News Analysis: Big State vs Digital Giants Battle Over News Access And Compensation
Sharing Links Is The Foundation Of The Internet
When Tim Berners-Lee set the specifications of URLs, HTTP, and HTML protocols for the world wide web, he set off how information would be shared on the internet. In fact, the foundation and spread of the internet has come from the free sharing of internet links across a free and open internet. The sharing and compensation of these links is at the heart of the battle among governments and news publishers with the digital giants.
Over the past few weeks, the digital giants (i.e. Google and Facebook) have faced a standoff over how news organizations and their content would be compensated for access to social media networks as well as search engines. The battle came to a heated frenzy when Google agreed to compensating some news organizations and Facebook decided to pull news feeds and links from their Australian users. The recent news of Canada following suit with Australia has brought this issue to the forefront.
The Business Models Of Journalism Have Not Fared Well In A Digital World
At the center of the battle is the business models and monetization models among content (i.e. news organizations), network (i.e. the reach of the internet with social networks and media), technology platforms (i.e. digital giants), and consumers. The news organizations feel their content is what draws the social networks and search giants, yet the data would show that only 2 to 4% of content used by social networks come from these content providers. Anywhere from 1 to 3% of searches are news related for the search giants. For the digital giants, they provide access to their networks and distribution platforms as a service to the publishers and news organizations and feel that they should not compensate them for this valuable access to billions of users.
In the case of Australia, over 75% of the population receive their news from social media. In fact, in most countries that number is higher. Hence the conundrum. The biggest network for journalism and news content distribution is unfortuantely through a third party that competes with news organizations for digital advertising. News organizations and digital content producers are subservient to the digital giants who have the network and the technology platform. In fact, these digital giants are crushing content publishers in the amount of digital ad revenue generated. Google generates almost $147 billion in ad revenue in 2020. Facebook almost reached $70 billion in ad revenue for 2020.
In the case of Google in Australia, the move to pay the biggest publishers has given the larger publishers an advantage over the smaller ones. While this has put Facebook on the defensive, Facebook has every legal right to not only charge for access to their network, they also have the right to determine whom they want on their network. Paying publishers for sharing their links on Facebook's own network is counterintuitive. In fact, Facebook's social network of 2.7 billion users and the 14 million users in Australia is what attracts the publishers to want to share their links and drive traffic to their own sites. To be clear, the news is not the what attracts Facebook users to the community, it's the sharing of free content among other free users, including news links.
Digital Giants Face Massive Regulation By Governments "Seeking Their Fair Share"
What we have now is a challenge to the internet and digital giants on behalf of the governments around the world who want to take on big tech AND the failure of the ad supported and subscription market for journalism. While it may be popular to hate on the digital giants for their success and governments would like to get a cut in on the action on behalf of news organizations and journalism, the challenge is finding a fair approach that will enable smaller publishers to succeed as well as the large ones while respecting the first principles of the internet, the free sharing of links.
For decades publishers failed to invest in their social networks and relied on digital giants to do the dirty work of building out their communities and membership base. In fact, many content publishers built business models on classifieds, pay to play content, and events. However, few of these models achieved success. For every New York Times and Wall Street Journal subscriber paywall, there were about 50 organizations that were merged, acquired, or gone bankrupt since 2000. In fact, sites such as Craigslist decimated local news organizations.
With Digital Giants succeeding in disrupting traditional industries such as journalism and generating massive profits, legislators around the world now seek any opportunity to insert themselves to play a populist role in "regulating" for free and fair markets while taking a "cut" of the profits. Taxes and regulations are one way to keep digital giants in check, but these rules should be carefully thought out to protect personal privacy, enable fair and free markets, and keep innovation alive. There is an outright danger legislators will move to far in regulation and stifle the innovations provided as a public good.
The Bottom Line: The Future of Journalism Is At Stake But Regulations For Digital Giants Must Be Smartly Crafted
Societies around the world need a strong, fair, and free press in order to build healthy communities. The digital giants have played a role. Just a decade back, social media companies provided a great distribution channel and was a "savior" to journalism. Why? In lieu of investing in one's own community, these content providers could piggy back on top of the networks and drive traffic back to their sites. Unfortunately, the business model of journalism required scale to succeed. Unless you were a funded model such as the BBC or NPR to some degree, scale was very hard to achieve. Media properties found community even harder to build and maintain.
This move to go after Digital Giants is world wide. Their success and failure of many digital giants to engender trust and convey value have placed the big tech firms squarely in the bulls eye of aspiring regulators and elected officials From China to the EU and now Australia, Canada, and the US, states want to take back the power they ceded to Digital Giants. The fight over news is just one front on that battle. Digital giants can expect more fights ahead as governments around the world fear the growing power of these digital giants and seek to add more controls in the public interest.
The policies determined around access to platforms by journalism and content providers will continue to be a battle waged by regulators. Digital giants and regulators must come to terms as the value of the network comes from a wide variety of content sources such as news, user generated data, games, media, entertainment, education, etc. Policies created for one type of source around monetization will have consequences for other sources. Smart regulation is needed amidst this popular backlash or digital giants will find themselves in unsustainable business models and monetization schemes.
For more about digital giants, get my latest book Everybody Wants To Rule The World where we go deep on the digital giants and what's needed to build, partner, or perish.
Do you think the Digital Giants will weather the storm against governments and the populist backlash? Will news and journalism fix their broken business model? Who's approach is better Google? or Facebook?
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