the spike happens just before work and then dips and then it happens again at lunchtime and then it dips and then it peaks again during the commute home.

So, to answer your question in a longwinded way, some media work hand in hand with social and the likes of Google. There are some, such as print, which I see are struggling to make that connection. As I said, the measurement behind each different medium needs to be taken into consideration. I think Mr Woolley touched on that before—that there was a disparity between the different metrics. One of the complications with agencies when they are buying a cross-media campaign is that they are not comparing like with like when it comes to measurement. So, that is something that overcomplicates it as well.

Senator XENOPHON: I am just thinking about what Marshall McLuhan said all those years ago, that the medium is the message. What do you say now? The message is the medium?

Mr Whitfield : The platform is the medium.

Senator XENOPHON: Yes, the platform is the medium. I want to go back to what was discussed and perhaps wrap this up by asking all of you to take this question on notice—some of the matters you have raised about the 'click farms'. For some reason I just think of lots of chickens in a shed somewhere! But obviously these click farms need a pesticide or some sort of herbicide in order to be dealt with. In short summary—and perhaps I could invite all of you to put an answer to this in writing, should you wish to do so—there are several fundamental reforms that need to be done, because even these changes would make a difference in terms of ensuring that advertising dollars are going where they are meant to be going rather than being dissipated, and that in turn has an indirect effect on journalism in this country. So, what are the four or five key reforms that you think need to be made from a legislative point of view to deal with these things head on? And are other jurisdictions dealing with these things effectively, or not?

Mr Whitfield : Thank you very much for the question. I think if it came down to a couple of key bullet points I would say, in no particular order, that we would certainly be ahead of the world should we decide to take a proactive stance on eliminating things such as click farms and robotic activity from our media, and the other thing is that we could try to eliminate ad fraud, which is a way to try to buy 'likes'—'like farms'—or buy not only clicks but views of advertising. It is currently 100 per cent legal to go and create a website and buy traffic on that website and create fake audiences.

Senator XENOPHON: In terms of the proactive stance to eliminate click farms and robotic activity, you are saying that it can be done with algorithms and by having a regulatory approach?

Mr Whitfield : Yes.

Senator XENOPHON: And in terms of eliminating ad fraud, at the moment there is nothing illegal about setting up a site in order to enable clicking on to something?

Mr Whitfield : Correct. If you wanted to you could, for the price of $100, go and create a website on how to cook mac and cheese and then go and buy stacks of viewership of that particular website of you cooking mac and cheese and then you could go and sell tens of thousands of dollars worth of media on that website, and it would be 100 per cent legal, unfortunately.

Senator XENOPHON: So, what do you do? You have a particular product that you want to sell, you set up the website, you buy the activity, you buy friends or likes or eyeballs—

Mr Whitfield : Yes. There are companies out there that will sell you traffic to your website. Let's say hypothetically that those companies are selling it at 1c per visit to your website, but you are selling that activity on your website at, say, $20. You are making a massive profit, and you are just ripping off valid activity in Australia.

Senator XENOPHON: But this is quite different from when people boost Facebook 'likes'.

Mr Whitfield : Yes, they are two different issues.

Senator XENOPHON: And the difference there, just for the purposes of putting it on the record for the Hansard, is that Facebook is actually getting it out to genuine people—

Mr Whitfield : Yes, 100 per cent. This is not a Facebook—

Senator XENOPHON: That is right. That is a legitimate source of revenue for Facebook; we don't want to tackle that.

Mr Whitfield : No.

Senator XENOPHON: But you are saying that people actually set up these unofficial—

Mr Whitfield : It is a big business, and I believe from some anecdotal stories I have had from New York that people are out there collecting multimillion-dollar salaries from setting up fake websites, and I think it is something that could be dealt with through education and through a regulatory committee.

Senator XENOPHON: Thank you. Sorry: given my age, I'm not as familiar with these things as you youngsters are! Does that mean, though, that the mischief is that they are not real eyeballs?

Mr Whitfield : Correct.

Senator XENOPHON: So, that is what it boils down to. If it is going to real people, that is at least something.

Mr Whitfield : Correct. They are not real eyeballs insofar as they are not people who naturally want to consume that content and buy that flight to Phuket or buy that hamburger or buy that credit card. They are people who have been forced or coerced, either through the buying of that traffic or through some other means, to view that website. You might have heard of things like pop-unders or pop-overs and these types of technologies. There are very simple, tangible ways forward that we can take to say that this is a bad activity and be able to take a proactive stance on cutting it out from the market.

Senator XENOPHON: So, we would be world leaders if we could actually tackle those two things?

Mr Whitfield : In my professional opinion I believe so, yes.

Senator XENOPHON: So, taking a stance on eliminating the click farms and robotic activity and eliminating ad fraud—

Mr Whitfield : Correct.

Senator XENOPHON: And you are saying that if there is political will and a will to enforce that then legislatively we could actually make a real difference?

Mr Whitfield : That is my opinion, correct.

Senator XENOPHON: In terms of the $6.8 billion spent on ad spend in Australia, what impact in dollar terms—again, I think this might be a stab in the dark, but can you give me a ballpark figure, your informed, educated guess, and I ask others on the panel to consider this, on what difference that makes in terms of click farms, robotic activity and ad fraud? How big are they, do you think?

Mr Whitfield : I did a back-of-the-envelope calculation with this. I will give you my best guess.

Senator XENOPHON: We had an NBN based on that, so go ahead!

Mr Whitfield : I would say that it was north of $200 million for Australia.

Senator XENOPHON: That is for both?

Mr Whitfield : Correct.

Senator XENOPHON: Well, that would still make an appreciable difference.

Mr Whitfield : I believe so, yes.

ACTING CHAIR: It could be more, obviously.

Mr Whitfield : Absolutely. My understanding is based on percentages, extrapolated out for the entire marketplace, and understanding what percentage and how that is changing. But it changes over time, by region et cetera. My initial estimations put it north of $200 million.

ACTING CHAIR: Just to be clear, you are calling on there to be government regulation of advertising for the advertising industry in respect to this and fraud?

Mr Whitfield : Sorry if I was not clear. I feel that there is a lot of work that is happening already and is working well inside the organisation. There are a lot of committees where we should try to do this. What I am saying is that I believe that we could amp that up and we could do a lot better with tighter alignment between what the industry bodies are already working on in Australia—the Internet Advertising Bureau, for example—and tighter alignment between that through to what the government is doing. I think that with government endorsement and backing, we could be a world leader in eliminating ad fraud and click farms.

ACTING CHAIR: Would anyone else like to comment on that idea?

Ms Sangster : I don't know how you would regulate that. The fact that they exist now—they shouldn't exist; they do exist. I truly believe that market forces will play a role in solving the ad fraud problem, because, whether it is an agency or whether it is a brand, neither should be buying media when they don't understand what that media is. If they are, they have no business doing what they are doing. I do think you will find that market forces will find the swing back. Brands will say, 'I don't want to buy media unless I understand what that media is.' It will swing back to high-quality media that is safe media that people want to be aligned to and want to be alongside. I think we will see a bit of a swing back, and we are already seeing brands saying that they are pulling their media spend from certain places because they don't believe either that they are being seen or that they are being aligned alongside content that they want to be aligned to. I think it is too early to jump in now and say we need regulation when this is something that has only been around, or at the top of the agenda, for probably a year. I think it is too soon.

I think it might be a little bit simplistic as well to think that all of that money—if we did solve that problem of ad fraud—goes back into the right media, because it may be that all of that money goes into other digital platforms. Advertisers will spend money with any platform or with any media that delivers the result to them. The reason that they are spending their money with the Facebooks, the Googles et cetera at the moment is because they have the products that allow them to target their audiences. Advertisers will continue to spend where they think they are going to get the results. Part of it has to be that the traditional media is providing new product services et cetera that allow advertisers to reach their audiences in different ways. I think it might be a little bit simplistic to think that we can tackle both of these with regulation. I think it might be a bit of 'market forces will sort it out'.

Miss Schulze : In terms of market forces, with all of these issues around digital, whether it is visibility or whatever, there seems to have been, since the start of this year, a lot of questioning around digital—'Is it working well? Are the ads going to the right places?'—because of what the computers are doing. We are starting to see that in our data as well. For April and May, there was no growth in digital ad spend from a year-on-year perspective. This has been a huge change. I think it first happened in February. We looked at the data and, since 2009, there had never been a month that there had been negative growth in digital ad spend. That just makes it harder for the news media publishers though, because they trying to recoup some of what they have lost from print through digital, and now digital is starting to plateau. It is further compounding the issue for them.

ACTING CHAIR: Has anyone done any investigative work on the link between the programmatic providers and the click farms?

Ms Sangster : In what way?

ACTING CHAIR: To see how we can resolve this kind of ad fraud.

Mrs Almeida : My suggestion would be to talk to the likes of Google and Facebook—in particular Facebook—because of the like farms that they came across a couple of years ago. It is slowly coming back to me that they put an algorithm together where they noticed that a lot of brands were purchasing for like farms and all the likes were coming from India when a lot of the brands weren't in that region. These companies are already putting systems in place to prevent like farms, so I would recommend, if it is possible, to talk to those organisations.

Senator XENOPHON: On notice: I invite the panel to come up with any specific recommendations. I note Ms Sangster's concerns in relation to that. That's fair enough. I think it's important to have robust discussion of the legislative reforms that are needed there. Could you also consider, perhaps on notice, that one argument that's been put is that, because Google and Facebook control the data—there was a cover story in The Economist back on 6 May talking about this—do you need to have something almost like an access regime so people can access the data? News organisations large and small tell me that they are at a disadvantage in not being able to access the specific data that Google and Facebook have access to. It seems as though they have a monopoly over that information. Could you consider that in the context of a supplementary submission and get back to us within a couple of weeks? That would be terrific.

Miss Schulze : As per the ACCC access regime?

Senator XENOPHON: Yes. It has been used for railway tracks and telecommunications. Can it be used for data?

ACTING CHAIR: I thank all of you for all of your evidence today.