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After years of blissful ignorance, regulators are lining up to go after Big Tech.

A fact made obvious by Australia's proposed Media Bargaining Code that specifically targets Google and Facebook.

While millions of businesses have benefited from running ads on search and social, at the same time hundreds of publishers, news organisation and journalists have suffered.

With bankruptcies raking up, Australia is aiming to get Google and Facebook to pay for the cleanup.

Today's Business of Marketing is about how what's happening in Australia can change the nature of search engine marketing everywhere.

Australia is trying to take Facebook and Google to task

The Australian government proposed a world-first media legislation in April 2020.

One that would force Google and Facebook to start paying organisations for using their content in the newsfeed and organic search.

Boom! 🤚🎤

2020 was tough on publishers – who have already been struggling for a while. Because most of them still rely on ad revenue to fund their operations.

According to the Guardian, for every $100 spent on online advertising:

  • $53 goes to Google
  • $28 goes to Facebook
  • and only $19 to everyone else.
To offset this imbalance, publishers have been coming up with new revenue models – subscriptions and donations – but it hasn't been enough to avoid job cuts.

Australia's new bill is designed to rebalance this.

Despite pushback, the bill now seems to be on the fast track to becoming law.

It'll give media companies a framework to negotiate and reach an agreement with Facebook and Google.

The News Media Bargaining Code doesn't limit publishers from reaching a commercial deal outside the new code, but the framework makes it easier for smaller publishers to band together and negotiate collective agreements.

And that's not even the best bit.

Both Facebook and Google will have to give 14 days’ advance notice of deliberate algorithm changes that affect news media businesses.

In case the tech giants fail to reach an agreement or refuse to negotiate, they can be fined $10m, or 10% of annual Australian turnover, or three times the benefit obtained – whichever is the greater.

You might be wondering, but how's that different than the French deal?

Google's deal last year with French publishers was to start paying for licensing their content in the story panel as a part of Google's News Showcase.

Since then, this agreement has been the foundation for similar licensing agreements between Google and news organisations elsewhere in the EU.

The difference is that the French deal limits licensing agreements to news displayed in the News Showcase, whereas the Australian law will cover all of Google's organic search.

As recently as last week Australian lawmakers have turned down Google's proposal to use the same framework in Australia.

Google and Facebook, the unlikely duo, have tried to fight it

Facebook has threatened to block Australians from sharing news.

And Google has been campaigning against the code ever since it was introduced, even encouraging YouTubers to swamp the ACCC with objections.

Google – who controls roughly 95% of search in Australia – ran an experiment by removing news publishers from 1% of the searches in Australia.

While they called it a 'test', I can't help but wonder if it was more of a threat than one of the "hundreds of experiments"the company runs every day.

Because it’s all about precedent.

Google and Facebook are already under increasing regulatory pressure and this new law could turn into a template for regulating them everywhere else.

Google wants the Australian code to accept a France-like deal and limit any compensation to the News Showcase.

The argument being that blanket coverage for links and snippets will hurt the fabric of the free and open internet.

My opinion is that tech giants and big brands have a duty to support quality journalism.

Yet I find myself agreeing with Google.

Because a blanket solution to start charging a search engine for every single link leading to original content – while ambitious – goes against the idea of having a search engine where anyone's content can be searched and indexed.

Obviously, this isn't Google's only objection since they aren't keen on giving news publishers special treatment when it comes to giving advance warning of algorithm updates either.

This can totally spiral out of control.

The arbitration model outlined in the new code favours the publisher's costs over Google's – a point which both the US Chamber of Commerce and Executive Office of the President have raised to the Australian government.

And Facebook has called the code unworkable in its current form.

Facebook has also started paying new publishers for their content in other parts of the world. And they're currently requesting the Australian government for a six-month grace period to negotiate deals with news companies directly before hitting them with arbitration and fines.

What if Google Search leaves Australia?

It's an understatement to say it would be catastrophic for consumers, publishers and businesses.

Because Google accounts or 51% of all online advertising and over 95% of online search in Australia.

But the problem is that Google's monopoly over search means they can effectively erase anyone from the internet.

Which they did.

By removing 1% of Australian news sites from search results.

If the law comes into effect, many publishers will be pushed to attract direct traffic and build up their subscriber base.

Many of them will have to start buying much of that traffic from elsewhere – eventually leading the cycle to repeat itself.

It's unlikely that Google will permanently leave Australia.

But on the off chance that it does happen, Microsoft is already planning to step in to fill the gap and expand its presence in the country.

Bing also controls paid ads on DuckDuckGo, which could further help them serve local businesses that currently rely on paid search.

The tricky thing about this new code is that it only impacts Google and Facebook – and it's unclear whether other search engines will be subjected to it.

And it's not like Google hasn't pulled the plug before.

In 2014, it compelled German publishers to formally opt-into Google News, following the enactment of a copyright law that gave publishers near-total control over the use of their content.

It later limited German news content to headlines in order to avoid liability.

Later that same year, it shuttered Google News in Spain, following the passing of an even more extensive law that did not allow individual publishers to waive their copyright licensing rights.

That feud ended in Google 1 and News Publishers 0.

What if Google stays despite the new Code?

So far both the Australian government and Google are sticking to their guns. And if the law passes, as it's proposed today, we're entering uncharted territory.

As Google paying news publishers for their links will change the nature of organic search.

To offset the hit to their margins, Google might decide to start prioritising open-source content and even create a fund to support independent journalists and smaller publications that don't charge as much.

The current proposal sounds ambitious but it would hurt smaller publishers disproportionately.

Because it could lead to consolidation within the publishing industry with larger publishers buying up smaller ones.

And then there's the algorithm itself.

Under the new law, Google will need to give publishers a 14-day notice before making any updates.

An algorithm update from Google has the potential to change organic rankings drastically, which could make some publishers unhappy – especially if their content drops off the first page.

This could lead to publishers suing Google.

Then there's the potential for this code to be challenged by other publishers and content creators who might also want to get paid for their content.

Ultimately, this could lead Google to start optimising the quality of search ranking based on its commercial agreements in Australia as opposed to user criteria.

And that's bad for organic search in so many ways.

So, will the remedy be worse than the issue?

For Google, the primary issue is paying for links in its main search results, and the precedent that would set.

For Australian regulators, the issue may be about Google’s influence over its society and businesses as much as it is about struggling publishers.

Negotiations between the Australian government and Google have resulted in a sort of brinkmanship that, unless the two find an alternative resolution, is likely to affect:

  • how search engines work (at least in Australia),
  • the relationship between content creators and search engines,
  • and test whether either party is willing to carry on without the other.
Turning off search is a drastic measure, and as yet a far off option, but Australia is a fairly small market and withdrawing that part of the business may be more cost-effective than paying for links to Australian publishers and broadcasting.

Because if Google agrees to it in Australia, it would be taken as a sign that they're willing to do so elsewhere as well.

As digital sovereignty is becoming a key theme of 2021, more nations are looking at how they can curb the power of big tech giants and protect the personal data of their own citizens.

The recent Capitol riots in the US have once again sparked new questions around the influence of digital platforms, which many countries have grappled with over the past few years. 

Add to this the concerns around apps sharing data with foreign governments, and it seems likely that a time of reckoning will soon come, and new, regional laws will need to be implemented in order for platforms to maintain their operations.

But is that workable?

Can the platforms create region-specific laws, and stick to them effectively, in order to meet such demand?

Unique requirements like Europe's GDPR certainly add a level of operational complexity, which would be better served by implementing over-arching rules, that meet the varying requirements of each nation.

But that, also, may not be possible.

Here's a look at just some of the restrictions and rule changes that the major tech platforms are working to align with:
  • In Turkey, Twitter and Pinterest are facing new operating restrictions due to their failure to appoint local representatives in the region. Facebook and Google have met the new requirements, though some are concerned that the Turkish government is seeking to monitor speech on social platforms by exerting pressure on local spokespeople.
  • In India, the government has banned all Chinese originated apps, including TikTok, due to border disputes with the CCP. TikTok had over 200 million users when the ban was announced back in June.
  • In the EU, MEPs are considering sanctions against big tech companies if they fail to attend an upcoming hearing to discuss tax and competition policy. The hearing is designed to help structure new, fairer operating conditions for the evolving digital marketplace.

As you can see, there's a range of concerns here.

Not to mention the mixed bag of challenges for the major platforms to meet. The question is, will the major platforms be able to continue operating in each nation if they don't?

And I haven't even mentioned the potential for increased regulation in the US under the Biden administration.

Tech platforms spent the last four years placating President Trump – which many would argue lead to the recent unrest.

But now with the Trump administration gone, will the US government impose additional operating restrictions, or mandate new laws in relation to content moderation?

More and more, big tech platforms need to meet tougher regional restrictions.

Which will effectively change how they operate in each jurisdiction.

But maybe, with a more uniform approach, there could be a way to meet the various concerns and address these problems from a more global perspective.

Paying local taxes seems like a big one since most of the tech platforms still funnel their earnings through tax havens in each region.

But then again, adhering to varying local laws on content is virtually impossible to approach in any uniform way.

For now, it's safe to say that we can expect these calls to keep coming.

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Until next week,

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Thanks for reading and sharing! BR, Aliyar.
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