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Link Wars: Facebook vs. Australia

Australia’s struggle with US companies over taxing links illustrates the difficulties in regulating big tech. The long-term problem facing authorities is the advertising duopoly of Google and Facebook. And the only way out of that problem is robust anti-trust action.

In Australia, Facebook is once again hamstrung by its business model

Last month, the Australian government made headlines with a new law forcing Big Tech platforms, namely Google and Facebook, to pay publishers for news content. The move was ostensibly meant to provide a new revenue stream supporting journalism, but the legislation is also the latest development in a succession of moves by influential News Corp CEO Rupert Murdoch to strike back at the online platforms sapping his publications’ advertising revenue.

While Google brokered a deal with News Corp and other major Australian publishers, Facebook decided instead to use a machine learning tool to delete all “news” links from Australian Facebook. Caught in the wave of takedowns were also non-news sites: public health pages providing key coronavirus information, trade unions, and a number of other entities that share, but do not produce, news content. Facebook has since backtracked, and Australian news content has been allowed back on the platform.

While Google reached a deal with News Corp and other major Australian publishers, Facebook decided instead to use a machine learning tool to delete all “news” links from Australian Facebook.

The fiasco illustrates broader issues facing both the company and Big Tech in general: the spectre of regulatory action. This trend that explains the influx of politically influential figures entering Facebook’s employ, like Former UK Deputy Prime Minister Nick Clegg, who is now Facebook’s Vice-President of Global Affairs and Communications.

Facebook’s chronic problem isn’t the aggressive methods of its public affairs team, nor its CEO waxing poetic about free speech principles only to reverse course later. Facebook is hamstrung by its own business model, which incentivizes it to prioritize user engagement above all else.

The Australia case is reminiscent of another moment in the struggle between Big Tech and governments. In 2015, a pair of gunmen murdered a group of people at a barbecue in San Bernardino, CA with what were later understood to be jihadist motives. After the attack, Apple CEO Tim Cook seized the moment to solidify Apple’s brand image around privacy, publicly refusing the federal government’s requests to create a backdoor in iOS.

This principled stand was backed up by Apple’s business model, which involves selling hardware and software as a luxury brand, not selling data or behavioral insights. Cook’s move was both ethically defensible and strategically sound: he protected both users’ privacy and his brand’s image.

After the 2015 San Bernardino attack, Apple CEO Tim Cook seized the moment to solidify Apple’s brand image around privacy, publicly refusing the federal government’s requests to create a backdoor in iOS. This principled stand was backed up by Apple’s business model, which involves selling hardware and software as a luxury brand, not selling data or behavioral insights.

In the case Australia, different actors are involved. Google, like Facebook, relies on mining data and behavioral insights to generate advertising revenue. However, in the case of news, Facebook and Google have different incentives around quality. On the podcast “Pivot”, Scott Galloway from NYU pointed out that Google has a quality incentive when it comes to news. Users trust Google to feed them quality results, so Google would naturally be willing to pay to access professional journalists’ content.

More people use Google than any other search engine because they trust it to lead them not just to engaging information, but to correct information. Google therefore has a vested commercial interest in its algorithms delivering the highest quality response to users’ search queries. Like Apple in 2015, Google can both take an ethical stand — compensating journalists for their work — while also playing to the incentives of its business model.

On the other hand, Facebook’s business model is based on engagement. It doesn’t need you to trust the feed, it needs you to be addicted to the feed. The News Feed is most effective at attracting and holding attention when it gives users a dopamine hit, not when it sends them higher quality results. To Facebook, fake news and real news are difficult to distinguish amongst the fodder used to keep people on their platform.

In short, from Facebook’s perspective, it doesn’t matter if the site sends you a detailed article from the Wall Street Journal or a complete fabrication from a Macedonian fake news site. What matters is that the user stays on Facebook.com, interacting with content as much as possible to feed the ad targeting algorithms.

The immediate situation in Australia has been resolved, with USD 1bn over three years having been pledged to support publishers. But the fundamental weakness of Facebook’s reputation is becoming obvious. Regulators are clearly jumping the gun to take shots at the company in the wake of the Cambridge Analytica scandal, debates over political advertising, and the prominent role the site played in spreading conspiracies and coronavirus disinformation.

In short, shutting down news was a bad look. Zuckerberg may have been in the right on substance — free hyperlinking is a crucial component of an open internet. But considering the company has already attracted the ire of regulators around the world, this was likely not the ideal time to take such a stand.

In any case, Australia’s efforts, whether laudable or influenced by News Corp’s entrenched power, are largely for naught. As many observers have pointed out, the long-term problem facing journalism is the advertising duopoly of Google and Facebook. And the only way out of that problem is robust anti-trust action. Big Tech services may be used around the world, but only two legislatures have any direct regulatory power over the largest of these companies: the California State Assembly in Sacramento, and the United States Congress. Though the impact of these technologies is global, the regulatory solutions to tech issues will likely have to be American, as long as US-based companies continue to dominate the industry.

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