Issue 101

Facebook strikes back as Google folds

Delivered on 22 February 2021 by Justin Pyvis. About a 5 min read.

In response to the Australian government's move to push ahead with a slightly watered down version of its News Media and Digital Platforms Mandatory Bargaining Code, Facebook decided the Australian market just wasn't worth the effort:

The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content. It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.
Unfortunately, this means people and news organisations in Australia are now restricted from posting news links and sharing or viewing Australian and international news content on Facebook. Globally, posting and sharing news links from Australian publishers is also restricted. To do this, we are using a combination of technologies to restrict news content and we will have processes to review any content that was inadvertently removed.

For those who need a reminder, the media bargaining legislation would require Google and Facebook to pay a few large, politically connected media companies whenever a link to their content is displayed by Google or posted on Facebook - even when the media company posts/promotes the link itself. It is "fundamentally against the principles of an open internet"; nothing but an old-fashioned shakedown.

It doesn't take much analysis to show why, either, with the media companies the primary beneficiaries of the existing relationship. Just look at the low value of news to Google and Facebook and the very existence of the entire search engine optimisation industry, where companies pay to get their links closer to the top of Google searches and Facebook feeds. Then there's the question of why media companies post their articles to Facebook - no one is forcing them, just as no one is forcing them to have their pages indexed and displayed by Google. The fact that none of them use a single line of code to prevent Google displaying links to their articles says quite a bit.

Curiously, Facebook opted to remove all links to Australian news rather than fold like Google did last week, when it signed a "three-year deal with News Corp [that] will see it hand over an unspecified amount of money to include content from the publisher’s titles... in its News Showcase", thereby avoiding the government's one-sided 'bargaining process' altogether. It's not yet clear whether Facebook's decision was made on principle, commerce (Facebook's statement claims "the business gain from news is minimal"), or some combination of the two, but either way both Google and Facebook now comply with the code.

Problem solved, right? Wrong.

While Google has now conceded that it will effectively cut a cheque to every news outlet on the planet to placate their political puppets, Facebook has (so far) opted to defend the principle that no one should have to pay to link to a website. Yes, I know, 'principle' and 'Facebook' are rarely uttered together and I fully expect Facebook to prove me wrong when it does a Google and signs deals with media companies in the coming days or weeks (following through on its threat has given it a much stronger hand in negotiations - more on that below).

Google's concession and Facebook's exit should be the end of it but no, media pundits and politicians were furious that Facebook had refused to pay the government's ransom. How dare it simply walk away! The cronies all came out in force to defend their powerful masters, with all-too-familiar appeals to emotion (and omission of facts):

A small sample from The Australian newspaper.
A small sample from The Australian newspaper.

Admittedly, Facebook messed up. Rather than compile a database of Australian media sites to filter prior to withdrawing, it opted to use an algorithm that accidentally "erased several state government and emergency department accounts, as well as nonprofit charity sites". Machine learning isn't great at the best of times so there were some teething issues, for which Facebook has apologised and resolved (presumably by using humans to white-list the affected sites).

However, contrary to the wild claims made by many of Australia's politicians and journalists - some even going so far as to claim Facebook was acting like a "North Korean dictator" - none of those websites were actually 'erased'. As any of the 71% of Australians who don't use Facebook as a news source could have told them, there's this thing called the internet where all of those government websites are still available. You just... type the address directly into a web browser, or use a search engine. Hardly an "act of war".

But I digress. Following Facebook's decision, traffic to Australian media sites sent from Facebook fell from around 21% to about 2%, with total page views - which is what really matters for these media companies - falling by approximately 13%.

News media page views referred by Facebook

According to Chartbeat, a tool used by many Australian news outlets to track referrals:

In prior research, we've found that when Facebook was completely down, users shifted from Facebook to other platforms and traffic remained constant or even increased.

Unfortunately, Facebook's disappearance has resulted in a hit to publishers' traffic numbers: when Facebook traffic dropped off, overall Australian traffic did not shift to other platforms,

Translation: the early data suggest that Facebook likely increased the total number of people reading news produced by Australian media companies. With Facebook no longer posting links to Australian news websites, those people are simply consuming less Australian news. That can't be good for media companies' bottom lines and if the trend continues it will strengthen Facebook's bargaining power in its ongoing negotiations with the Australian government.

Long time readers know I'm no fan of Facebook but it is unequivocally in the right here, at least for now. If the Australian government wants to subsidise legacy media companies and tax Big Tech to pay for it, it should present the evidence for such a decision and do exactly that (it's what the French did). Instead, Australia's politicians - this legislation has bipartisan support - have fallen prey to legacy media's blatant rent seeking, opting to protect incumbent firms from competition (the beneficiaries of this code are explicitly named, essentially freezing out new content providers) with an opaque, incoherent 'bargaining code' that completely misunderstands the very thing it is supposedly trying to rectify.

Postscript: Follow the money

Australia's Treasurer Josh Frydenberg - who is, incidentally, leading the government's negotiations with Facebook - has strong ties to one of the organisations that will benefit the most from this legislation:

  • Josh Frydenberg was best man at Ryan Stokes’ wedding.
  • Ryan Stokes is Kerry Stokes’ son.
  • Kerry Stokes owns Seven West Media.
  • Seven West Media will do very well out of the media bargaining code.

Corporate welfare, crony capitalism, rent seeking; call it what you will. Everything about this code stinks, but unfortunately Google's capitulation (and I fully expect Facebook to follow - the Zuck's not one to pass up on a buck, even if governments clip the ticket on the way through) means this competition-stifling code will soon be exported around the world in various forms.

Issue 101: Facebook strikes back as Google folds was compiled by Justin Pyvis and delivered on 22 February 2021.