From massive layoffs to shuttered news outlets, it’s clear that the Canadian media sector is facing an acute viability crisis, stemming from the steady erosion of its traditional business model. Underlying this palpable upheaval is a second, more insidious crisis – one involving the long-term health of our public discourse and ultimately, of our democracy. It is a crisis of confidence in journalism itself, triggered by the decline of reliable local news, and the corresponding surge of misinformation and disinformation across all digital platforms.
At the root of these dual crises is the meteoric rise of American big tech and, more specifically, its near-total stranglehold on the digital advertising market. The good news is that while the monopolistic power vested in the hands of the Googles and Metas of this world may seem daunting, there are concrete policy measures that we can take to curb its most damaging impacts on Canadian media and public discourse.
Closing the loophole
According to Close the Loophole!, a report originally commissioned by Friends of Canadian Media in 2017, and updated in 2024, Canadian digital advertising spending has risen from an inconsequential amount to well over 14.2 billion Canadian dollars1 annually over the past 25 years.2 In that same time period, advertising in traditional Canadian media, such as television and radio, has stalled across the board. In newspapers, it has virtually collapsed.
And the results have been catastrophic. According to a joint study from Toronto Metropolitan University and the University of British Columbia, 40 daily newspapers, 400 community newspapers, 42 radio stations and 11 television stations have disappeared across Canada since 2008.3 These numbers suggest that the news deserts that we have seen in print media, particularly at the local level, are now starting to spread to broadcast news. At this critical juncture in the history of our media sector, it is vital that the Canadian Income Tax Act evolve to meet the moment, much as it has in the past.
Historically, Canadian tax law allowed businesses to receive tax deductions on their advertising expenses, which redounded to the benefit of the Canadian media organisations who published or broadcast these advertisements. But in the 1960s and 1970s, a growing number of Canadian companies began purchasing ads in American newspapers and magazines and on US TV border stations, in a bid to reach American consumers. Canadian media suffered significant losses in revenue, prompting the government to act. Parliament introduced targeted amendments to the Income Tax Act, which limited the deductibility of advertising expenses on foreign newspapers and broadcasters. Having been provided with a material incentive to prioritise Canadian media outlets, domestic businesses followed suit and started spending their advertising dollars at home once again.
Programmatic advertising has been a boon for publishers of harmful content that historically would not have benefited from advertising dollars
In the 1990s, the rise of the internet dramatically upended this temporary status quo. But the policies of the Canada Revenue Agency (CRA) on the deductibility of advertising expenses have stubbornly remained the same. Since 1996, the CRA has permitted full tax deductibility for Canadian advertising expenses on foreign internet-delivered media, relying on outdated definitions of ‘newspapers’ and ‘broadcasting’, as well as historical case law dating as far back as 1935.4 By 2022, 92 per cent of annual digital advertising spending in Canada was going to foreign-owned big tech companies, amounting to over 13 billion dollars a year.5
It is imperative that we close this loophole in federal tax law so that this money may be redirected towards Canadian news, programming and jobs. The Senate came to this very conclusion when it studied the issue in 2018,6 as did the House of Commons Finance Committee, in its recommendations to the government ahead of the 2024 federal budget.7
To that end, Friends of Canadian Media is currently working on proposed amendments to the Income Tax Act that will incentivise Canadian companies to support domestic media publishers. As Canada continues to face threats from south of the border, it is more important than ever that our politicians stand up for our national interests, especially ones as essential as the Canadian media ecosystem.
Keeping ad tech in check
The pernicious effects of American big tech’s stranglehold on digital advertising don’t stop there. More than simply draining Canadian media organisations of much-needed revenues, companies such as Google and Meta are actively funding the creation of harmful content online – the type of content that corrodes our civil discourse and undermines credible and reliable journalism. They do this by selling the digital advertising space that surrounds it, oftentimes without the knowledge or consent of the advertisers themselves, including well-known brands that enjoy the trust and confidence of millions of Canadians.
According to Oberlo, Google generated roughly 307 billion US dollars in digital advertising revenue in 2023 alone, with nearly 237.86 billion dollars (or 77.4 per cent) of that money coming from digital advertising revenue (see Figure 1).8 Meanwhile, Statista reports that Meta earned 134 billion dollars in 2023, with digital advertising accounting for 98 per cent of that amount.9 The overwhelming conclusion is that, while we may think of these companies as search engines or social media and video sharing platforms, they have in effect become the world’s biggest advertising companies. And they have cornered this market by showing virtually no compunction about whom they do business with, much to the chagrin of legitimate brands who find themselves unwittingly financing dubious online actors through no fault of their own.
Figure 1: Google worldwide advertising revenue, 2013-2023. Source: Statista
For example, in the fall of 2023, the marketing department of dating empire Match discovered that their ads were appearing, as intended, on Facebook and Instagram. The problem was, they were appearing alongside disturbing content, depicting provocatively dressed young girls, and even women being murdered. Match CEO Bernard Kim reached out to Mark Zuckerberg directly, saying ‘Meta is placing ads adjacent to offensive, obscene —and potentially illegal—content, including sexualization of minors and gender-based violence…. Our ads are being serviced to your users viewing violent and predatory content’.10 Zuckerberg offered no response.
Another concerning example is the case of Toronto 99, a website that purports to provide ‘independent news opinion’ but is in fact run by Mark Slapinski, a right-wing conspiracy theorist who, according to an extensive ProPublica investigation, previously ran the Conservative Beaver – a website that was shut down amidst suspected threats of legal action. As ProPublica concluded in its report, ‘Google simply allowed Slapinski to start a new site and keep earning money. It’s the equivalent of taking away an unsafe driver’s car instead of their license’.11 As a result, reputable brands such as Porter Airlines may now find their advertisements posted alongside Toronto 99 content.
All of this is possible thanks to a phenomenon called programmatic advertising, which now accounts for 84 per cent of all ads placed over the internet. An automated process that requires little to no human involvement, programmatic advertising works as follows: when a webpage or app loads, information about the ad space available for sale is collected, along with data about the user. This data is then sent to an ad exchange where advertisers of major brands such as Match or Porter Airlines place bids to show the user an ad based on the data that they have received about them. The top bidder wins and the ad loads onto the page or app. Money flows from the advertiser to the ad exchange, eventually making its way to the website or app publisher.
Due to the total anonymity it affords, programmatic advertising has been a boon for publishers of harmful content that historically would not have benefited from advertising dollars, nor the legitimacy that comes from being associated with trusted brands. Google and Meta maintain that they follow strict guidelines when it comes to ensuring brand safety on their platforms. Yet both companies have been shown to consistently violate the standards and practices they have purportedly put in place to ensure that digital ads aren’t placed around harmful content.
In this digital ad economy, it is nearly impossible for a brand to track every appearance of its ads across a platform’s billions of users. And currently, companies like Google and Meta are not required to provide advertisers with the necessary data to make informed decisions about where they place their advertisements. That’s why Friends of Canadian Media is calling for a regulatory framework that captures all digital platforms that sell advertising space, either directly or indirectly, and holds them to rigorous standards of transparency and accountability.
Like big tobacco and big pharma before them, big tech companies are causing clear and lasting harm as a direct result of their unfettered pursuit of profit at all costs. Thankfully, through strong, collective action, we can turn Google and Meta into the next Philip Morris and Purdue Pharma – high-flying corporate behemoths brought down to earth by common sense regulation. While it may not be easy, our government has the power – and, indeed, the obligation – to break big tech’s monopoly on digital advertising in Canada, and to enforce transparency and accountability standards that would stem the tide of toxic content on their platforms. Canadians deserve nothing less.
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