This article first appeared in The Edge Malaysia Weekly on March 8, 2021 - March 14, 2021

THE brouhaha over Facebook and Google being forced to pay for news is threatening to change the way the free world wide web has worked so far. The traditional business model of newspapers has been to package news alongside advertising and charge for a single newsstand copy or a subscription. The advent of the internet turned that upside down as newspapers shed ads — both classified and display — to social media and search giants, which were able to more precisely target ads by connecting advertisers to only the readers they wanted to reach most rather than casting a wide net for a broader swathe of readers.

These days, most of the news stories we read are not in print or from a newspaper’s website but in the form of a Facebook newsfeed or a Google link. Because they are “showing” news, users stay longer on the internet giants’ platforms, which makes them more appealing to advertisers. Not surprisingly, the ads surrounding the newsfeed or web links generate money for Facebook and Google rather than for the creators or original owners of the content. That makes the internet giants powerful gatekeepers of news.

How powerful? Consider this: A total of 52% of all Americans now get their news from Facebook. The remainder get it mostly from print newspapers or their websites. Unfortunately, a big chunk of that actually gets routed through Google’s search engine. So, American newspapers are getting an increasingly small amount of advertising because their own websites generate a very small amount of direct traffic.

What Facebook and Google have been able to do is to manipulate their users’ data and turn it into rivers of advertising revenue. The kind of advertising that could target consumers with way more nuance than traditional print ads or ads on TV, radio or billboards were able to do in the past. Though print journalism started more than a century ago with just street sales, the business model evolved over time to an overwhelming dependence on advertising. The most vulnerable were local papers, which relied on advertising from small businesses within their area. Programmatic ads and Facebook’s use of granular data to target readers have further tilted the scales against news publishers.

Micro-targeting ads of Facebook and Google have not only gutted the newspaper industry but also changed the way news is distributed as well as what we get to read and where. Divisive and sensational stuff, such as livestreaming of murders, dissemination of dangerous conspiracy theories and fake news, attracts readers and helps drive engagement on internet platforms, making them stickier for users. The New Global News Order is now threatening democracies around the world. Witness how margins of victory in elections from Asia to Europe and the Americas in recent years have become narrower and the discourse less civil. Little wonder then that governments are waking up to the hollowing out of the news media and taking action against Facebook and Google.

Last December, Australia proposed a law to force Facebook and Google to pay for news. Why was Canberra the first to make such a move? Rupert Murdoch, the 90-year-old Australian-born billionaire owner of News Corp, which controls The Times of London and The Wall Street Journal, has long campaigned for Google and Facebook to pay his newspapers for newsfeed or links instead of just posting them on their websites free of charge. Murdoch controls 70% of total newspaper circulation Down Under. Because his newspapers have such incredible reach, he commands immense political power in Australia even though he now lives in New York and holds dual US-Australian citizenship. When Murdoch speaks, directly or through proxies, top leaders from the ruling Liberal Party as well as opposition Labor listen. Several former Australian prime ministers have publicly accused Murdoch-controlled newspapers of having had a hand in removing them from office.

The Australian Competition and Consumer Commission, the main regulator, in a report last year accused the internet giants of abusing their dominant positions to manipulate the digital ad market to their advantage, effectively setting prices and exploiting their users by sucking up all their data, which they promise advertisers would lead to more clicks, and then using that treasure trove of data as a weapon against any competition. The commission argued that news publishers are vulnerable because much of their traffic relies on Google searches or Facebook links. It noted that the two internet behemoths also make the technology that is used to buy and place the ads.

Under the new law that was passed by the Australian parliament last week, if the internet giants are publishing a link that allows others to read any story from a news publisher, they must have a prior deal to pay the publisher before that link goes up on their platforms. Initially, the two media giants threatened to pull out of Australia altogether. Surprisingly, software giant Microsoft, which has been trying to boost its own fledgling search engine Bing, welcomed the proposal, going as far as to say that Europe should adopt something similar. At the last minute, Google sealed a three-year deal with News Corp, as well as several broadcasters, to pay for local news content. Facebook baulked, banning publishers as well as its individual users from posting anything news-related on its websites, thereby pulling all Australian news content. It vowed not to pay for news, only to reverse its original stand five days later, hastily agreeing to “pay for news” as its stock continued to plummet.

Facebook’s temporary pullout in Australia meant that, for a while, Sydneysiders and Melburnians could see baby or cat photos but no news articles since nobody was posting any news links on Facebook and those that were posted were being blocked. That meant traffic to publishers’ websites plunged. Having lost most but not all of their advertising to Facebook and Google, Australian news publishers suddenly found they were on the verge of closing one of their last major revenue sources — online ads, which are driven by traffic.

Back in 2013, Spain passed a law that required Google to pay for news. Instead of paying newspapers, Google’s search engine just stopped listing Spanish newspapers. News websites in Spain lost all the traffic that was coming through Google, which impacted their own digital advertising business. Within weeks, publishers were urging lawmakers in Madrid to immediately dismantle the law because instead of helping newspapers with additional revenues, it was actually hurting them. Spanish publishers learnt the hard way that Google helped them almost as much as it hurt them.

As part of the compromise deal, one of the things that Facebook and Australia agreed upon was that there would be a mediation process before any arbitration between publishers and Facebook. Internet giants were worried that by going straight into arbitration with publishers, they would be forced to pay a lot more than they needed to. Facebook also wanted to enter into individual content agreements with publishers, which were not allowed under the original bill but had been included in the amended one that had just become law. Facebook was hoping that by entering into deals with a handful of large publishers, it would avoid having to pay tons of small publishers, which just do not generate any money for it anyway.

Another contentious issue in the legislation was that Google and Facebook had to give notice for any algorithmic changes — such as Google’s search rankings — to news publishers ahead of time. That part of the law was so onerous that Google and Facebook feared it would break their product. By doing deals with publishers in what is the 13th-largest economy in the world, the two internet giants have extricated themselves from something that could have haunted them in other jurisdictions.

Why did Facebook pull out of Australia briefly only to get back in five days later? It just wanted to avoid the precedent of having to pay publishers in other countries. The social media giant claims that publishers in countries such as Australia, Canada and the UK benefit far more from having their news links on Facebook platforms than it does. If internet giants continue to pay Australian publishers, you can bet that every country in the world, including Canada, the UK, New Zealand as well as European nations that have been pushing Facebook and Google on payments, will demand similar deals, asking for at least as much money, if not more. And if Australian, Canadian and European publishers are getting paid by Facebook and Google, do not expect developing country publishers and governments, be it Indonesia, Malaysia, Brazil or Mexico, to not ask for money as well. After all, it is the publishers in emerging markets that have borne an outsized brunt of Facebook’s and Google’s domination of advertising.

Usually, the way issues involving large global players get resolved is that the near-monopolies often drag things in courts for years, or decades. Eventually, other technologies or companies gain prominence and market share, so attention turns away from them to the emerging new players or technologies. Facebook and Google have been hoping that some of the new controversial fast-growing players like China’s TikTok will soon emerge as the threat that regulators and governments are more worried about and, as such, will move on to the next target.

Different countries will eventually come up with different solutions to deal with Facebook and Google. The European Union, for example, recently developed a framework for member nations to take similar action. Canadian Heritage Minister Steven Guilbeault last week promised that parliament would enact legislation this year to ensure tech giants like Google and Facebook pay for news they disseminate on their platforms. “Publishers must be adequately compensated for their work as they deliver essential information for the benefit of our democracy and the health and well-being of our communities,” he said.

One big impact of the internet giants’ dominance of advertising is the transfer of tax to the US as it is Google and Facebook that take away an 80% share of advertising and they don’t pay taxes in Australia, Europe or Southeast Asia.  Governments around the world have latched on to the idea of a “digital tax”. They could use the money.  Australia already helps some “rural” or regional newspaper with subsidies. Canada helped news publishers, particularly community papers and news sites, as part of its Covid aid plan last year and is working on a longer-term blueprint to help the long-suffering news industry.  Across Europe, governments have aided several projects to help struggling news publishers.

Thirty years ago, Tim Berners-Lee, the inventor of the world wide web, declared that the internet was for everyone. Now, he is arguing for “data sovereignty”, or giving internet users power over their own data. That, he believes, will help wrest back control of the personal information we surrendered to big tech companies such as Facebook many years ago.

Assif Shameen is a technology writer based in North America

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