The now-deleted article and disclaimer running on the NZ Herald (image: screenshot)
A glowing sponsored story spoke of a historic poverty reduction. But reader feedback to the Chinese Communist Party-linked story has seen NZME pull it down and reassess its policies, reports Duncan Greive.
Under the subheading “Relocation & revitalisation see 100m people lifted out of poverty” sits an unambiguously positive story about the Chinese government’s role in raising incomes and living standards in China. It contains lengthy quotes from the Chinese president Xi Jinping, and notes that he “has taken a personal interest in alleviating poverty, having visited almost all the most poverty-stricken areas in China since the 18th national congress”.
It goes on to quote citizens speaking passionately about their jobs growing fruit (“The apples grown here taste nice and are popular nationwide”) and making other extremely on-message statements (“Compared to before, life is considerably better”). It is basically a boilerplate example of the kind of propaganda routinely created by authoritarian regimes to illustrate their excellence.
And it ran on the website of the NZ Herald, New Zealand’s most popular newspaper. The NZ Herald, like most media organisations in this country (including The Spinoff), runs stories from partners who pay to be placed on their sites. Some of these will be crafted by a journalist at the organisation, others simply supplied and posted unaltered.
This piece of content had an unusually explicit level of distancing involved, with a disclaimer included as a boxed image at the top of the story.
The disclaimer at the top of the now-removed article (Screenshot: nzherald.co.nz)
It said the story “has been produced and published by the People’s Daily who take sole responsibility for the content” and goes on to underline that “the New Zealand Herald does not necessarily agree with or endorse any opinions which may be expressed here”. This is the most full-throated distancing I’ve seen on a story, far more aggressive than the simple “sponsored by” which accompanies most stories of this nature.
When I contacted the NZ Herald, it pulled the story down within hours of the email landing, and a spokesperson supplied a statement explaining why. “This came out of a commercial agreement that sees us host a very small amount of sponsored content online, which is clearly labelled as sponsored. It’s made clear that the advertiser takes full responsibility for the content, and that the NZ Herald doesn’t necessarily agree with nor endorse any opinions contained within.
“However, following reader feedback on this particular advertisement, it has now been removed and we are reviewing this type of sponsored content arrangement moving forward.”
‘Media is under threat. Help save The Spinoff with an ongoing commitment to support our work.’
Duncan Greive — Founder
How is this different to any other piece of sponsored content? The most crucial difference is that the People’s Daily is not just any other client. It’s a newspaper group owned and controlled by the Central Committee of the Chinese Communist Party – China’s most powerful elite leadership group. It is headed by Chinese leader Xi Jinping – he is functionally the publisher of the story which quotes him so admiringly.
While the story has been pulled, many others remain. NZME calls it “a very small amount” of sponsored content, but there are more than 30 stories on a dedicated homepage, going back months. A scoop earlier this year from Critic – Te Arohi noted a similar practice at the Otago Daily Times. In it, journalist Denzel Chung noted that he had approached other news organisations, including NZME, to ask whether they had similar deals. NZME did not reply. When contacted, NZME rival Stuff confirmed to The Spinoff that it had no current deal with the People’s Daily.
Some of the content from People’s Daily Online that has been republished on the NZ Herald
So what’s the problem?
Gavin Ellis, former editor of the NZ Herald, pointed out that there should not be anything stopping the Herald publishing stories of this nature, “but if it does, it should contain a fact-check panel. That if there are facts contained in there which are verifiably untrue, it should say so”.
He pointed out that China is fundamentally a different kind of government to our own. “It’s coming from an increasingly autocratic state, it should be treated with great care, in the interests of their readers.” Additionally, he pointed out that the People’s Daily is “not just another newspaper”. Its status as the mouthpiece for the Central Committee of the CCP means that by publishing its work you are publishing the views of the Chinese leadership.
Ellis believes that because that link is not made clear on the stories, it runs the risk of violating an Advertising Standards Authority guidance note, which states that “advocacy advertising must clearly state the identity and position of the advertiser”. A spokesperson for the ASA told The Spinoff that it had “have dealt with complaints about advocacy ads in this space” but that they “don’t comment on the likelihood of code compliance for specific ads, in case we get a complaint.”
This is not uncomplicated. Tourism New Zealand is a massive advertiser, in and out of this country, while also being a Crown-owned entity. This is not noted on its ads or content, and nor would anyone expect it to be. But China is committed to a giant global propaganda campaign which aims to burnish its reputation and undermine that of Western democratic states.
A major Guardian investigation said that “China is trying to reshape the global information environment with massive infusions of money – funding paid-for advertorials, sponsored journalistic coverage and heavily massaged positive messages from boosters. While within China the press is increasingly tightly controlled, abroad Beijing has sought to exploit the vulnerabilities of the free press to its advantage.”
Most of the previous stories published in the series are less explicitly political. They talk about the potential of 5G to fuel economic growth, driverless taxis and “fish robots” – the future-gazing heart of many sponsored stories the world over. Yet the ultimate motive of this advertiser is very different. With its identity obscured, it’s not at all clear that the average reader would know exactly what they were reading – or why.
Keep going!
Hamish McKenzie and several Elons Musk. Design: Tina Tiller
Hamish McKenzie and several Elons Musk. Design: Tina Tiller
Hamish McKenzie was hired by Musk, wrote a book about his Tesla revolution and went on to found Substack, the platform today enjoying a ‘Musk bump’ as Twitter users look elsewhere amid the chaos. He talks to Toby Manhire.
The timeline is mayhem, and the big, volatile mouth at the top is for real. Elon Musk is not playing 10-dimensional chess, nor contriving a persona for Twitter – he’s the same in real life, says Hamish McKenzie, the New Zealander who once worked for the billionaire entrepreneur and subsequently wrote a book about the man and his electric car colossus Tesla. “The guy he is on Twitter at the moment is pretty much who he is. I don’t think he’s hiding anything.”
Since completing a strange and ultimately reluctant takeover of Twitter less than a month ago, Musk has set about his work like a flamethrower seeking out fuses. Impulse sackings and ultimatums, a flurry of diktats and tweaks to the business model, the summary reinstatement of Donald Trump’s account based on a user poll. And all of it playing out before a mesmerised, mocking gallery on the very toy he just paid US $44bn for. Elon was meant to own Twitter, not the other way round.
Call it crazed genius or atomic grade hubris, the world’s richest human is chronicling the chaos as he goes, in bursts of 280 characters or fewer. “You see all of it. The sensitivity. The callousness. The humour. The boldness. The unforgiving analytical view of things,” says McKenzie. “All of it is on display.”
Musk and his companies became subjects of fascination for McKenzie when he was reporting for the erstwhile tech publication Pando Daily about a decade ago. A couple of years in, Faber & Faber got in touch, asking if McKenzie would be up for writing a book on “this guy Elon” – and whether Musk might cooperate. Musk’s response at the time, McKenzie recalls: “I don’t know about the book, but would you be interested in coming to work at Tesla?”
They agreed to put the book on the back burner, and McKenzie joined the company as part of the comms team, with the title “lead writer”. “No one knew what that meant. So we had to figure that out. I wrote for them for a year and a bit. And it was a crazy ride, for reasons that might be now apparent.”
When it looked like his role might get chopped McKenzie turned his attention back to the book. The result was Insane Mode – named after an acceleration setting, but hinting, too, at Musk’s modus operandi. The book is principally about Tesla and the electric vehicle revolution, says McKenzie, “but he’s a big character”.
Who is he, then, in a nutshell? “Who is Elon Musk? He’s this kid who was severely bullied when he was a teenager growing up in South Africa. Extremely, extremely smart. The nerd who was always correcting you on, like, how far the actual distance the moon is from the Earth. And through a sort of backpacker-type hustle, he landed himself up into entrepreneurship in Silicon Valley. He’s a huge-thinking entrepreneur with a ‘what’s the worst that can happen?’ type of mindset. A chip on his shoulder, from past business experiences and his high-school bullying,” says McKenzie.
“And he has strong extremes of personality. So at his best he is charming and hilarious. And at his worst, he’s callous to the point of ruthless. He doesn’t seem to have many close friends who have endured as close friends.”
Elon Musk speaks at the 2020 Satellite Conference and Exhibition in Washington. (Image: Win McNamee, Getty; design magic Tina Tiller.)
Substack and the Elon-gation
I’m talking with McKenzie just after 8am in the food hall at Auckland Airport’s domestic terminal, where he, his wife and two young children have paused for a bite before completing their journey to Wellington. They’re returning for a stint to visit family and friends, but home is now San Francisco, and work is Substack – the digital media company McKenzie co-founded five years ago this month.
That lends him a unique perspective on the Twitter-Musk experiment. Substack has grown from a newsletter company into a broader publishing platform, with a formidable roster of contributors. (New Zealand writers thriving on Substack include Bernard Hickey, Emily Writes, David Farrier and David Slack, while most of the Spinoff’s newsletters use the service.)
As the flames have lapped around Musk and his new acquisition across recent days, many high-profile Twitter users, among them writers with hefty follower counts, have been chucking a change of clothes in a Substack lifeboat. And Substack has been eagerly hailing them aboard.
The Elon-gation superhighway
“A lot of people are saying, ‘I don’t know what’s going to happen here on Twitter, but, just in case, you can find me over at Substack.’ That’s a good message for us,” says McKenzie. “It underlines the importance of owning your audience. On Twitter you’re vulnerable to whatever the king’s going to do. On Substack you can be more in control of your audience.”
McKenzie can’t today put a number on the uplift, but it is a “significant bump“, he says. “We should give it a name,” he says, alert to my appetite for a headline. “Like, the Musk Bump, or the Elon Elevation. The Elon-gation?”
The Substack formula was in part designed as an alternative to social platforms like Twitter, Facebook and Instagram. By privileging the direct author-reader relationship, rejecting an algorithmic monster hungry for outrage and hostility, and favouring subscription revenue over click-based ad models, the Substack pitch to writers is “full editorial control and no gatekeepers”.
In that light, has Musk mostly just hurled accelerant all over a social medium that was already burning? “I don’t think it makes a difference to Substack’s mission of providing an alternative to the attention economy, whether Elon is the Twitter CEO or not,” says McKenzie. “The same dynamics apply – unless he’s successful at radically changing their business model, which he seems to be intent on doing. But because of the extremeness of it all, the extreme reactions on all sides, it highlights very clearly the dynamics that led us to starting Substack in the first place, which is to kind of help people take back their minds … to make readers not so submissive to these engagement-oriented AIs, and to help writers have much more control and ownership and a way to make money that’s not just some giblets of the advertising economy.”
On Friday afternoon, while the Twitter furnace was roaring, McKenzie tweeted at his old boss. “Hey @elonmusk let us take over Twitter.” It was a joke amid a flurry of gallows hysteria – but why not? What might Substack do with what’s left of Twitter?
“Oh, if someone gave us the keys to Twitter, we’d be like, OK, let us drive,” laughs McKenzie. “The problem is not that people want to post stuff online, or that social media is bad and it can never be done right. The problem is the business model … So if we got control of Twitter, we would rip out the business model. Put in the Substack business model, make the platform much more aligned with the writers and creators and make the writers and creators much more aligned with the readers and consumers. Make it around direct payments and subscriptions, so the users of the platform stop becoming the product and start becoming the customers. And I think Twitter could get really, really interesting if it [was remade] based on those assumptions.”
He says: “If you remember, before 2014, Twitter was pretty well liked. It was a pretty good experience. It was much more based on the social graph – who you follow, who you opt to pay attention to. The feeds were much more chronologically oriented, they weren’t being determined by whatever contentious content was keeping people mostly addicted. And the same is true of Facebook. Facebook took a long time to monetise around advertising. And in those days, Facebook was loved. The newsfeed was a very good experience based much more around the relationships you have with people. And as the ad model has kicked into gear, and as the machines have responded to the ad model to be more and more optimised for monopolising attention and feeding the advertisers’ needs, the experience has got less and less about human relationships and more about are you entertained? Or are you piqued? Those things are contributors to polarisation and a lack of good-faith arguments. And, you know, a coarsening in the discourse overall.”
Maybe Musk is moving, lurching in that direction – reorienting the business model towards a subscriber-centred approach. Maybe. “He’s thrown out a hundred different ideas,” says McKenzie. “And some of them are in conflict with each other.” Musk’s urgent priority, as far as McKenzie can see, is the “giant financial hole” the company faces. “They can’t even afford to keep up on the interest payments. So he’s got to get cash flows in some way, at the same time as advertising dollars are shrinking. A subscription at $8 a month might be just his first step to get some money flowing.”
A full Twitter implosion is not something Substack would cheer, mind you. “I think it would be bad for us,” says McKenzie. While his platform has in recent times started to measure significant “network effects” – with around 40% of new subscriptions now coming from within the Substack universe – they continue to see a substantial number of people arriving at Substack after clicking on a link posted by the author or an admiring reader on Twitter or another social platform. “So it would probably hurt us in the short term. But we’re hoping to get ourselves into a place where we’re less reliant on that kind of thing.”
Sustack co-founder Hamish McKenzie
‘The whole game has changed for us’
Twitter is just the latest, wildest plot twist in a Silicon Valley storyline that has a distinctly doomy feel of late. At Meta, where Mark Zuckerberg has bet the house on what could prove a megalomania-verse, 11,000 people have been laid off amid dire results. Amazon is cutting 10,000 jobs. And then there’s the crypto world, with its carnival of what Nouriel Roubini calls “crooks, criminals, con men [and] carnival barkers”.
Is McKenzie sensing any – gulp – dotcom bubble deja vu? “This is definitely a bad moment,” he says, raising his voice above an airport boarding call. In the Bay Area the mood reflects “a bloodbath of layoffs”. But the impacts feel more like the global financial crisis fallout in 2008 than the bubble-burst of 2001, he says.
“In 2001 it was like a house of cards falling down. There’s a whole lot of businesses that should never have been businesses. In 2022, no one doubts an internet business can be a huge thing. There are some people that have been revealed to have no clothes on when the tide goes out. But it’s at a stage when they’re building their company, before they had got to the point where they had a provable business model, that this economic downturn has happened and they’ve been exposed … I’m not downplaying it. It is major, significant. But it’s of a different quality than the 2001 crash.”
Substack has had to rethink its approach, too. In May, the New York Times reported – with a lick of snark – on the “the ballyhooed newsletter platform” abandoning a capital-raising round that was seeking between US $75m and $100m from investors, which would have valued the company, according to the Times, at more than $750 million.
‘If you regularly enjoy The Spinoff, and want it to continue, become a member today.’
Toby Manhire — Editor-at-large
“The whole game has changed for us,” says McKenzie today. In 2021, when Substack confirmed a capital raise of $65m, “that was a hot market. The pandemic was a huge lift for companies like ours. And venture capital was easy. And we timed our run with venture raising to perfection. We raised at a really good valuation. Because the story was really good. Momentum was really good. The team was really good. And we had a lot of the best writers. But it wasn’t that tightly coupled to the actual revenue numbers. And so when the economic downturn started, well, 2022 was the inverse, a 180-degree shift from 2021. We had to go from this mode where we’re spending wildly with confidence to a mode where we’re like, wait – we’re going to be in a state quickly where no companies at our stage are going to be able to rely on raising venture capital on good terms. And so we’re going to have to make sure that we put ourselves in a position to weather an economic winter, no matter how long it might be, without having to take any outside funding.”
Substack, too, made layoffs, with 14 redundancies from a staff of 93. Expenses were cut. It meant “funding ourselves through our own growth”. It’s not right to call it a “rough patch”, says McKenzie. “But it is a more challenging game. You have to be paying attention to every dollar you spend. It’s good. That’s what proves companies ultimately.”
More Reading
As the Substack town square becomes bigger and more populous, the platform will face accordingly greater scrutiny. Facebook has long since abandoned the absurd claim it is not a publisher, and taken steps, however unsatisfactory many consider them to be, towards addressing issues of hate speech and misinformation.
Is that something that looms larger for Substack, especially as the first rotors of the 2024 presidential election begin spinning? McKenzie harks again to the pre-2014 nirvana, when “experiences on Facebook and Twitter were different”. He says: “Then their new models kicked in, and they became these much more like these giant contentious content and behaviour amplification machines, which contributed to a bunch of problems in society.”
It is not quite anything goes – Substack has content guidelines – but McKenzie is optimistic that even as it adds a bunch of functions including in-app forums, his platform has a DNA closer to that of the old-school blog, where “you didn’t really get rewarded status points for dunking on each other or scoring points against your enemy in public”. He says: “Our version of being responsible custodians of a platform where people are doing influential work is not to come up with a more sophisticated censorship regime. But to get us back to a model that totally changes the impact of anything that might be construed as hate speech or misinformation, by having a different model that puts people much more in charge, where writers have much more ownership and control and readers have a lot more agency.”
If Substack continues to grow as it has, picking up the tired, poor and disaffected masses of Twitter along the way, that optimism will soon be put to the test.