Unfriending big tech

Google threatens to leave Australia. Microsoft’s search engine Bing offers to step in. Facebook blocks sharing and posting of news for Australian users. Google and News Corp tie up.

The drama playing out between news publishers, Google/Facebook and the Australian government hit all kinds of high points last week. It could, along with many more skirmishes to come, decide the future of news publishers and their relationships with large tech platforms. It could also decide whether the internet will remain free and open. Though many of the arguments going back and forth between analysts, regulators and platforms have a chicken and egg feel, it is critical to keep tabs on them. India has 662 million citizens online. About 392 million of them consumed entertainment (October 2020) and 454  million consumed news (December 2020) going by Comscore data. Much of how this plays out then makes a material difference to India.

A quick flashback first.The Australian Parliament is close to passing the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill, 2020. This makes it mandatory for Google and Facebook to pay news publishers for linking to or displaying their content. If they cannot arrive at an independent commercial agreement with each other, an arbiter will determine the money publishers should be paid. More importantly, it requires the platforms to “give 14 days’ notice of deliberate algorithm changes that impact news media businesses.”

The Bill drafted by the Australian Competition and Consumer Commission (ACCC) has political support across parties and is expected to go through. The ACCC, which researched and held consultations on the issue for 18 months, is emphatic that the idea is not to stifle innovation or competition but to create a level playing field. It found that for every Australian $100 of online advertising spend, A$53 goes to Google, A$28 to Facebook. The remaining A$19 is what all other media companies get.

The figures may vary but across the world this duopoly dominates digital advertising. It accounts for over 52 per cent of all digital advertising in the US. In India, Google and Facebook walked away with over 70 per cent of the Rs 22,100 crore advertisers spent online in 2019. A bulk of what readers search and read is legacy brands. So while people may walk in to read the Indian Express or Prabhat Khabar, it is the gatekeepers, Google or Facebook, that get a lion’s share of the revenues. The result has been the steady decimation of the news publishing business — more so in developed countries. This imbalance then affects the quality of journalism on offer. As governments push back in France, Australia, the US and the European Union, many such options are being discussed and implemented.

You could argue that publishers should compete or lump it. That this hampers a free internet. That brings this to the first of the two main implications of a mandatory payment code. “I am concerned that the code risks breaching a fundamental principle of the web by requiring payment for linking between certain content online. If it is deployed globally, it could make the web unworkable around the world,” said Tim Berners-Lee, the inventor of the World Wide Web in a submission to the Australian senate looking into the Bill. Mr Lee is right but so are the regulators.

The world’s biggest online distribution platforms are owned by a handful of firms. Apple (1.5 billion users, $274 billion revenue), Google (1.7 billion users, $183 billion revenue), Facebook (2.8 billion users, $86 billion revenue) and Amazon ($386 billion revenue). A newspaper, a song, a show, a film or a game can reach these audiences only on terms that the firms decide. If they don’t agree, publishers and content creators could get locked out of the global market in one go like Fortnite was from Apple last August or a large section of the Australian press was from Facebook last week. Each of these big firms has bought out potential competitors time and again. As they keep growing, the network effect has made them way bigger than their actual size.

The second implication is a skewing of the market in favour of the big guys. The firms with many brands, large audiences and negotiating power, like Seven West and News Corp, have already signed up deals with Google; more will follow. According to estimates, Google and Facebook get about a third or less of their traffic through news. Assuming it has a threshold number of deals in place, Google may not need the smaller guys.

You could argue that some of this can be mitigated if a market is pay-driven. In India, every major publisher is locking up its website or working on some version of a pay product. This is driven by the collapse of ad revenues and the surge in online traffic during the pandemic. A move to pay is good for small, medium and specialised publications. This assumes they have the depth of content to hold on to subscribers and the budgets to get new users and fuel discovery. Without the reach of a Google and Facebook that is tough. It is like we said, a bit chicken-and-eggish.  

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