All Blogs,Digital Marketing,Media, - March 17, 2021

Cumulus Media: Google and Facebook Must Pay For News

New Law Sets Disastrous Precedent: Big Tech Must Pay for News Content in Australia
How This May Impact Online Marketing In The United States

In an effort to curb the dominance of big tech, Australia is the first mover in passing a law that will make Google Search and the Facebook News Feed pay for news content that is featured on their platforms. The Australian Parliament recently passed a law called the News Media and Digital Platforms Mandatory Bargaining Code. That’s a long name so… let’s just call it the “News Media Bargaining Code” for purposes of this blog.

Like legislators and small businesses in the United States, Australia has been at odds with Big Tech since last year and beyond. From discussions of online censorship and how these companies compete under century-old antitrust laws, there is wide acceptance of the fact that Big Tech has become too powerful. However, to date, little has been done by regulators and in the courts to make things more competitive for small businesses.

In July of 2020, after a year of investigation, the US House Judiciary Committee called Amazon, Facebook, Google, and Apple to a salvo of antitrust hearings that teed up lawsuits filed by the DOJ and FTC. Concurrently, Australian lawmakers had been fielding several years’ worth of complaints from news publishers about Facebook and Google’s roles to decimate their abilities to do business effectively.

In a nutshell, the ad platforms that support Facebook and Google and how these companies control clicks and impressions to specific content were crippling to news publishers.

Investigations into the online dominance of these tech firms have been ongoing.

Leading up to the passing of this new law, in Australia, an investigation found that in 2018, for every $100 Australian Dollars (about $78 USD) invested by Australian advertisers, about A$49 of those dollars went to Google and A$24 to Facebook. That’s a huge cut of the overall ad budget — and that’s just data coming in from Australia!

While the passing of this new law is designed to be a remedy to this, the world will now look to Australia as a test case for how similar regulations may be mandated in the United States and beyond.

What is Australia’s News Media Bargaining Code?

This new law, or “code,” fundamentally changes the relationships between news publishers and big tech outlets by ensuring that news companies earn money for use of their content.

This means that big tech outlets must pre-negotiate and agree on payment terms for content that will be featured in Google search results and Facebook shares, among other uses. News content that is not already coming from an approved publisher will not be allowed on the platforms.

In respect of heated debates surrounding Section 230 in the United States, digital marketers have discussed how Facebook and Google adjust their search algorithms to increase or decrease the engagement and visibility that specific publishers enjoy from one day to the next.

It is important to note that big tech companies own the rights to their proprietary search algorithms, and it is within their rights, as private companies, to make unilateral decisions to adjust these algorithms.

At issue is that many of these adjustments have been made in ways that publishers claim are unfair or anti-competitive. With this new law in effect, any major algorithm changes must also include a 28 days notice before the adjustment.

How News Sites Make Money Elsewhere

In most countries, such as in the United States, news publishers earn revenue by displaying ads within their news content, from sponsorships and subscriptions, and from clicks to their website where banner ads are shown.

A high volume of clicks and organic traffic originates from Google and Facebook. This happens when users share links, make comments on original posts, and when advertising dollars are invested into boosting the number of impressions that a particular story can gain.

Publishers with greater visibility attract more site traffic, which equates to greater advertising revenue. In practice, this means that Facebook and Google can unilaterally make decisions that strongly impact the ability of publishers, such as news organizations, to maintain a feasible business model centered around ad revenue.

Claims of bias as to which sites are given preference and which are not is fuel to the fire that Australia is working to extinguish.

What Facebook Has To Say About This

At first, Facebook fought against the imposition of this law by blocking all news content from its platform across all Australian users.

You (publisher) need us more than we (Facebook) need you.

Facebook measures that news content equates to just about 4% of the total content that users are exposed to within its News Feeds.

In large, this is because Facebook’s algorithm deemphasized the importance of news posts and added favor to activity from friends and family. For early Facebook users, this probably felt a bit like a throwback to the mid-2000s when the platform was truly designed to amplify conversations between friends and not 3rd-degree connections.

Facebook argued that social media allows publishers to gain the attention of users that are on their platforms for a purpose other than a news update. In 2020, publishers gained over 5 billion free referral clicks to their websites.

Because of this, there is an argument that Facebook, as is, helps small news publishers more than it hurts them. After significant negotiations with Australian regulators, the company ultimately agreed to work according to the new law.

How This Impacts Small Businesses and News Publishers

Did we mention that this new law requires big tech outlets to pre-negotiate payment terms with their news publishers? News Corp already has a multi-year agreement in place with Google and they’re extremely happy about it. We should be asking ourselves: “why are they so happy about it?”

…the new law will shrink the market by reducing the number of publishers that are able to compete for user engagement.

There is a chance that other big media companies will be strongly in favor of this because the new law will shrink the market by reducing the number of publishers that are able to compete for user engagement.

A law like the News Media Bargaining Code means that big tech can now pick and choose who to do business with.

Prior to the law’s passing, complaints were that big tech was already making decisions about which publishers to censor and boost via changes to their algorithm.

With this new law in effect, this takes control over publishers a step further and requires that news companies jump through additional hurdles to gain visibility. Leadership at big tech companies is now able to decide who is and is not on the “approved publisher” list and the public should be extremely wary of this.

The Presumed Impact On Free Press and Potential Impacts In The US

On one hand, action by Australian regulators validates a strong, global desire to curb big tech’s power. On the other, it points to a lack of understanding of how lawmakers should remedy concerns related to online censorship and competition.

As well-intended as this new mandate may be, the implications of a less diverse, less numerous source of news content may equate to a less free press and diminished free speech. A 2019 Pew survey found that 43% of Americans get their news from Facebook. Considering that Facebook has over 223 million US users, this issue is critical to the future of public access to a free press.

Business and political leaders in the US have to recognize that a shortcoming to this law is that it does not provide clear guidance on the definition of news content. So in practice, who will make that decision before approaching the negotiating table? Big tech has already indicated that it will take a broad definition to respect the law as drafted, but how will this actually play out? As is, un-elected leaders within big tech companies and/or politically motivated decision-makers will be tasked with oversight. This is not a pathway toward a free and vibrant press.

The Remedy Is In The Future of Section 230 and Antitrust Reform

Today, there is bipartisan support for antitrust reform from politicians such as Senators Klobuchar and Hawley, elected leaders who typically disagree with one another.

instead of testing Australia’s attempt to curb giants like Google and Facebook, the US should look to the Aussies as a test case while furthering the discussions related to Section 230 reform and updates to outdated antitrust regulations. The world will observe Australia as the first mover.

However, the expectation is that this new law will inevitably harm small publishers, and it will shrink the market, reducing competition and limiting the diversity of news sources that online users were able to access in 2020.

Agency Partner watches Google’s algorithm and the online market every day. As a digital agency, we know how much value these companies offer the market, but we also respect that with great power comes greater responsibility. If your business is looking to utilize the powers of big tech in an ethical, aggressive way, then the digital marketing team at Agency Partner should be your next call.

Author: S. Adam Rizzieri
Co-founder & Chief Marketing Officer // Agency Partner Interactive