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Facebook and Google to be forced to share advertising revenue with Australian media companies

With advertising revenue in free-fall as a consequence of coronavirus, Facebook and Google will be forced to share their advertising revenue with Australian companies after a landmark digital platforms inquiry in December, which led to the federal government asking the Australian Competition and Consumer Commission to develop a code between media companies and digital platforms.

The code was intended to require the companies to negotiate in good faith how to pay Australian news media for their content, make news agencies aware in advance of algorithm changes that could impact their business, give precedence to original news sources, and share data with the media companies.

The code was due to be in place by November 2020 but, unsurprisingly, there has been little success in early negotiations. Now, facing a sharp decline in advertising revenue and a struggling news sector, the government has handed the responsibility for writing the code directly to the Australian Competition and Consumer Commission.

According to this report in The Guardian, the mandatory code will have the same elements as the proposed voluntary code, but would also include penalties and binding dispute resolution mechanisms for negotiations between the digital platforms and news businesses. It will also define news content that would be covered by the code, and will encompass services beyond Google search and Facebook’s main platform, such as Instagram and Twitter.

“This will help to create a level playing field,”

Josh Frydenberg - Treasurer

Why does this matter?

With Google now facing a similar situation in France after losing their court battle over advertising revenue generating using news from French media agencies, failing to reach a settlement has cost them vital leverage in Australia. They will now not have a hand in how this new code of conduct will be written, but they will need to adhere to it or face the penalities defined by the code.

There is an increasing groundswell of demand for change in the way that companies such as Google and Facebook monetise content that they didn't create.

The question becomes - can Google be profitable if it actually has to pay people for the content it consumes?

The code about the code: Google's crown jewels

But, this is about more than just revenue - there are two elements to the code that could fundamentally change how Google goes about its business.

The code will contain requirements for Google to "make news agencies aware in advance of algorithm changes that could impact their business" and "give precedence to original news sources"

This means that Google are going to need to tell the news media in advance about changes to their algorithm. By definition, any change to the algorithm could affect traffic, and therefore revenue, and so the scope of this could be incredibly wide ranging. The problem here is that when Google changes the algorithm... it's news. Will news agencies be bound by confidentiality clauses to ensure that they don't pass on the inside knowledge they will gain about how Google ranks sites? Unlikely, given that this would, in turn, give them a competitive edge and lead to hard questions about who and what constitutes the news media.

This requirement mirrors a conundrum that Google faced in the UK courts recently when they were asked to share their algorithm with a court appointed "SEO expert" or withdraw statements about their algorithm worked from their defence.

Keeping the algorithm a secret is fundamental to Google's business model - but this new code may force them to share more information about it than they ever have before.

What about the rest of us?

An increasing number of news sites are implementing pay-walls, requiring subscribers to pay a monthly subscription to read their articles. It seems strange, in 2020, to consider that an aberration but historically this was always the way that we consumed news. Newspapers cost money. Magazines cost money. Even the venerable BBC is subject to a license fee (that we pay with, yes... money).

I wrote about a possible way of paying websites for their content in this article earlier this month but is the real problem... us? Are we so used to getting news and information for free that we would baulk at the prospect of paying for news and information that we currently get for free?

Every time we use Google News or search for a blog post on Google, we play our part in transferring revenue from the content's source to Google.

Perhaps what's needed is a change in consumer behaviour. Next time you need a piece of information, perhaps it's time to try a new search engine?

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