Google and Facebook should abandon Australian news

Twenty-two years ago this year I first published On Line Opinion. We beat Crikey into cyberspace by a month or so, which makes us the first online-only journal of politics and current affairs in this country.

My partner in crime, Lionel Hogg (junior, and not to be confused with senior who edited the Brisbane Telegraph) and I could see that all news would migrate to the net, and that this was the biggest disruption since the introduction of the printing press.

We didn't want to die wondering what it would be like to be part of that revolution.

Over the last 20 years I've seen legacy media make the most elementary mistakes which have contributed to the dumbing down of political culture and the hyper -sensationalising and -sexualising of media coverage.

The government's proposal, at the urging of legacy media, to force Google and Facebook to pay them a fee for referring readers to them is just another elementary mistake from an industry that thinks it is the smartest in the country.

Rather than redressing inequality, it is in the grand Australian history of larceny. If anything Australia's publishers should be paying Google and Facebook for delivering them readers.

Without Google and Facebook, Australia's publishers would die. They are the guides who bring readers to the websites and give the publishers a chance to convince them to pay for specific content or view ads on their sites.

In the early days of the net a lot of content was subject to paywalls, then those came down (honourable mention for the Wall Street Journal who never succumbed) and the race for market share, or eyeballs was on.

How was news to be paid for? These were the "Field of Dreams" days – venture capitalists would break an arm and a leg, yours as well as theirs, to lose money on projects without any obvious financial model.

Then came the days of the "free-to-air" model, which had been so successful for television and radio. At one stage Crikey was charging up to $90 per thousand ad impressions, and business analysts were forecasting that ad revenues would grow.

But the "free-to-air" model only worked because of limited broadcast bandwidth which was auctioned-off to media companies, giving them an oligopoly, with oligopolist returns – who else but an oligopolist could afford to pay characters like Eddie McGuire in the millions?

Now rates are generally under $1 per thousand meaning the advertising model can't work in small markets like Australia - or on any but the most massive sites, with the lowest overheads - leading to a hybrid model where some publications enforce a hard paywall, and others timidly feed you limited amounts of free material before kindly asking whether you might be prepared to pay.

It's also led to click-bait and hyperventilation as most media reach for a mass market.

Exacerbating this problem is the fact that the major tabloids were economically viable only by an act of philanthropy on behalf of their advertising departments, particularly classifieds. When these were cannibalised by Realestate.com.au, Craigslist, and on and on, and when advertising inventory on the internet became virtually infinite, charitable intra-company cross-subsidy was no longer a possibility.

So now we are onto a new funding model where the legacy media, many of whom made the money they did because of regulation of one sort or another, have prevailed on the ACCC and the government to embrace a funding model where they hit-up the social media companies, who can make money on advertising only by keeping overheads miniscule, and confiscate some of their advertising revenue via a company-specific tax.

This is not law, this is theft. While it might be legitimate to tax different kinds of companies at different rates and book the income to general revenue, it can never be legitimate to tax different companies at different rates and book the income to their competitors.

Search and media are in a symbiotic relationship where media would die without search, but where they both need advertising, and where the advertising on both platforms is sometimes provided by search, so the relationship can be confusing, and has been deliberately confused by media in this case.

Google and Facebook are the newsagents of the twenty-first century, but unlike the newsagents of the 20th Century, they don't get to charge the news organisations for their services.

So they have to fund it another way – internet advertising. Now legacy media wants to clip that ticket, and they've enlisted the government to help. I can't think of a better description of this than crony capitalism.

If the social media companies had to pay for linking to other company's content, then their business model is broken and they should withdraw their services.

This isn't a threat, as the Prime Minister claims, this is standard business practice – if you can't make a profit, you don't do it. If legacy media had followed this practice then it would be profitable – and different – by now, rather than trying to suck Internet frenemies dry to prop-up uneconomic content.

What we are seeing now is classic rent-seeking where legacy media, including some of the early online pioneers, are trying to penalise a successful competitor for having a better model.

Mainstream media claim that social media are profiting from their content, but this doesn't stand scrutiny. If there was any theft in what Google and Facebook are doing it would be a breach of existing copyright law and the media companies would be able to claw back profit using it.

The fact they are proposing novel legislation proves their over-reach.

What Google and Facebook do is display snippets of information from news websites so that readers know what information is there and are attracted to click on it. The media are complicit in this because they specifically dress their pieces up with headings, images and metadata so that they get the best displays on the search engine pages.

There are real problems with the social media giants, but it has nothing to do with them "stealing" content from news organisations, and this government/media proposal is a distraction from dealing with those real problems.

Google and Facebook use their almost monopoly status to rig political discussions. They pick and choose what opinions and facts will be made public, and they make undeclared contributions to political campaigns by biasing their algorithms.

They even de-platformed the head of the most powerful country on earth on the pretext of policy breaches.

They have a lot to be held accountable for, but that doesn't justify the government hitting them with a discriminatory tax to favour legacy media cronies.

If Google or Facebook refuse to carry Australian news, that would just be commercial good sense. If they entirely desert the Australian market, that is likely to be little skin off their nose – a market of 25 million eyeballs is Lilliputian – and fix some of the other problems by introducing competition into the search market, until those search engines are targeted in turn.

If the government thinks Google and Facebook should provide the service as a community service, then let them pay them a community service obligation payment which they could then be distributed amongst the legacy media on a per click basis.

Of course, this would effectively be a government payment to legacy media, and a reward to media companies for bad management. I wouldn't recommend it, but public assets being syphoned off for the benefit of select media proprietors is nothing new in Australia.