A Deep Dive Into Google, Facebook and Australian News

A scuba diver in silhouette against blue water looking up to the light.

A few weeks ago, the Australian Consumer and Competition Commission (ACCC) published draft legislation for a mandatory news media bargaining code and there has been quite a kerfuffle since.

The actual details are nuanced, complex, and boring, so rather than talk about them, nearly everyone is fixated on proxy issues that, while related, mostly miss the point. But, it means people can spend their time grinding their favourite axes instead, and that’s both easier and more fun.

Most commentary is like this, so it’s not a surprise.

I’ve rewritten this article a bunch of times, and decided not to bother posting it at least three times, but some people wanted to read a longer form version of my short rants about the situation, so I figured I might at well post it. If nothing else it means I’ll have receipts I can point to if it turns out I’m right.

This is a long read. It’s over 5500 words, so grab a coffee and strap yourself in as we explore the seedy sub-strata of this sordid saga.

Some Background Reading

The journalists talking about this issue in Australia are, largely, about as well informed about it as they are any other complex issue, which is to say not at all. This is also not a surprise, but the Gell-Mann Amnesia Effect is alive and well.

There are some journalists who cover this beat that know it better than others, but even they can’t track the details of what’s going on across the wide array of media, technology, politics, and business that are all wrapped up in this issue. An integrated view requires too much specialist knowledge, coupled with the ability to step back and view it as a whole, as well as the time to actually do that. There just aren’t that many people who are both good at this and also willing to accept journalist-level wages to write about it.

That’s why most of the coverage is he-said, she-said, view-from-nowhere pieces, or “who’s winning” horse race nonsense. They’re easy to write and easier still to churn out day after relentless day. I’ve not seen much that looks into the detail while keeping the context in mind and employing some good-old joined-up thinking.

If you want to understand this issue, or any complex issue for that matter, you’ll need to take in a range of information from multiple sources, viewed critically to adjust for the writer’s and outlet’s biases, and you’ll gradually build up a multi-faceted view of the whole complex thing. This is made extra hard in today’s media landscape because so very much of it is working to actively mislead you.

We have left the information age and entered the propaganda age.

Here are some things I’ve read on the issue that I think are worth your time and will help you to understand what I say here:

Some of what I think about this is probably wrong, too, and I can’t shake the feeling that I’m missing some important details that I should have noticed.

The Story So Far

The mediocre middle managers who run (and I use the term loosely) Australia’s incumbent media organisations have been doing what Australian managers usually do when they’re not busily awarding themselves inflated remuneration packages: lobbying the government for subsidies instead of figuring out how to run a profitable business.

This has been the case since at least the 1960s when The Lucky Country stated

Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.

Australia is one of the most concentrated media environments in the world. Since that report was published, Nine bought Fairfax, and NewsCorp shut a lot of papers down, so it’s only gotten more concentrated. Australia’s media is also very white and very racist.

These businesses are welded to the idea that the only way they can make money is by selling advertising. It’s a bit of an odd business decision when you look at the landscape they’ve been operating in for the past, oh, 25 years or so.

Globally, the traditional news business has been in decline ever since the Internet decoupled classified ads from news and lowered the barrier to entry for competitors. Newspapers were extremely slow to put their content online, even as blogging exploded as a thing. I remember because I was there, watching it happen and boggling at the incredibly poor strategic thinking in real time.

Blogs and AdWords Changed The World

An old mechanical typewriter

Google AdWords and blogs completely upended the market for all kinds of written media. People seem to have forgotten just how massive the change was from what came before it. Given AdWords was introduced in 2000, a lot of people don’t have direct experience of what it was like, so that partly explains the lack of knowledge.

Essentially, a huge number of people realized they could make money via advertising if they built an audience, and thanks to the Internet that became really easy to do. You didn’t need to build a huge printing plant to print anything, and you didn’t need a complex system of distribution to get your writing in front of your readers, you just put it online.

So that’s what people did, and a lot of them made quite a nice living out of it. An entirely new ecosystem sprang up around it. Suddenly, traditional (very profitable, and socially powerful) news media businesses had a huge amount of competition that didn’t exist before. And this is before you factor in the sheer volume of other Internet things that sprang up; Games, commercial websites, eCommerce; A huge number of things other than news that people might be paying attention to, and places an advertiser might want to put an ad or three.

Now, while younger folks don’t remember any of this, mostly because they hadn’t been born yet, the ancient white men who run the traditional news media businesses very much do remember, so keep that in mind for later on.

For a long time, the online advertising product was also vastly better than the offline version it replaced, both for buyers of ads, and consumers of ads. Commercial Search used to be called the Yellow Pages (remember them?) which was a physical book you paid to be in and was only updated once a year and you had to manually thumb through it to find anything. Now you just search and click and it’s much easier (though far from perfect, which we’ll get to later). You can buy ads for your tiny e-commerce business without once interacting with a high-pressure salesperson trying to pressure you into a bigger ad buy, and it’s cheaper to boot.

With all these new places to show people ads, that’s where the ad spend went. There’s still value in advertising in newspapers, just as there is in advertising on radio and TV, but people spend a lotmore time on the Internet (and Facebook and YouTube) now than they do reading newspapers. But that’s simply because people have always spent more time doing things other than reading newspapers.

You also have to remember that marketing people, by and large, aren’t very bright. They’ve been frothing about the death of television for many years. Radio still exists. Books still exist. It’s just that there are also new things for people to do that didn’t exist before. Computer games is a massive industry now, worth over USD 30 billion a year. Advertisers try to put ads where they think people will see them, so why would they continue to buy ads they think most people simply won’t see? All the time, apparently, because there are breathtaking levels of fraud in the digital ad market but, despite this fraud, online advertising does work, just not quite in the way stupid marketers believe it does. Stupid marketers still spend a lot of money on ads, because advertising works on them too.

The competitive response from the news media came late and wasn’t informed by any real strategy. It was purely reactionary, and when you do this you’re letting your strategy get defined by the people you’re competing with. There was no real situational awareness, little understanding of the shifting climatic patterns affecting the landscape, and thus no ability to see the forest for the trees.

That this approach would be an utter failure was obvious very early on, but the arrogant old people running things didn’t want to hear it and now we’ve got two decades of proof of how wrong they were. This has only deepened their resentment.

At any point they could have changed to a different business model that didn’t rely on an ever-dwindling source of advertising revenue to pay for news.

But they didn’t.

Why Advertising?

A city street at night with lots of illuminated billboards

In fact, for commercial operations, the news only exists as a way of getting eyeballs in front of the ads. A business sells things to make money, but they don’t sell access to news, they sell access to readers. With no news, there’d be no audience for the ads, and with no ads, there’d be no profits to pay to the owners of the news business.

Pure news, no ads, commercial services did (and still do) exist (behold the Bloomberg terminal) but they don’t get classified as news in the sense being used here.

There are plenty of non-news, entertainment publications that also contain ads, and there’s a thriving content industry that is all about trying to find something people actually want to look at so you can also slide an ad in there as well in the hope that you might convince people to buy something. Product placement in movies is a thing. Disney loves to sell merch. There’s a thriving right-wing grift machine that sells people overpriced, branded snake-oil to fund its unhinged rants.

There are also outlets that do nothing but ads, like The Trading Post and the aforementioned Yellow Pages. They’re mere shadows of their former selves now because that audience moved online to revolutionary new things like Craigslist and eBay that completely surprised the incumbents’ management despite plenty of warning.

The people in charge of managing these businesses in a competitive landscape made a bunch of strategic choices that were, objectively, bad. It’s easy to see this in hindsight, but a lot of it was pretty obvious at the time, if you were paying attention.

For example, the race-to-the-bottom, clickbait churnalism approach we saw from most outlets was pure reactionary tactics; there was no strategy worth speaking of. Dollar-per-ad was dropping (because relative reach was declining) so to maintain profits they tried to do more of the same with less: fewer journalists churning out more, shittier articles. Lower costs, bigger volumes, in an ever-faster Red Queen death spiral. Brilliant!

The people who made these decisions are the same people who think Google and Facebook should pay them for news because reasons.

ACCC Finally Succumbs

After years of lobbying by traditional media orgs (especially News Corp but also Ninefax) an ideologically aligned government has finally succumbed to pressure to Do Something. In keeping with the usual political approach (something must be done; this is something; therefore this must be done) a compliant ACCC has proposed a dog’s breakfast of laws to address a market failure it allowed to happen, and in a way that disproportionately favours people who are closely aligned to those with existing power.

I previously provided a quick, snarky summary of the bits of the proposed laws I found most objectionable, so check that out for more background.

In getting to this point, we’ve completely skipped over a discussion of the value of news and reporting as a public good and how that public good should be funded. We’ve also conveniently side-stepped a discussion of the market failure that has occurred under the regulator’s nose, why nothing was done until now, and how that market failure might be best addressed.

We haven’t even talked about what the market failure actually is. It’s just been assumed that Google and Facebook owe News Corp money because News has been yelling about it for so long. Being loud and obnoxious doesn’t make you right, though.

So let’s talk about it.

Market Failure

A partially demolished factory.

Let’s start with the market failure part, because that bit’s easier and it leads into the discussion about the value of news.

Remember that we’re talking about addressing a power imbalance so severe that we need to pass new laws to deal with it. Apparently all the existing competition laws have proved no match for the ingenuity and cunning of these digital platforms, despite the ACCC’s best efforts to address this budding market failure before it got this bad.

Right?

This does somewhat assume that the ACCC has taken an active role and didn’t just sit back passively letting a major market failure occur under its nose. Australia has a sad and all-too-recent history of regulators doing sweet fuck all until they have no other choice.

So what is this market failure? According to the ACCC, there is a “fundamental bargaining power imbalance between Australian news media businesses and major digital platforms” but I’ve yet to see an explanation for why this power imbalance is fundamental.

I would argue that it isn’t fundamental at all, but is more a function of how traditional news media businesses have decided to structure themselves despite ample opportunities to change their structure in response to changes in the competitive landscape over the past two decades.

By declaring the imbalance fundamental the ACCC is allowing the news businesses to claim their current lack of bargaining power is somehow completely unrelated to their relentlessly poor decision-making over the past couple of decades. That’s important, because for the free market enthusiasts a simple failure to compete in a market is no reason to be given government assistance, and you should be allowed to fail.

Nor, handily, is it the result of the actions—or lack thereof—by a regulator that now needs to clean up this mess that has mysteriously appeared out of nowhere with no warning whatsoever and that is most certainly not anybody’s fault.

What Market?

If we’re going to talk about a market failure, we need to be clear on what market we’re actually talking about. Are we talking about the market for news, or the market for advertising?

Google and Facebook don’t produce news and no one seems to be suggesting that they do.

Previous skirmishes in this global battle have focused on a somewhat more logically consistent approach based, essentially, on copyright law. Google was accused of capturing most of the value of other people’s work—without paying them for it—by providing extracts, summaries, or snippets of news as part of its linking to the content. This gets into some murky copyright territory about just how much of an original piece of content can be reproduced by other people and why.

Most jurisdictions recognise various fair use or fair dealing type exemptions to copying, but there is a case to be made, I think, of platforms pushing their luck in their quest to keep people inside the walled garden of their platforms. The longer you spend on Facebook, the more money Facebook makes, so they don’t want you to leave the walled garden and venture out onto the rest of the internet. We saw similar stuff in a previous age with AOL.

Google also tries to do this, but its approach varies by property. Search takes a more Yahoo! style homepage/portal approach and tries to just answer your question so you never look anywhere else. This works great for immediate short fact things like “what is the weather going to be today”, or “what are the lyrics to that WAP song?” (much to the chagrin of commercial weather and lyric database folks) but it doesn’t work well for full news articles.

For YouTube, though, Google uses the autoplay feature to try to give you something interesting to watch once you’ve finished whatever you originally went there to do. Again, this is to try to stop you leaving and doing something productive with your life instead of watching WhitePride Jimmy explain how the Jews are using 5G to give cows Ebola.

But neither platform is taking full copies of the news articles and republishing them in full on their own platforms or plagiarising the work of others so the copyright approach didn’t work that well in Spain or in France. Google simply stopped providing links and snippets of news there, and traffic to small providers (but no so much the large incumbents, interestingly) dropped a bit while Google kept printing ad money.

The Market Is Advertising

The actual market here isn’t for news, but for advertising.

Google and Facebook sell advertising inventory (space to put ads) on their platforms. That inventory only has value because people use Google and Facebook to do things, and one small part of the total set of things they do there is find, and perhaps read, news. Facebook lets people share things they find interesting, which could be news or it could be Nazi propaganda. Facebook doesn’t care, unless it has to by law, like in France and Germany. Google, similarly, is trying to help people find things they want to find, which could be news, or it could be detailed instructions on how to cure cancer with 5G.

The alleged market failure here is related to revenue from advertising, not news. That’s why the current sortie has avoided the whole copyright/plagiarism angle that didn’t work and is trying something closer to the real game here, which is about power and money.

The news businesses have been explicit about their plight: they aren’t making as much money as they want to. But they’re not claiming Google and Facebook are making money selling news. We essentially have news businesses complaining that they are unable to sell ads as effectively as Google and Facebook.

Okay. So?

Why should that mean that Google and Facebook have to give you money?

What We Have Here Is A Failure To Communicate

Google and Facebook don’t want to give money to anyone if they don’t have to because they’re corporations in a capitalist system. The news businesses are also corporations in a capitalist system (when they want to be) so they need to figure out some kind of exchange of value based on their relative bargaining position.

For a number of years, the news orgs have tried to negotiate with Google and Facebook and failed to get what they want because they have a terrible bargaining position. After comprehensively screwing up their business strategy for two decades, the news organisations don’t have the same leverage they used to have. Surprise!

However, the old white men who have been allowed to remain in charge, despite making one catastrophic strategic error after another, remember the better times quite keenly. They really would prefer to return to the days where they could just print money with classified ads and want these online upstarts to pay them a bunch of money because… why, exactly?

Well, now isn’t that an excellent question?

The Value of News

A closeup of a newspaper, folded in half

There is, in fact, not just one important question at the heart of this saga, but two:

  1. What is the value to Australia of news?
  2. What is the value to Australia of these specific news businesses?

These are very different questions, and the news businesses in question would very much prefer you to conflate them together as if they’re the same.

The ACCC asserts that “a strong and independent media landscape is essential to a well-functioning democracy” but doesn’t bother to explain why. Indeed, there isn’t anything in the code that explains what a strong and independent media landscape looks like, nor how this aim would be achieved by this legislation. It’s simply assumed that this idyllic state of affairs will magically spring into existence if additional money flows from Google and Facebook to this fairly small subset of Australian media businesses. More money, that is, than they have been able to get without government help.

By news here, people seem to mean journalism in its Fourth Estate sense; something that provides a check on the power of the other three Estates: the legislature, the judiciary, and the executive. The idea is that an independent entity should be able to draw people’s attention to issues that are important, and expose them to scrutiny. While these three branches of government are supposed to check each others’ power, in a democracy that power is supposed to be derived from a mandate from the masses (not some farcical aquatic ceremony). That mandate is granted by the consent of the governed, and ideally it should be informed consent, but that requires us to be informed somehow. News, journalism, is one of the ways that can happen.

But there’s nothing inherent in this idea that says the Fourth Estate has to be a newspaper full of ads. There are lots of places to get information from: books that we pay money to purchase; scholarly papers that the researchers pay to have published in journals (another problematic industry, but let’s not go there just now); pamphlets people leave in our letterbox; blogs run by people as a hobby, subsidised by them having a day job doing something else; newsletters that people pay to subscribe to. There are lots of different ways we can get our information now, and lots of different ways to pay for it.

Which is why it’s weird to focus on the handful of news businesses that the narrowly defined criteria in the draft Code singles out for special treatment, and one specific mechanism—advertising—used to pay for it. That’s baking into legislation one specific business model from last century, one that happens to be the way specific companies have chosen to do things despite ample opportunity to change.

It seems especially odd that something that is apparently this vital to a well-functioning democracy requires two specific multi-nationals to directly subsidise their vanquished marketplace competitors, and to shore up their finances while ignoring the multitude of alternatives that have sprung up to replace them.

Unless, of course, you consider that this is just another example of Australia’s ongoing Game of Mates where grey gifts of public revenue are handed out to entities that happen to provide some sort of benefit to the individuals doing the granting. There’s no direct quid pro quo or anything as obvious as a bribe, it’s all perfectly legal and I’m not suggesting it isn’t.

And while there may also be some benefit to the public, a substantial part of the value tends to flow into very specific private hands. Not through competition on a level playing field (because they tried that and lost comprehensively) but through policy settings configured to favour specific parties.

As many others have suggested, if there is a market failure, the intervention should correct that failure for the entire market not just a subset of the players who happen to have the ear of a friendly regulator. And if there are excess profits that should be returned to the people, the way to do that is called taxation.

What Should News Look Like?

If we accept that there is a need for a robust and independent media landscape, then there are a couple of follow-on questions to ask:

  1. What form should it take?
  2. How should it be funded?

One form is a competitive marketplace full of people trying different approaches and competing with each other to see which approaches work better. Some of them will succeed, and some will fail, and that’s all considered part of the way things operate. Creative destruction ensures that the new and better replaces the old and busted, at least in theory.

That’s tricky in an environment like Australia where there are natural monopolies that lead to outsize concentrations of power, especially for local news due to the concentrated population centres. It’s not as bad as it once was, because the barriers to entry are lower now (no expensive printing presses or distribution networks, remember?) but there are still certain scale efficiencies that give you an advantage when you get bigger.

Generally you address the risk of market failures due to natural monopolies through regulations that address those market failures, and we had a lot of those (media ownership laws, for example) but they’ve been steadily abandoned. Most recently with the takeover of Fairfax by Nine, but it’s been happening for a while, and it happened under the guidance and approval of the ACCC.

Publicly Funded News

Another form is to ensure a basic level of service is provided by a public entity and then more specialised providers compete with each other for value-added services. Like Australia Post and courier companies, or the NBN and business network connectivity providers, or public healthcare and private hospitals. There are plenty of examples.

And we have this already with publicly funded providers of news and entertainment: The ABC and SBS.

Both the ABC and SBS have been explicitly excluded from participation in any of the funding mechanisms in the proposed Code. The justification provided is that they receive the majority of their funding from sources other than advertising (SBS sells some ads, ABC doesn’t) and so revenue derived from advertising paid to Google and Facebook) shouldn’t make its way to them.

This is weird until you recall the strong antipathy towards the public broadcaster by private news organisations and conservative governments. They hate the ABC, and have been actively trying to kill it off for years by continuously defunding it. They can’t simply abolish it because the majority of the public love the ABC and continue to be strongly in favour of it. The political fallout would be too much to handle all at once, and so it is being killed slowly, piece by piece in a relentless death-by-a-thousand-cuts/efficiency dividends.

Providing another source of revenue other than government funding would risk the ABC actually becoming more independent, and the government definitely doesn’t want that. Controlling the ABC’s funding is how the government maintains coercive control over the ABC. Its management has become less and less confrontational as its management constantly seeks to avoid further budget cuts dealt out as tacit punishment for stepping out of line. From the government’s perspective, their project to bring the ABC to heel is working well. The ABC will be strangled until it can no longer perform its legislated function, at which point it will be declared no longer fit for purpose and abolished or sold.

Because those in power don’t actually want a check on that power. They want a check on other people’s power because that makes it harder for them to mount a challenge to their own power.

It’s all about power.

Google, Facebook Overplay Their Hand

A stereotypical nuclear explosion, in deep reds and oranges, against a black background.

Google was the first to react to the ACCC’s draft code, by publishing an open letter and using its platforms to promote it to people directly using everyone’s favourite online user-experience: popup ads that get in the way of what you’re trying to do.

This was ham-fisted, clumsy bollocks and seriously underestimates how much people in Australia dislike Google. It feels like Google has mistaken people using its products for liking Google. Most people have bank accounts but we all hate banks. People use Google products because they feel they don’t have a choice, and as far as online advertising goes, they really don’t. But that’s got nothing to do with news.

Then Facebook had its turn to say “we’ll just not carry news from Australia then” which instantly became a threat that our politicians could easily use to stoke the flames of hatred for the company. Again, the fact that people use Facebook doesn’t mean they like the company. They use it because they feel that if they don’t, they’ll be cut off from friends and family who spend so much time posting racist memes in there. They like talking to their family and friends, but they also hate that Facebook spies on their every move.

Google and Facebook have been cast in the role of foreign bully here. Australia is as rule-bound as Germany with the punishment lust of Singapore , coupled to a desperately insecure lack of cohesive national identity. Lashing out at others provides a handy distraction from the difficult and painful process of figuring out who we are and what we want to be as a country.

This isn’t the USA where there’s a reflexive hate for government and a love of tech companies that stand up to it, though even there the love for big tech is very much on the wane. The techlash is in full swing here, far more so than the more libertarian-inclined America, and it looks like Google and Facebook haven’t taken that into account in their campaigning.

People have a love/hate relationship with the commercial media, but the enemy of my enemy is my friend, so in the performative theatre of Media vs Google, Google is the bad guy we love to hate, and Australians love it when cops beat up The Other. People don’t so much want the media to win as to see Google and Facebook taken down a notch as payback for all the things they’ve done wrong. And let’s be clear, there are plenty of terrible things that Google and Facebook have done that they very much need to be held to account for.

This is a performative morality tale, not a nuanced discussion of public policy.

Lose Lose

Australians are going to get screwed no matter how this latest pissing contest works out in the end.

Our media is aggressively disinterested in taking advice from the ungrateful proles (their customers) who fail to genuflect appropriately when their betters tell them how they should think, especially if we happen to know more about the topic at hand than they do. They’re too busy holding us to account for the abysmal job our politicians are doing, and treating any backlash as an excuse to write 1200 words of turgid prose about how mean and ungrateful we are.

Meanwhile, Google and Facebook continue to hoover up around 60% of digital ad spend (and over 25% of worldwide advertising dollars ) in an industry infested with fraud, relentlessly spying on all of us with a surveillance infrastructure straight out of dystopian fiction.

Surveillance infrastructure that is widely repurposed by panoptic governments who don’t have to spend any time building it, with the added bonus of side-stepping laws that prevent public entities from running something like this themselves.

Why spy when you can buy?

Governments then tell us that because Facebook lied to us about their data practices that we should let government lie to us about theirs, too. These are the same governments that were supposed to protect us from malignant shitfunnels like Zuckerberg and have manifestly failed to do so. Their failure is turned into marketing for their own relentless grasping for yet more surveillance.

They don’t want to fight Facebook, they want to be Facebook.

You’d think a journalist might try pointing that out once in a while, but having a multi-decade pity party does rather eat into your time.

It might also make it just a little too obvious that the news businesses want to get their grubby mits on all that tasty surveillance data as well. They want to force Google and Facebook to explain how they can do that.

They haven’t for a moment tried to argue that no one should have this data or tried to prevent Google, Facebook, or the government from collecting it in the first place. No. They just want their turn at being creepy weirdos who watch everything you do online. All while they tell us how this is somehow good for us and we should be grateful.

It’s extremely frustrating to have people that I want to support actively undermining their own position and insisting that other options aren’t possible. It’s yet another massive failure of imagination in an area that once held such promise.

This is why we can’t have nice things.

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