Holding Facebook and Google to account might be a great idea in theory, but the proposed code is based on false assumptions, writes Australian ex-MediaWorks news boss Hal Crawford.

A couple of weeks ago, the Australian government announced that it was going make Facebook and Google pay news companies for the news content they “used to drive traffic to their sites”.

Treasurer Josh Frydenberg directed the Australian competition watchdog, the ACCC, to develop a mandatory code that covered “value exchange and revenue sharing; transparency of ranking algorithms; access to user data; presentation of news content; and the penalties and sanctions for non-compliance”.

Frydenberg’s deadline is July, which if you’re a staffer in the ACCC might feel pretty intense. After all, the treasurer has confidently announced the media industry equivalent of squaring the circle and given you just a couple of months to get it done.

Unfortunately the code, when it arrives, will be ineffective at fixing news media. For it to work, the assumptions underlying it would have to be correct. Despite the ardent hope of almost everyone, they are not.

The Australian code will have an impact in New Zealand not because it will show the way in “holding digital giants to account”, but because it will rule out one ostensibly promising lead for news media. If based in any kind of reality, the money paid from Google and Facebook to news companies will be minimal. If not based in reality, the mandatory code will collapse under legal examination.

What’s right

I don’t want to start with the mistakes in the ACCC and the government’s position, however. Here’s what’s right about the thinking behind the code: Google, Facebook and other global companies are not sufficiently contributing to the public purse and the community life of the places where they conduct business. Both companies have made moves to support news locally, but these good initiatives are not yet enough to balance the books.

The poor contribution makes it feel right that the government is going after the two giants on the news front. After all, news is vital to our societies and it’s becoming financially impossible to create. But just because making the big guys pay for news feels right doesn’t make it right.

The reasons being advanced for payment are wrong.

The treasurer, announcing the code in the News Corp owned The Australian, wrote: “It is only fair that search engines and social media giants pay for the original news content that they use to drive traffic to their sites.”

This position echoes News Corp Australia boss Michael Miller’s view: “We’re competing with companies that do not create content, have no journalists, but continue to take our content and don’t pay for it.”

The world view behind both these statements has news media and digital platforms in the same kind of league, conducting the same kind of business. In this alternate reality, the digital guys are winning because they are nicking so much content. The treasurer’s statement even describes Facebook and Google as “sites”, which puts them in the same ballpark as theaustralian.com.au and every other news website. They use “content” to drive “traffic”, which they then monetise with advertising.

This is how a news person looks at digital. I know because I am one, and I’ve spent a lot of time thinking that way. But it’s not how Facebook and Google work. They are expressly and explicitly not content companies and they have become wealthy not by focusing on traffic but by subordinating everything to utility for the user. They are coding companies with an obsession for generalisation. They are swimming in oceans of traffic because through the development of their products and services they haven’t focused on traffic. In this way they are the opposites of most digital news media.

In the treasurer’s News Corp piece, he notes that the majority of money spent on online advertising in Australia goes to Facebook and Google, and that the market has grown eight-fold since 2005. This is mentioned by way of supporting evidence for the mandatory code, but what is does is remind us that both companies created the market they dominate.

Like cellular life in the early history of the earth, the digital giants have created the conditions in which they are thriving.

In terms of revenue, they have done this by having very good advertising products. Ad-funded media businesses often publicly forget they are half advertising companies and prefer to focus on the news they are making. They don’t have the engineering muscle of the coding companies, and when it comes to innovating in digital advertising, they have been left behind. There are some things old media still do better – like providing environmental legitimacy, “road block” campaigns across digital/broadcast, and outdoor advertising – but for most advertisers, the price, precision and ease of use of the digital giants’ ad products are superior.

News is not a cash cow for anyone

News is an an important part of both digital giants’ products and services. It’s timely, mostly accurate and, importantly, “authentic”. But news doesn’t directly make Google or Facebook much money: the Google News interface is not commercialised and news accounts for just 4% of Facebook feed content. Both companies are willing to walk away from news. Google did so in Spain, where 2014 legislation required it to pay news agencies for using their content in Google News. It turned off the service, and it still has a good business there.

Facebook’s ability to walk away from news traffic and still make big profits was demonstrated in 2018 when Mark Zuckerberg and his engineers tweaked the main feed algorithm to favour content from friends and family. News publishers still talk about those dark times, but Facebook didn’t skip a beat. At the time Zuckerberg emphasised that Facebook was about “personal connections”. It is possible there is a faction within Facebook that would prefer the social media company disengaged with news altogether.

First Google

Google indexes news content in general search because that’s what a search engine is. It’s a searchable index. If it had to pay site owners for making that index it wouldn’t exist, and that’s a deal every content creator for the past 25 years has accepted. You can opt out of Google if you want to, and if you don’t want to, Google won’t invoice for the traffic it sends you.

News publishers do not get a cut of revenue from ads on Google results pages where links to their content appears. It’s hard to see how such a payment could be legally justified. For that to make sense, there would have to be a fundamental difference between news media and every other kind of content creator. When does a blog become a news publication?

There’s also the issue of existing law. Snippets, excerpts and summaries aren’t covered by copyright in most countries at the moment, I think because as societies we value freedom of information. So on what basis does Google pay the news companies – presuming it can identify them – for ads it has sold on index pages it has created?

Then Facebook

The social media giant’s situation is similar to Google’s. Instead of making index pages, it allows users to post content that is then shown to other users. Some of that content is links to news. The “opting in” of news media on Facebook is usually even more explicit, because to be included in Facebook’s various news products, outlets have to post stories themselves. They do so because they value the traffic from the social media giant highly. For many news outlets, Facebook comprises the biggest single audience source.

Should Facebook pay news media for the news links posted by individuals? On what basis? If you can answer that question, how do you distinguish news from all the other content?

What about fairness?

Weirdly, I think what the news industry is railing against, deep down, is the fact that you can’t own general information. It feels unfair that Google and Facebook can make such profitable businesses on the back of all these facts that others have unearthed. Shouldn’t we move to stop this happening by granting ownership of news to news creators, and not just the form of the words and video but the information itself?

The problem with this stance is that when you follow it through, to have someone owning and controlling information is incompatible with a free society.

So we are left with this really big problem: the very expensive and necessary task of gathering true information about what is happening in our societies has become not only financially unattractive but impossible. As much as we’d like to find someone to blame for this situation, pointing to two plump digital newcomers and baying like a pack of hounds won’t work.

The answer

A good interim solution would be to stop trying to find a direct and unequal value exchange between news media and the platforms and to instead raise a tax on digital giants directly. That will require a lot of energy, but it has the benefit of clarity. It is a response to a very new situation, a situation where global tax laws have allowed these companies to contribute very little locally despite making lots of revenue on the back of New Zealanders and Australians.

When we have raised the tax, the real debate begins: how best should we use public money to ensure the continued unearthing of daily truths?