Google and Facebook have an adverse impact on local communities by leading to the demise of local journalism and by using their market dominance to skew the market against local businesses, found a report by the American Economic Liberties Project (AELP). The paper points out that thousands of local news outlets have closed down across the US in the past decade. Google and Facebook have been unable to fill this vacuum and instead have populated it with misinformation and misleading commentary.

The paper, authored by AELP’s director for state and local policy Pat Garofalo, argues that both tech giants have a debilitating effect on local communities by undermining the people’s ability to access good local information, and instead provides them with commentary and conspiracy.

Decline of local journalism and news industry

The report highlighted the contribution of local papers in local community and decisions. For instance, a small town in Massachusetts, where local papers have shut down, was to vote on a proposal for floating bonds to raise funds for two schools. However, commenters on a local Facebook group spread misinformation about the proposal. Simultaneously, a local committee funded by a local mall ran targeted advertisements against the initiative. The proposal was ultimately voted down. The report noted that dedicated local news outlet could have been able to provide accurate information on the matter, instead of leaving people with no information but propaganda on social media platforms. 

  • The lack of local news coverage has many adverse impacts for local governance in general. For instance, AELP referred to a Brookings report, which observed that the lack of local news coverage has led to higher borrowing costs for municipalities trying to raise money. The report had said that in the absence of local news, officials would be less likely to handle public money properly, hence investors demanded higher interest rates. Simultaneously, the researchers had noted that local newspapers and alternative information sources such as Facebook are not substitutable when it came to information on local governance.

Both companies have cornered advertisement market: The AELP report notes that Google and Facebook have monopolised the digital advertisement market, taking over the revenue that used to support the journalism ecosystem. It said Google and Facebook together account for 60% of digital ad revenue and Amazon and a few other companies account for 15%. This leave only 25% of available ad revenue for the news outlets.

Google eats into revenue of news websites with ‘snippets’: The report observes that Google is also a news aggregator through Google News and Google Discover. Google provides users with snippets of articles on search queries. This leads to users never having to visit the websites, thereby leading to dropped traffic and ad revenues.

Facebook undermines news industry with fake news: Facebook, noted the report, serves as breeding ground for local conspiracies. It took the example of a town in Idaho, where a hoax was spread that Syrian refugees committed a rape. However, the town didn’t even have any Syrian refugees.

Search algorithm puts local businesses at disadvantage

Google searches lead to fraudulent businesses: Google has replaced local “yellow pages” directories for people trying to find businesses. The company’s local search allows residents to find local businesses. However, Google ends up hurting the local businesses by allowing scammers to infiltrate the listings.

  • It took the example of a locksmith in Florida, whose name was stolen by scammers on Google pretending to be him. The scammers would then charge customers five or six times the normal amount. The Wall Street Journal in 2019 had reported that Google profits from millions of fake businesses across industries that are listed on Google maps.

Google takes advantage of poor-quality results: In an attempt to avoid the effects of fraudulent listings, businesses pay Google for ads. The aforementioned Florida locksmith had reportedly paid USD 115,000 on ads between 2008 and 2015.

Google’s search dominance allows it to exclude information from competitors: The report noted that though there are competitors such as Yelp and TripAdvisor that can offer credible local information, Google will often exclude them in favour of its own listings on Google Maps or search that may be fraudulent or of inferior quality.

Report suggests structural changes to companies’ business models

  • More antitrust enforcement: AELP suggested that policymakers at both Federal and local levels make changes to rules and laws that currently enable Google and Facebook’s business models. It said Google could be made to delink its general search business with mapping and local reviews. It also called for the reversal of merger of Google and DoubleClick, which could return competition to the advertisement industry. US lawmakers and enforcement agencies are currently looking into the matter. The subject was also a major topic of discussion during the deposition of Google CEO Sundar Pichai before an antitrust committee hearing in July.
  • Make companies liable for content: The report suggested that removal of protection from liability as prescribed under the US’ Telecommunications Act. Section 230 of the act allows social media companies to not be held liable for any illegal content posted on them. This would, the report said, incentivise a form of advertising based on buiilding trust with users rather than on “clickbait and sensationalism”.