Facebook may end up paying news companies for content, but it has shown Australia who’s boss. By Peter Griffin.
When Stephen Fenechquit his job as a journalist on Sydney newspaper the Daily Telegraph in 2010, he was taking a leap of faith that he could go it alone in the world of new media.
The risk paid off for the respected technology journalist and founder of techguide.com.au, which publishes tech news and dispenses advice on new gadgets.
With a presence on platforms such as Facebook, Twitter and YouTube to drive traffic to his website, Fenech found enough support from advertisers and sponsors to support TechGuide, and drummed up free publicity for the venture with appearances as a tech pundit on the likes of Sky News Australia and Sydney talk radio station 2GB.
But as Fenech this month celebrated the 10th anniversary of TechGuide and life away from the daily grind of the Telegraph, he also faced an existential threat to his business. On Thursday, February 18, Fenech logged on to the TechGuide Facebook page, which has more than 13,000 followers, to find that a decade of posts, thousands of articles and tens of thousands of readers’ comments had vanished.
The website was caught up in Facebook’s massive purge of Australian news articles from its platform. That not only saw articles from small publishers such as TechGuide stripped from Facebook, but also news content from Australia’s largest media outlets, the Sydney Morning Herald, 9News, the Australian, the Guardian Australia and public broadcaster ABC among them.
It was a shock protest move by Facebook against the News Media Bargaining Code the Australian Government is introducing that will require Facebook and Google to pay Australian news outlets for the privilege of running links to their articles.
Both tech companies had made their displeasure about the new legislation widely known and, in early February, Google raised the prospect of withdrawing its search engine from Australia rather than be forced to strike deals with media companies.
But Facebook moved first. “Facebook decided in the middle of those negotiations to hold a gun to the Australian Government’s head,” Fenech told the Listener.
“The years I’ve put into building this page, this community. It has suddenly and without warning been taken away from us,” he said last week as TechGuide’s Facebook page went dark, displaying just three words: “no posts yet”.
The news ban turned out to be short-lived. Five days later, Facebook said it would restore news content on its platform after striking a deal with the Australian Government to alter the terms of the code before it is enshrined in legislation.
But it was incredibly disruptive and a public relations disaster for Facebook. Not even Australia’s Treasurer, Josh Frydenberg, who had been holding lengthy meetings with Facebook founder and chief executive Mark Zuckerberg, knew what was coming.
To make matters worse, when Facebook pushed the button on its news ban, it botched the process. Non-media agencies including state health departments gearing up for Australia’s Covid-19 vaccine rollout and the Victorian Police saw their Facebook posts disappear, too.
Facebook apologised and scrambled to restore those non-media pages and content, but it faced widespread anger and condemnation – including from European politicians preparing to make it and Google pay for publishing links to news articles.
The 11th hour changes to the code effectively eliminates the key concern both Facebook and Google had – the prospect of mandatory government arbitration if they and publishers couldn’t strike commercial deals. Facebook can now offer publishers whatever it wants and walk away from negotiations without fear of penalty.
“In my mind, Facebook came out of this fantastically,” says Merja Myllylahti, co-director at the AUT Journalism, Media and Democracy Research Centre.
“It pretty much gives the power back to them. They will decide who they want to negotiate with.”
She considered the news ban a “fundamentally anti-democratic move” creating a vacuum on the platform used by 17 million Australians for misinformation and conspiracy theories to spread.
“They scared the hell out of the Government, because people couldn’t get crucial vaccination information. In that sense it was perfect timing for Facebook.”
The Cambridge Analytica data scandal, the live streaming of the Christchurch mosque attacks and the targeting of the Rohingya people in Myanmar were all disseminated via Facebook. The world’s largest social network has a woeful track record of corporate citizenship.
It has paid billions of dollars in fines in the US for its transgressions, allowed the QAnon conspiracy movement to flourish and now faces an antitrust lawsuit from the US Federal Trade Commission. That suit alleges that Facebook simply bought any competitor that threatened its dominance, including WhatsApp and Instagram, and suggests a potential break-up of the company as a remedy.
Facebook has survived all of this – so far. Last year, it generated US$29 billion in profit, almost exclusively from advertising, up 58 per cent on the previous year. Google and Facebook between them control 70-80 per cent of the digital advertising market in Australia and New Zealand.
With their clever algorithms delivering, in Google’s case, the best collection of search-engine results on the web and, from Facebook, a news feed crammed with posts tailored to your tastes and designed to keep you liking, sharing and commenting, the two tech giants have built the most successful internet businesses in the world.
It has come at the expense of the world’s commercial media outlets who, by and large, failed to adapt their business models to meet the new reality of the internet. That’s not uncommon – Blockbuster, Borders and Kodak all paid the ultimate price for their inability to innovate as the world went digital.
The mainstream media is seen by many news consumers, journalists and politicians alike, as being different and worthy of a helping hand. Its role in democracy as a check on power is considered sacrosanct and one that can’t be fulfilled by state-run media alone.
But in Menlo Park, California, home to Facebook and 2000 of its employees, the media has no special status, even in the age of misinformation and conspiracy theories.
Facebook describes the business gain it gets from news content as “minimal” and claims news makes up less than 4 per cent of the posts people see in their news feed. So, pulling the plug on news outlets rather than paying to have their content as part of its mix was a smart business decision.
But Google’s brinkmanship took a different turn. As Facebook was preparing to ditch news, Google was negotiating deals with major Australian publishers to pay for content it features in Google News Showcase. The largest of them is with Rupert Murdoch’s News Corp, publisher of the Australian, the Herald Sun and the Daily Telegraph, and they extend internationally to include the Wall Street Journal and the London Times. Other deals with the Guardian and Nine, publisher of the SMH and the Age, will see millions of dollars flow their way from Google each year.
“Murdoch might have got the biggest deal, but it’s not just News Corp. Every major media company around the world has been pushing for this,” says Myllylahti.
The Australian Government thinks it won, addressing the power imbalance between Big Tech and news publishers by forcing Facebook and Google into action.
Myllylahti agrees, to some extent. “Kudos to them. Without the code I don’t think Facebook or Google would have come to the negotiating table.”
But some see moves to force Google and Facebook to prop up cash-strapped media companies as just maintaining the status quo. “The shareholders of digital platforms will be a few million dollars poorer and the shareholders of large Australian news outlets will be a few million dollars richer,” was the analysis of Joshua Gans, a Sydney-born economist, who is now a professor of technical innovation and entrepreneurship at the University of Toronto.
“In other words, there is no improvement in any competitive outcome whatsoever. It is the codification of an oligarchy. For those outside, notably Australian consumers, it offers nothing.”
Google needs news much more than Facebook does. The search giant makes money from hosting the best collection of links from around the web and running adverts alongside those links.
Even if Google and Facebook do begin paying Australian publishers tens of millions of dollars each year, most of that will go to large media outlets who have bargaining power. Facebook says it is willing to work with smaller publishers, too. But Stephen Fenech isn’t holding out for a big payout.
“Personally, I’ve never asked Facebook for a cent. I actually pay Facebook to boost my posts, to get it in front of more people,” says Fenech.
“Love it or hate it, a lot of people use it. I want to get in front of those eyeballs.”
He estimates the drop in traffic to his site is in line with the 13-16 per cent (net) that ratings firm Nielsen has recorded across larger Australian publishers.
Myllylahti says there is some truth in Facebook’s argument that publishers need it more than it needs them. Her own research shows that New Zealand publishers rely on social-media platforms for a large chunk of their web traffic.
In January, she says, Newshub saw 35 per cent of its traffic come from social media. For subscription news service BusinessDesk, the figure was 30 per cent. The vast majority of that traffic, says Myllylahti, came from Facebook.
Stuff, publisher of the Dominion Post, the Press and the Stuff news portal, is the one media company that has gone against the grain. It stopped posting its articles to Facebook and Instagram last July. In January, only 4 per cent of its traffic came from social media.
“We don’t want to participate in a toxic environment built on a business model that profits from the amplification of hate speech, misinformation and fake news,” Stuff editor-in-chief Patrick Crewdson said last week. But he acknowledged the dilemma – by not publishing its articles on Facebook, it may be aiding the spread of misinformation on the platform.
“Blacklisting news is manifestly not in the best interests of Facebook’s users. But Facebook won’t hesitate to hold its users hostage when profit is at stake,” he said.
Highly trafficked websites are more attractive to advertisers, but social networks are increasingly also responsible for attracting readers who then sign up as members or paying subscribers. Back when it was on friendlier terms with publishers, Facebook included websites such as newsroom.co.nz in its Accelerator programme, helping them optimise their sites and social-media presence. Newsroom reported that donations increased by 150% and subscriptions by 225 per cent.
That may help explain why our own Government hasn’t tried to regulate Google and Facebook the way the Australians are. Despite having a left-leaning government in place, we’ve favoured a free-market approach to the problems thrown up by digital disruption.
“Since the 1980s, New Zealand has had this very neoliberal, laissez-faire approach: let market forces work it out,” says Myllylahti.
“When it comes to regulating these platforms as Australia has done, we’ve just been looking on.”
She doesn’t expect anything like the News Media Bargaining Code to emerge here. Two weeks ago, Broadcasting and Media Minister Kris Faafoi announced a $55 million support package that will see NZ On Air dish out grants to media outlets on a contestable basis over the next three years.
“That doesn’t create a strong negotiating stance from the Government’s point of view,” she says.
Google and Facebook may voluntarily offer deals to publishers here, but Myllylahti expects they would amount to “peanuts” compared to the deals with Australian publishers.
“Without that pressure from the Government, they are not just going to hand over $10 million or something.”
There is, says Myllylahti, a “certain cosiness” between the big tech companies and the Labour Government. Prime Minister Jacinda Ardern has been masterful in her use of Facebook and Instagram to talk directly to her support base, often to the frustration of mainstream journalists.
Of the $110 million the Government spent on advertising in 2018-19, 30 per cent (about $33 million) went to Facebook and Google.Covid-19 has since prompted a boost in advertising – $20m was spent on Covid-related advertising by June 30 alone – so the figure is expected to be higher in 2020/21.
There’s nothing necessarily dodgy about that, says Myllylahti. “But as a journalist, you are trained to look at what lies underneath, and the sense I get is that there’s a certain understanding between the Government and these platforms that we can solve this without some sort of heavy-handed code.”
Faafoi says there are no immediate plans to replicate the Australian model. “I have asked the Ministry of Culture and Heritage to provide advice around what could work in the best interests of New Zealand.
“We are watching developments in Australia and other jurisdictions.”
Across the Tasman, Fenech is just relieved the news blockade didn’t last.
“None of my advertisers have deserted me as they have with the bigger publishers, so I’m quite happy for things to return to the way they were before,” he says.
“If [Facebook] make an offer, I will definitely listen.”
But he is under no illusions as to how the social media giant he has paid thousands of dollars to over the years views his tiny publishing operation. A few weeks ago, readers alerted him to the fact that another page had sprung up on Facebook, carrying the TechGuide logo and a photo of Fenech.
“It was trying to lure my followers to this new site. It was trying to set up a scam competition site,” he says.
He reported the fraudulent page to Facebook, as did many readers.
But Facebook, presumably unwilling to spend the time to investigate further, even on behalf of a paying customer, wasn’t interested.
“Facebook said it doesn’t appear to be infringing the community standards,” says Fenech.
“That’s how Facebook operates. I’m really disappointed about that.”
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