The old news business model is broken: making Google and Facebook pay won’t save journalism


Amanda Lotz, Queensland University of Technology

The federal government is talking tough about making Google and Facebook pay Australian news businesses for linking to, or featuring, these publishers’ content.

The digital platforms have been talking equally tough. Facebook is threatening to remove Australian news stories and Google says it will shut off search to Australia if the government pushes ahead with its “mandatory bargaining code”.

The code is meant to help alleviate the revenue crisis facing news publishers. Over the past two decades they have made deep cuts to newsrooms. Scores of local print papers have become “digital only” or been shut down completely.




Read more:
Digital-only local newspapers will struggle to serve the communities that need them most


If legislated, the code will require the platforms to negotiate payments to news publishers, as well as disclose changes in algorithms affecting traffic to news sites.

But the code is unlikely to do much to fix the crisis faced by journalism in the internet age. It isn’t even a band-aid on the problem.

The traditional commercial news business model is broken beyond repair. If the government wants to save the social benefit of public-interest journalism, it must look elsewhere.

Newspapers didn’t sell news, but readers

To understand why the commercial news model is so broken, we first need to recognise what the primary business of commercial news media has been: attracting an audience that can be sold to advertisers.

Newspapers attracted readers with news and feature journalism that provided public value, but also information of interest such as weather forecasts, sports scores, stock prices, TV and radio guides and comics. Readers even sought out papers for their advertisements – in particular the “classifieds” for jobs, cars and real estate.

Before the internet the newspaper was the only place to access much of this information. This broad bundle of content attracted a wide range of readers, which the economics of newspapers – particularly the cost of producing the journalism – required.

Why the business model is broken

Internet technologies introduced two changes that have dismantled the newspaper business model.

They offered new and better ways to connect buyers and sellers, pulling advertiser spending away from newspapers. More than 70% of revenue for a typical daily newspaper came from advertising. Before 2000 print media attracted nearly 60% of Australian advertiser dollars, according to an analysis for the Australian Competition and Consumer Commission’s Digital Platforms Inquiry. By 2017 it was just 12%.


Australian advertising expenditure by media format and digital platform


Internet technologies also provided better ways to access the non-journalism information that had made the bundled paper valuable to a mass of readers.

Readers also now access news in many other places, through news apps, aggregators and social media feeds such as Twitter, Reddit, Apple News, Flipboard and many others, including Facebook and Google. Research by the University of Canberra’s News and Media Research Centre published in 2019 found just 30% of Australian news consumers accessed online news directly from news publishers’ websites.

The bargaining code doesn’t solve the main problem

If Google and Facebook are “to blame” for news publishers’ malaise, it is not in the way the bargaining code suggests. Separate from their linking to, or featuring, these publishers’ content, the digital platforms are just more effective vehicles for advertisers seeking to buy consumers’ attention. They serve ads based on consumer interests or in relation to a specific search.

The simple fact is news publishers’ core content is not that important to the platforms’ profitability.

Research by the Reuters Institute for the Study of Journalism during the 2019 UK general election – tracking 1,711 people aged 18-65 across mobile and desktop devices for six weeks – found news took up just 3% of their time online (about 16 minutes and 22 visits to news sites a week).

So if stories from Australian news outlets disappeared from Facebook or Google search results, it would barely make a scratch on their appeal to advertisers.




Read more:
It’s not ‘fair’ and it won’t work: an argument against the ACCC forcing Google and Facebook to pay for news


Save journalism, not commercial publishers

The Australian Competition and Consumer Commission’s Digital Platforms Inquiry has rightly noted the revenue crisis has crippled commercial provision of public-interest journalism “that performs a critical role in the effective functioning of democracy at all levels of government”.

But the core of the problem is that funding such journalism through advertising is no longer viable. Other solutions are needed – locally and nationally – to ensure its survival.




Read more:
Web’s inventor says news media bargaining code could break the internet. He’s right — but there’s a fix


Commercial news organisations no longer offer value to advertisers. Instead of searching for ways to make an obsolete business solvent, efforts should focus on alternative ways to fund public-interest journalism.

More funding for independent public broadcasters is one solution, and incentives for philanthropic funding and non-profit journalism organisations are proving successful in other countries.

It’s a global problem. To solve the crisis in Australia will require focusing on the core problem and thinking bigger than a bargaining code.


For transparency, please note The Conversation has also made a submission to the Senate inquiry regarding the News Media and Digital Platforms Mandatory Bargaining Code.The Conversation

Amanda Lotz, Professor of Media Studies, Queensland University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

If Google does pull its search engine out of Australia, there are alternatives



Shutterstock/Wachiwit

Gianluca Demartini, The University of Queensland

The Australian government’s push to make Google pay news organisations for linking to their content has seen the search giant threaten to pull out of Australia.

Google Australia’s managing director Mel Silva said if the government’s proposal goes ahead, “we would have no real choice but to stop making Google Search available in Australia”.

Prime Minister Scott Morrison pushed back saying he won’t respond to “threats”. Even the Council of Small Business Organisations Australia says Google needs “strong and stringent” regulation because of its monopoly on searching the web.

What if Google pulls out?

Google’s proposal to make Google Search unavailable in Australia means we would need to search the web using other systems and tools. If this really happens, we could no longer go to google.com and google.com.au to search the web.




Read more:
It’s not ‘fair’ and it won’t work: an argument against the ACCC forcing Google and Facebook to pay for news


It is important to note that Google is not just web search. Google’s parent company Alphabet Inc also runs key web portals such as YouTube, and productivity tools such as Gmail, Google Calendar, Google Docs and Google Maps (which actually started in Australia). Those services are not going to be removed from the Australian market, even if web search does get pulled out.

Online advertising is another sector in which Google is the market leader and where it makes money. Pulling Google web search out from Australia does not mean businesses would no longer be able to advertise using Google’s services.

But with no Google Search here, those adverts would no longer appear ahead of any other search results and be visited by Australian users.

A Google Search result showing an ad for The Conversation ahead of any search results.
Google Search places paid advertising ahead of any search results.
Google.com/screenshot

Businesses would still be able to put their adverts on other Australian websites that use the Google Ads service.

The issue with this scenario is that Google’s key competitive advantage is the ability to access data from people using its search services. Pulling web search out from the Australian market would mean Google missing out on that data from people in Australia.

The alternatives to Google

Google is the dominant search engine in Australia — it has 94% of the web search market in Australia — but there are other search services.

The second most popular search engine in Australia is Bing, developed by Microsoft and often integrated into other Microsoft products such as its Windows operating system and Office tools.

Another less popular search option is Yahoo, which also offers its own news and email service.

Other alternatives include niche search engines that offer unique tools with special features.

For example, DuckDuckGo is a search engine that has recently risen in popularity thanks to a commitment to protecting its users’ privacy.

The DuckDuckGo homepage
DuckDuckGo is gaining support.
DuckDuckGo/Screen shot

Contrary to the web search products from Google and Microsoft, DuckDuckGo does not store its users’ search queries or track their interactions with the system.

The quality of DuckDuckGo’s search results has improved over time, and is now comparable to that of the most popular search engines.

It says it now processes a daily average of more than 90 million search queries, up from just over 51 million the same time last year.

Despite not drawing on users’ data to refine its search algorithms, the technology behind DuckDuckGo and other smaller players is based on the same machine-learning methods that others are using.

Search the web, save the planet

Another interesting and recent proposal of an alternative web search engine is Ecosia. This system is unique as it focuses on sustainability and positive climate impact.

Its mission is to reinvest the income generated by search advertisements (the same business model Google Search is using) to plant trees in key areas around the world.

So far, it says it has 15 million users and has contributed to planting more than 100 million trees, about 1.3 every second.

Will Google really abandon Australia?

Tim Berners-Lee, widely regarded as the inventor of the web, has pointed out that the idea of asking web platforms to pay to post links runs counter to his fundamental concept.




Read more:
Web’s inventor says news media bargaining code could break the internet. He’s right — but there’s a fix


That said, it is also unfair for a search engine to make money using content that others have created.

It is also true that most of Google’s revenue already comes from asking others to pay for links on the web. This is how Google’s online advertising works: Google Ads makes advertisers pay for every impression users get or click users make to navigate to the advertised web page.

If users end up buying the advertised product, Google gets an even higher payment.

More likely than Google pulling out of the Australian market, the government and the search giant should diplomatically find a compromise in which Google still provides its web search product in Australia and there will be a return to news organisations for Google making use of their content.The Conversation

Gianluca Demartini, Associate professor, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Web’s inventor says news media bargaining code could break the internet. He’s right — but there’s a fix


Tama Leaver, Curtin University

The inventor of the World Wide Web, Tim Berners-Lee, has raised concerns that Australia’s proposed News Media and Digital Platforms Mandatory Bargaining Code could fundamentally break the internet as we know it.

His concerns are valid. However, they could be addressed through minor changes to the proposed code.

How could the code break the web?

The news media bargaining code aims to level the playing field between media companies and online giants. It would do this by forcing Facebook and Google to pay Australian news businesses for content linked to, or featured, on their platforms.

In a submission to the Senate inquiry about the code, Berners-Lee wrote:

Specifically, I am concerned that the Code risks breaching a fundamental principle of the web by requiring payment for linking between certain content online. […] The ability to link freely — meaning without limitations regarding the content of the linked site and without monetary fees — is fundamental to how the web operates.

Currently, one of the most basic underlying principles of the web is there is no cost involved in creating a hypertext link (or simply a “link”) to any other page or object online.

When Berners-Lee first devised the World Wide Web in 1989, he effectively gave away the idea and associated software for free, to ensure nobody would or could charge for using its protocols.

He argues the news media bargaining code could set a legal precedent allowing someone to charge for linking, which would let the genie out of the bottle — and plenty more attempts to charge for linking to content would appear.

If the precedent were set that people could be charged for simply linking to content online, it’s possible the underlying principle of linking would be disrupted.

As a result, there would likely be many attempts by both legitimate companies and scammers to charge users for what is currently free.

While supporting the “right of publishers and content creators to be properly rewarded for their work”, Berners-Lee asks the code be amended to maintain the principle of allowing free linking between content.




Read more:
Google News favours mainstream media. Even if it pays for Australian content, will local outlets fall further behind?


Google and Facebook don’t just link to content

Part of the issue here is Google and Facebook don’t just collect a list of interesting links to news content. Rather the way they find, sort, curate and present news content adds value for their users.

They don’t just link to news content, they reframe it. It is often in that reframing that advertisements appear, and this is where these platforms make money.

For example, this link will take you to the original 1989 proposal for the World Wide Web. Right now, anyone can create such a link to any other page or object on the web, without having to pay anyone else.

But what Facebook and Google do in curating news content is fundamentally different. They create compelling previews, usually by offering the headline of a news article, sometimes the first few lines, and often the first image extracted.

For instance, here is a preview Google generates when someone searches for Tim Berners-Lee’s Web proposal:

Results page for the Google Search 'tim berners lee www proposal'.
This is a screen capture of the results page for the Google Search: ‘tim berners lee www proposal’.
Google

Evidently, what Google returns is more of a media-rich, detailed preview than a simple link. For Google’s users, this is a much more meaningful preview of the content and better enables them to decide whether they’ll click through to see more.

Another huge challenge for media businesses is that increasing numbers of users are taking headlines and previews at face value, without necessarily reading the article.

This can obviously decrease revenue for news providers, as well as perpetuate misinformation. Indeed, it’s one of the reasons Twitter began asking users to actually read content before retweeting it.

A fairly compelling argument, then, is that Google and Facebook add value for consumers via the reframing, curating and previewing of content — not just by linking to it.

Can the code be fixed?

Currently in the code, the section concerning how platforms are “Making content available” lists three ways content is shared:

  1. content is reproduced on the service
  2. content is linked to
  3. an extract or preview is made available.

Similar terms are used to detail how users might interact with content.

Extract showing the way 'Making content available' is defined in the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020
The News Media and Digital Platforms Mandatory Bargaining Code 2020 outlines three main ways by which platforms make news content available.
Australian Government

If we accept most of the additional value platforms provide to their users is in curating and providing previews of content, then deleting the second element (which just specifies linking to content) would fix Berners-Lee’s concerns.

It would ensure the use of links alone can’t be monetised, as has always been true on the web. Platforms would still need to pay when they present users with extracts or previews of articles, but not when they only link to it.

Since basic links are not the bread and butter of big platforms, this change wouldn’t fundamentally alter the purpose or principle of creating a more level playing field for news businesses and platforms.




Read more:
It’s not ‘fair’ and it won’t work: an argument against the ACCC forcing Google and Facebook to pay for news


In its current form, the News Media and Digital Platforms Mandatory Bargaining Code could put the underlying principles of the world wide web in jeopardy. Tim Berners-Lee is right to raise this point.

But a relatively small tweak to the code would prevent this, It would allow us to focus more on where big platforms actually provide value for users, and where the clearest justification lies in asking them to pay for news content.


For transparency, it should be noted The Conversation has also made a submission to the Senate inquiry regarding the News Media and Digital Platforms Mandatory Bargaining Code.The Conversation

Tama Leaver, Professor of Internet Studies, Curtin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Is news worth a lot or a little? Google and Facebook want to have it both ways


Tim Dwyer, University of Sydney

Executives from Google and Facebook have told a Senate committee they are prepared to take drastic action if Australia’s news media bargaining code, which would force the internet giants to pay news publishers for linking to their sites, comes into force.

Google would have “no real choice” but to cut Australian users off entirely from its flagship search engine, the company’s Australian managing director Mel Silva told the committee. Facebook representatives in turn said they would remove links to news articles from the newsfeed of Australian users if the code came into effect as it currently stands.




Read more:
Expect delays and power plays: Google and Facebook brace as news media bargaining code is set to become law


In response, the Australian government shows no sign of backing down, with Prime Minister Scott Morrison and Treasurer Josh Frydenberg both saying they won’t respond to threats.

So what’s going on here? Are Google and Facebook really prepared to pull services from their Australian users rather than hand over some money to publishers under the bargaining code?

Is news valuable to Facebook and Google?

Facebook claims news is of little real value to its business. It doesn’t make money from news directly, and claims that for an average Australian user less than 5% of their newsfeed is made up of links to Australian news.

But this is hard to square with other information. In 2020, the University of Canberra’s Digital News Report found some 52% of Australians get news via social media, and the number is growing. Facebook also boasts of its investments in news via deals with publishers and new products such as Facebook News.

Google likewise says it makes little money from news, while at the same time investing heavily in news products like News Showcase.

So while links to news may not be direct advertising money-spinners for Facebook or Google, both see the presence of news as an important aspect of audience engagement with their products.

On their own terms

While both companies are prepared to give some money to news publishers, they want to make deals on their own terms. But Google and Facebook are two of the largest and most profitable companies in history – and each holds far more bargaining power than any news publisher. The news media bargaining code sets out to undo this imbalance.

What’s more, Google and Facebook don’t appear to want to accept the unique social role of news, and public interest journalism in particular. Nor do they recognise they might be involved somehow in the decline of the news business over the past decade or two, instead pointing the finger at impersonal shifts in advertising technology.

The media bargaining code being introduced is far too systematic for them to want to accept it. They would rather pick and choose commercial agreements with “genuine commercial consideration”, and not be bound by a one-size-fits-all set of arbitration rules.




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Changing the rules to control monopolies could see the end of Facebook domination


A history of US monopolies

Google and Facebook dominate web search and social media, respectively, in ways that echo the great US monopolies of the past: rail in the 19th century, then oil and later telecommunications in the 20th. All these industries became fundamental forms of capitalist infrastructure for economic and social development. And all these monopolies required legislation to break them up in the public interest.

It’s unsurprising that the giant ad-tech media platforms don’t want to follow the rules, but they must acknowledge that their great wealth and power come with a moral responsibility to society. Making them face up to that responsibility will require government intervention.

Online pioneers Vint Cerf (now VP and Chief Internet Evangelist at Google) and Tim Berners-Lee (“inventor of the World Wide Web”) have also made submissions to the Senate committee advocating on behalf of the corporations. They made high-minded claims that the code will break the “free and open” internet.




Read more:
Web’s inventor says news media bargaining code could break the internet. He’s right — but there’s a fix


But today’s internet is hardly free and open: for most users “the internet” is huge corporate platforms like Google and Facebook. And those corporations don’t want Australian senators interfering with their business model.

Independent senator Rex Patrick hit the nail on the head when he asked why Google wouldn’t admit the fundamental issue was about revenue, rather than technical detail or questions of principle.

How seriously should we take threats to leave the Australian market?

Google and Facebook are prepared to go along with the Senate committee’s processes, so long as they can modify the arrangement. The don’t want to be seen as uncooperative.

The threat to leave (or as Facebook’s Simon Milner put it, the “explanation” of why they would be forced to do so) is their worst-case scenario. It seems likely they would risk losing significant numbers of users if they did so, or at least having them much less engaged – and hence producing less advertising revenue.

Google has already run small-scale experiments to test removing Australian news from search. This may be a demonstration that the threat to withdraw from Australia is serious, or at least, serious brinkmanship.

People know news is important, that it shapes their interactions with the world – and provides meaning and helps them navigate their lives. So who would Australians blame if Google and Facebook really do follow through? The government or the friendly tech giants they see every day? That’s harder to know.


For transparency, please note The Conversation has also made a submission to the Senate inquiry regarding the News Media and Digital Platforms Mandatory Bargaining Code.The Conversation

Tim Dwyer, Associate Professor, Department of Media and Communications, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Expect delays and power plays: Google and Facebook brace as news media bargaining code is set to become law


Tim Dwyer, University of Sydney

The long-awaited mandatory code that will force Google and Facebook to pay Australian media companies for news content was finally unveiled yesterday.

The Treasury Laws Amendment Bill 2020 (news media and digital platforms mandatory bargaining code) will be introduced to parliament today, before being referred to a Senate committee.

Many of Australia’s news businesses have been on a hiding to nothing for more than a decade, as their revenue is undercut by the targeted advertising business model used by major digital platforms.

The most visible casualty has been public interest journalism — with the prospect of a well-informed citizenry on a slower, less obvious burn.

Against a backdrop of reports suggesting intense lobbying efforts by Facebook and Google against the new legislation, it appears some key concessions have been achieved by the platforms that weren’t present in the draft code.




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No more negotiating: new rules could finally force Google and Facebook to pay for news


What’s changed in the revised code?

First, the revised code will now abide by an added “two-way value exchange” principle. This allows the monetary worth of traffic sent to news providers to be taken into account when determining the financial value of a particular news business’s content to the platforms.

How this will be calculated, however, will likely be an ongoing bone of contention for both parties.

A second major concession will see Facebook’s Instagram and Google’s YouTube exempted from the application of the new law. But the Treasurer will be able to add these (and other platforms) at a later date, should he deem it justified at the time.

A third concession is the halving of the 28-day notice period for the platforms to warn news websites of major changes to their ranking algorithms. These directly impact how news articles are displayed on Facebook’s Newsfeed and Google Search.

It seems the basic idea to “level the playing field” between platforms and news providers remains baked into the revised code, but only time will tell whether it works in practice.

A figure stands under a Google sign.
Following a year of discussion, Google last month struck a deal with French media in which the tech giant is expected to pay about €150 million (roughly A$245,003,250) over the next three years.
JAE C. HONG/AP

A related objective — to implement a process that sustains public interest journalism — remains equally tricky and may hinge on the revised code’s success.

But many will be pleased the public broadcasters ABC and SBS now fall within the code’s scope, too. Both will be financially compensated for news content along with their commercial rivals.

This may seem like a win, and it may be eventually, but for now it’s unclear how this will actually play out in terms of the government’s ongoing funding of these broadcasters.

Although conjecture at this stage, it may emerge in a forum such as Senate estimates that any compensation payments should be factored into overall funding calculations for the public broadcasters.

The arbitration model

One pivotal feature of the new legislation is it will address the entrenched power of the platforms by introducing a “final offer arbitration” model for price negotiations.

This process, overseen by the Australian Communications and Media Authority, will be mandatory when parties are unable to independently reach an agreement. It will likely be central to the new code’s success, or lack thereof.

Curiously, the revised code’s framework encourages deals to be struck outside of it. In these situations, key elements of commercial negotiations between the parties can be “turned off” with mutual agreement.

This appears to be a pragmatic recognition by the ACCC the code will never be able to control the realities of commercial media deal-making, which continue to be struck despite the code’s new bargaining marketplace.

However, where negotiations break down, news media businesses will be able to trigger the code’s provisions for meeting minimum standards.

This will cover advance notice of algorithmic changes and the requirement to engage in good faith bargaining for up to three months, before participating in the mandatory arbitration process.

Smaller news publishers will be able to bargain collectively, or accept “standard” offers from the platforms.

When one party fails to engage

The code has reasonably strong enforcement provisions in cases where there is a failure to negotiate in good faith, comply with an arbitration decision, avoid participation or engage in “retaliatory action against news media companies”.

The maximum penalty for a breach by Google or Facebook is the greater of either 10% of the platform’s annual Australian turnover, A$10 million, or three times the benefit obtained as a result of hosting the specific news business’s content.

Facebook and Google have put their previous threats to switch off local news content on hold until they see the final version of the code. For now, they appear to be engaging with the ACCC.




Read more:
Facebook vs news: Australia wants to level the playing field, Facebook politely disagrees


We still need to tackle media concentration

As we await the final version of the code, the irony is not lost on those of us also waiting eagerly for events to unfold before another Senate committee on media pluralism.

The committee was set up in response to a petition started by former Prime Minister Kevin Rudd. Amassing more than 500,000 signatures, Rudd’s petition has called for a royal commission into the negative influence of News Corp’s power in Australia’s highly concentrated media landscape.

A rich history of Australia’s parliamentary inquiries into the media indicates we can expect delays, power plays and ongoing lobbying in both these committees. And clearly there will be winners and losers in both.The Conversation

Tim Dwyer, Associate Professor, Department of Media and Communications, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

World is watching plan to make Facebook and Google pay for content: Frydenberg


Michelle Grattan, University of Canberra

The Morrison government will introduce on Wednesday its legislation forcing Google and Facebook to face arbitration if they fail to come to commercial deals with traditional media on payment for content.

The government resorted to the mandatory bargaining code after it was clear agreement wouldn’t be reached for voluntary arrangements on content payment. A voluntary model had been recommended by the Australian Competition and Consumer Commission.

Treasurer Josh Frydenberg told a news conference Tuesday the government wanted the parties to reach deals outside the code. Where agreement could not be reached, the arbitration would kick in.

The ABC and SBS are among the media that will benefit from revenue under the legislation, which won’t be dealt with by parliament until next year.

Communications Minister Paul Fletcher said the ABC had indicated it would devote the revenue it receives to regional journalism. He told Tuesday’s news conference the government would not seek to offset such revenue in its funding for the ABC.

The legislation will set minimum standards for digital platforms including requiring a fortnight’s advance notice of deliberate algorithm changes that have an impact on news media businesses.

The negotiations for payment will need to incorporate the value to providers of the additional eyeballs brought by having their content on the tech platforms.

This provision was put in following consultations on the code with the tech companies. But Frydenberg stressed the money flow was only one way – from the tech companies to the traditional media.

Frydenberg said it was the government’s intention “to ensure that the rules of the digital world mirror the rules of the physical world and ultimately to sustain our media landscape here in Australia”. He described the outcome as fair and balanced.

He said “we live in the age of digital disruption – and nowhere is this more apparent than in our media landscape.” Dollars spent on print advertising had fallen by 75% since 2005; in that time, dollars spent on online advertising increased eightfold.

The application of the code can be extended beyond Facebook NewsFeed and Google Search to other digital platform services if they “give rise to a bargaining power imbalance”. The treasurer has the power to add new services.

Frydenberg said “the word coming back to us is that there are deals that may be struck very soon between the parties”.

He described the scheme as a “world first– and the world is watching what happens here in Australia”.

The Australia Institute’s Centre for Responsible Technology said the legislation was a “globally significant response to the growing power of Big Tech”.

The centre’s director, Peter Lewis, said the move “would give media organisations a fighting chance at building a viable business model, in the face of the market domination of Google and Facebook”.

Lewis called for cross party support for the legislation.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Calls for an ABC-run social network to replace Facebook and Google are misguided. With what money?



shutterstock.

Fiona R Martin, University of Sydney

If Facebook prevented Australian news from being shared on its platform, could the ABC start its own social media service to compensate? While this proposal from the Australia Institute is a worthy one, it’s an impossible ask in the current political climate.

The suggestion is one pillar of the think tank’s new Tech-xit report.

The report canvasses what the Australian government should do if Facebook and Google withdraw their news-related services from Australia, in reaction to the Australian Competition and Consumer Commission’s draft news media bargaining code.

Tech-xit rightly notes the ABC is capable of building social media that doesn’t harvest Australians’ personal data. However, it overlooks the costs and challenges of running a social media service — factors raised in debate over the new code.

Platforms react (badly) to the code

The ACCC’s code is a result of years of research into the effects of platform power on Australian media.

It requires Facebook and Google to negotiate with Australian news businesses about licensing payments for hosting news excerpts, providing access to news user data and information on pending news feed algorithm changes.

Predictably, the tech companies are not happy. They argue they make far less from news than the ACCC estimates, have greater costs and return more benefit to the media.

If the code becomes law, Facebook has threatened to stop Australian users from sharing local or international news. Google notified Australians its free services would become “at risk”, although it later said it would negotiate if the draft law was changed in its favour.

Facebook’s withdrawal, which the Tech-xit report sees as being likely if the law passes, would reduce Australians’ capacity to share vital news about their communities, activities and businesses.




Read more:
If Facebook really pulls news from its Australian sites, we’ll have a much less compelling product


ABC to the rescue?

Cue the ABC then, says Jordan Guiao, the report’s author. Guiao is the former head of social media for both the ABC and SBS, and now works at the institute’s Centre for Responsible Technology.

He argues that, if given the funding, ABC Online could reinvent itself to become a “national social platform connecting everyday Australians”. He says all the service would have to do is add

distinct user profiles, user publishing and content features, group connection features, chat, commenting and interactive discussion capabilities.

As a trusted information source, he proposes the ABC could enable “genuine exchange and influence on decision making” and “provide real value to local communities starved of civic engagement”.

Financial reality check

It’s a bold move to suggest the ABC could start yet another major network when it has just had to cut A$84 million from its budget and lose more than 200 staff.

The institute’s idea is very likely an effort to persuade the Morrison government it should redirect some of that funding back to Aunty, which has a history of digital innovation with ABC Online, iView, Q&A and the like.

However, the government has repeatedly denied it has cut funding to the national broadcaster. It hasn’t provided
catch-up emergency broadcasting funds since the ABC covered our worst ever fire season. This doesn’t bode well for a change of mind on future allocations.

The government also excluded the ABC and SBS as beneficiaries of the news media bargaining code negotiations.

The ABC doesn’t even have access to start-up venture capital the way most social media companies do. According to Crunchbase, Twitter and Reddit — the two most popular news-sharing platforms after Facebook — have raised roughly US$1.5 billion and US$550 million respectively in investment rounds, allowing them to constantly innovate in service delivery.

Operational challenges

In contrast, over the past decade, ABC Online has had to reduce many of the “social” services it once offered. This is largely due to the cost of moderating online communities and managing user participation.

Illustration of person removing a social media post.
Social media content moderation requires an abundance of time, money and human resources.
Shutterstock

First news comments sections were canned, and online communities such as the Four Corners forums and The Drum website were closed.

Last year, the ABC’s flagship site for regional and rural user-created stories, ABC Open, was also shut down.

Even if the government were to inject millions into an “ABC Social”, it’s unlikely the ABC could deal with the problems of finding and removing illegal content at scale.

It’s an issue that still defeats social media platforms and the ABC does not have machine learning expertise or funds for an army of outsourced moderators.

The move would also expose the ABC to accusations it was crowding out private innovation in the platform space.

A future without Facebook

It’s unclear whether Facebook will go ahead with its threat of preventing Australian users from sharing news on its platform, given the difficulties with working out exactly who an Australian user is.

For instance, the Australian public includes dual citizens, temporary residents, international students and business people, and expatriates.

If it does, why burden the ABC with the duty to recreate social media? Facebook’s withdrawal could be a boon for Twitter, Reddit and whatever may come next.

In the meantime, if we restored the ABC’s funding, it could develop more inventive ways to share local news online that can’t be threatened by Facebook and Google.




Read more:
Latest $84 million cuts rip the heart out of the ABC, and our democracy


The Conversation


Fiona R Martin, Associate Professor in Convergent and Online Media, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Vital Signs: Google’s huge market share doesn’t automatically make it a monopoly



shutterstock.

Richard Holden, UNSW

This week the United States Department of Justice (DoJ) filed a lawsuit accusing Google of using “anticompetitive tactics to maintain and extend its monopolies in the markets” for search and advertising.

It is the most significant antitrust case since the US government took on Microsoft in 1998 for using its dominant position as the provider of the Windows operating system to force PC makers to bundle its Internet Explorer web browser.

That case was fought out in US courts for years before Microsoft agreed to settle in 2001. This case will no doubt be heavily litigated, and likewise take years to conclude. But it’s not too soon to consider the basic economics.

The bottom line is more complicated than one might think. Yes, Google has a huge share of the search-engine market – 92% globally according to statcounter.com, compared with 2.8% for Microsoft’s Bing, 1.6% for Yahoo! and 0.5% for DuckDuckGo.

But does that give Google a lot of “market power” – the ability to charge high price or produce low-quality products? Probably not.

To judge if a company like Google is really a monopolist, it is crucial to understand the difference between ordinary markets (like those for clothes, cars, or breakfast cereal) and technology markets (like those for internet search, social media, or ride sharing).




Read more:
The US is taking on Google in a huge antitrust case. It could change the face of online search


Markets with ‘network externalities’

Any introductory economics textbook will tell you a large market share is smoking-gun evidence of market power; and that with market power comes the ability to shut out competitors, charge high prices and even get away with producing low-quality products.

Economists of all stripes agree that regulating monopolies and making markets more competitive benefits consumers, through lower prices and better products.

Indeed, this was the motivation behind the so-called “trust-busting” movement in the US in the early 20th century. The most famous scalp was John D. Rockefeller’s Standard Oil, which the US Supreme Court ordered in 1911 be broken up into 34 separate companies. (The break-up made Rockefeller the world’s richest man).

But internet search isn’t like oil. Neither is social media, ride sharing or platforms like Amazon. These are what economists call “markets with network externalities”. That is, when more consumers use the product, it becomes more valuable for other consumers.




Read more:
Lawmakers keen to break up ‘big tech’ like Amazon and Google need to realize the world has changed a lot since Microsoft and Standard Oil


Facebook is useful because it connects one with lots of other users. A thousand little, disconnected social media platforms would be much less useful. Amazon connects lots of sellers with million of consumers. This is hugely valuable for both. Google connects lots of consumers with advertisers and information. Again, this is valuable to both sides of the market.

Because network externalities mean — all else being equal — the bigger the market share the more valuable the company’s product is to consumers, we tend to see one dominant company and a few smaller ones in such markets.

Just because tech companies have a big share of the market now, however, doesn’t mean they are destined to keep it.

Remember Netscape? In the mid-1990s it had a 80% share in the browser market, before losing it to Microsoft’s Internet Explorer.

Netscape Navigator Version 1.11
Netscape Navigator version 1.11.
OiMax/flickr, CC BY-NC-ND

But Internet Explorer’s dominance, peaking at 95% share in the early 2000s, didn’t last either. It now claims barely 1% of the browser market.

This is why companies in markets with network externalities are never asleep. Uber and Facebook are constantly running experiments to innovate their products, as are other companies like Amazon and, you guessed it, Google.

Influencers and defaults

An important part of the Department of Justice’s suit against Google is that it allegedly pays Apple as much as US$11 billion a year to be the default search engine on the Safari browser on every iPhone.

This is a bit like paying for a social media influencer to plug your product — with a twist. Making something the default doesn’t mean the user has to use it, but the small effort to choose an alternative means most don’t bother.

But if it really wasn’t a good product and didn’t deliver good search results, wouldn’t consumers (a) remove it and (b) be less likely to buy iPhones?

There’s a big difference between something being a default and there being no choice. Articulating this difference may end up being an important part of how the Google litigation plays out.

Indeed, Microsoft making Internet Explorer the default browser in Windows has been an ongoing source of back and forth with US and European competition authorities.




Read more:
Twitter is banning political ads – but the real battle for democracy is with Facebook and Google


Ultimately misguided

As with the suits against Standard Oil and Microsoft, the case against Google will be decided by the courts, perhaps ending with the US Supreme Court. The outcome will be instructive as to whether other tech companies like Amazon, Facebook or Uber will also wind up in the firing line.

Ironically, at a time of extreme polarisation in US politics, breaking up big tech companies is popular on the left and the right.

But we should remember that consumers are huge beneficiaries from these tech companies. Think about how much it used to cost to take and print photographs. A 2018 International Monetary Fund report cites research suggesting US consumers would need more than US$25,000 a year to compensate for the loss of free services from tech companies.



International Monetary Fund, Measuring the Digital Economy, 2018

That’s a lot.

What is crucial for competition regulators around the world to note is that the markets in which big technology companies operate are not like other markets. Because of network externalities they tend to have big “in” firms (with a large market share) and smaller “out” firms (with small market shares but providing competitive discipline).

That doesn’t mean these markets aren’t competitive. It means the “in” companies have a lot to lose by being leapfrogged by a small competitor. Which is why they work so hard to innovate and keep prices low.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The US is taking on Google in a huge antitrust case. It could change the face of online search


Katharine Kemp, UNSW

The US Department of Justice (DoJ) has filed an antitrust lawsuit against Google for unlawful monopolisation. The department says Google’s conduct harms competition and consumers, and reduces the ability of new innovative companies to develop and compete.

It’s the most important monopolisation case in the US since 1998, when the DoJ brought proceedings against Microsoft.

It’s possible the current proceedings, given their timing, are politically motivated. US President Donald Trump and other Republicans have repeatedly voiced the view that Google is prejudiced against conservative beliefs.

But even if Democratic candidate Joe Biden is elected president, this action against Google is unlikely to go away.

The ramifications for Google, if the court rules against it, could ultimately be dramatic. The DoJ’s associate deputy attorney general, Ryan Shores, has refused to rule out seeking orders to break up the tech giant, saying “nothing is off the table”.

Google’s monopoly power

Google’s economic power is no secret. Regulators around the world, including in the European Union, are investigating the company’s conduct and bringing actions under competition, consumer and privacy laws.

US Attorney General William Barr said the new DoJ action:

[…] strikes at the heart of Google’s grip over the internet for millions of American consumers, advertisers, small businesses and entrepreneurs beholden to an unlawful monopolist.

Specifically, the DoJ claims Google is illegally monopolising the markets for online search and search advertising (the advertising that appears alongside search results).

According to the DoJ, Google’s US market share is roughly:

  • 88% in the market for general search services

  • 70% in the search advertising market.

However, holding a dominant position isn’t against the law. A company is allowed to enjoy a dominant position or even a complete monopoly, as long as it doesn’t do so by unlawful means.




Read more:
The ACCC is suing Google for misleading millions. But calling it out is easier than fixing it


So what has Google allegedly done wrong?

The DoJ’s main complaint is Google has entered into several “exclusionary agreements” that preserve its monopoly power by hindering competition from rivals (and potential rivals). Exclusionary agreements are deals that restrict the ability of at least one party to deal with other players.

The DoJ says Google spends billions of dollars each year on:

  • long-term agreements with Apple that require Google to be the default search engine on Apple’s Safari browser

  • exclusivity agreements that forbid pre-installation of competing search services by certain mobile device manufacturers and distributors

  • arrangements that force certain mobile device manufacturers and distributors to pre-install Google search applications in prime locations on mobile devices and make them undeletable, regardless of consumer preference

  • using monopoly profits to buy preferential treatment for its search engine on devices, web browsers and other search access points.

The DoJ claims these agreements have created a “continuous and self-reinforcing cycle of monopolisation” in the market for online search and search advertising (which relies on Google’s dominance in online search).

Google has responded by describing the court action as “deeply flawed”. In a blog post it said:

[…] people don’t use Google because they have to, they use it because they choose to.

It also said users are free to switch to other search engines.

But even if that’s technically true, Google’s agreements for pre-installation, default settings and preferential treatment give it a substantial advantage over its rivals.

Does any of this matter when Google is ‘free’?

Google provides services that are hugely valued the world over — and with no direct financial cost to the user. That said, “free” services can still cause harm.

According to the DoJ, by restricting competition Google has harmed search users, in part “by reducing the quality of search (including on dimensions such as privacy, data protection, and use of consumer data)”. This is an important recognition that price is not all that matters.

The logic behind this claim is that other search engines with better track records on privacy, such as DuckDuckGo, might otherwise be more successful than they are.

Or, to frame that another way, Google might actually have to compete vigorously on privacy, instead of allegedly imposing privacy-degrading terms on its users.

DuckDuckGo logo
DuckDuckGo says it ‘does not collect or share personal information’ from users.
Shutterstock

What might happen if the action succeeds?

If Google is found to have contravened the prohibition against monopolisation under the US Sherman Act, it could face substantial fines and damages claims.

But perhaps more concerning for Google would be the prospect of the DoJ seeking to break up Google’s various businesses.

Google owns a range of highly successful services, including Google search, Google Chrome, the Android operating system, and numerous ad tech (“advertising technology”) services. Google’s position and access to data in one business arguably give it advantages in its other businesses.

Eleven Republican attorneys general from various US states have joined the proceedings and could individually seek remedies.

The action won’t be having a major impact any time soon, though. Google’s lawyers estimate the case would only come before the US District Court for the District of Columbia in a year.

Could our competition watchdog be taking notes?

Google could contravene Australia’s misuse of market power law under the Competition and Consumer Act 2010, if it has engaged in conduct of the kind alleged by the DoJ that has an effect on Australian markets.

As part of its 2019 Digital Platforms Inquiry, the Australian Competition and Consumer Commission (ACCC) said Google has substantial market power in the general search and search advertising markets in Australia. It has a market share of about 95% in both cases.

If this is true, it would be unlawful for Google to engage in any conduct that substantially lessens competition in a market (or has the purpose or likely effect of doing so). This could include entering exclusionary agreements that affect Australian markets.

So far, the ACCC has twice brought proceedings against Google, alleging it misled users about how it collects and uses their data. It is also investigating the conduct of Google and Facebook, in particular, in digital advertising markets as part of its ad tech inquiry.

While Australia’s consumer watchdog might wait and see how proceedings against Google fare in the US and the EU, the recent DoJ action could encourage the ACCC in any action it might be contemplating under Australian law on misuse of market power.




Read more:
Every step you take: why Google’s plan to buy Fitbit has the ACCC’s pulse racing


The Conversation


Katharine Kemp, Senior Lecturer, Faculty of Law, UNSW, and Academic Lead, UNSW Grand Challenge on Trust, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Vital Signs. Google shouldn’t subsidise journalism, but the government could



Jeff Chiu/AP

Richard Holden, UNSW

You might have missed it – what with the biggest recession since the 1930s and a pandemic going on – but there may be big, and bad, changes happening to a media landscape near you.

Right now the Australian government is considering amending the Competition and Consumer Act 2010 to force Google and Facebook to pay local commercial media organisations for the sharing of their content on the digital platforms.

The News Media and Digital Platforms Bargaining Code proposed by the Australian Competition and Consumer Commission will require the tech and media companies to make terms through “mandatory binding arbitration”. It will also oblige them to divulge parts of their core intellectual property (such Google’s search algorithm).

It has been lauded as a world-first in addressing the power imbalance between the platforms and traditional news organisations.

Champions such as commission chief Rod Sims argue it’s a simple matter of forcing Google and Facebook to pay a fair price for extracting value from journalism for which they pay nothing. As Sims put it:

What this was all about was the imbalance in bargaining power, the market failure that comes from that, and underpayment for news having a detrimental effect on Australian society.

Who could argue with that? Even federal treasurer Josh Frydenberg has described it as “a question of fairness”.

But from an economic standpoint the whole bargaining code is hopelessly confused. It fails to properly understand the source of competitive pressure for media companies, and why they have lost revenues over the last 15 years.

Mandatory binding arbitration between tech and media companies is also a completely inappropriate policy tool to achieve the public policy goal of fostering high-quality journalism.

As I have written about in detail for the Stigler Center at the University of Chicago Booth School of Business, making the code law risks doing serious harm to Australian consumers while shovelling money to large media companies like Nine Entertainment and News Corp Australia.

Faced with the prospect of having to divulge key intellectual property, it would not be surprising if Google and Facebook simply prefer not to be in the Australian market. Millions of Australians using Google, YouTube and Facebook will lose out.

Media revenue sinking

Between 2002 and 2018, consulting firm AlphaBeta estimates total annual revenue for Australian newspapers fell from A$4.4 billion to A$3.0 billion. Almost all of this was due to lost classified advertising revenue, worth A$1.5 billion in 2002 but just A$200 million in 2018.

“That’s Google’s fault,” you might cry.

Actually no. The vast bulk of lost classified advertising revenue was due to online “pure-plays” such as Seek, Domain and Carsales. Google and Facebook took basically none of this revenue.




Read more:
Billions lost, boards to blame: Colleen Ryan on the rise and fall of Fairfax


The media companies were sitting on a gold mine of classified advertising. Then there was massive technological disruption due to the internet and smart phones.

That, as they say in the classics, is show business.

It doesn’t justify making companies who happened to succeed in an adjacent space at the same time fork over a chunk of their revenues.

But aren’t tech companies ‘stealing’ content?

If big tech companies were somehow allowing you and me free access to content we would otherwise have to pay for, there might be a case to answer.

That would be like Google Maps not only giving you directions to a restaurant but the means to also avoid paying for your meal.

But using a search engine does not allow you to get free meals, nor to get around a news organisation’s pay wall.




Read more:
It’s not ‘fair’ and it won’t work: an argument against the ACCC forcing Google and Facebook to pay for news


In fact, having their content pop up in search results, or shared on social media, helps Australian media companies to attract readers and sell subscriptions – something that now accounts for roughly half the revenues of some leading players such as The Australian.

All you get for “free” is a snippet of a line or two from the search.

For instance, when I searched for news about recently deceased US Supreme Court Justice Ruth Bader Ginsburg, I got this:

If you can figure out the full content of the article from that snippet, you should be using your superpowers for other, more lucrative purposes.

Beware the politics

There is a very real risk this misguided code will end up becoming law.

An overzealous regulator has proposed something that stands to benefit the big media companies, who are – not surprisingly – strongly for it.

Those same media companies have huge influence over public perceptions and the fate of politicians. It will be a brave elected representative who pushes back on the proposed code and draft legislation.

But if politicians were serious about resolving the real issue at stake in all of this, they would act more directly.

Like newspapers all around the world, Australian media and journalists are under pressure – and one thing most people agree on is that high-quality news and journalism is critical to a well-functioning democracy.




Read more:
Platform regulation in Australia is just the start. Facebook and Google are fighting a global battle


Whatever the market forces that have slashed the funding of such journalism, there is a strong case for government intervention. But if the Australian government wants to subsidise high-quality journalism, it should do it itself.

With the 10-year bond rate less than 1%, it would cost the government just A$18 million a year to fund the interest bill on A$2 billion of media subsidies a year. That’s 72 cents per Australian a year.

And all without driving away the hugely valuable services of companies like Google and Facebook that Australian consumers love.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.