The Big Lesson from Google’s and Facebook’s Australia News Crisis: The Information’s Weekly Newsletter

Change is a funny thing. You rarely feel it happening. But then you look back—and wow. This week, I couldn’t shake the feeling that so many tectonic shifts are transpiring across—well, everything, but especially the technology industry, all happening inches at a time and spurred by the pandemic. More on that later.

A must-read article this week is Sam’s column about Clubhouse. To be honest, I didn’t think I needed to read another column about Clubhouse. But Sam makes an interesting argument about why Clubhouse is a major break from other internet communities. Based on the response to the article, I think many agree.

A New Digital Media World Order

As someone who worked at News Corp’s Wall Street Journal writing about Google and Facebook for nearly a decade, I’ve found the faceoff between all three companies over the future of news in Australia both fascinating and deeply frustrating.

On the fascinating side, it’s been the culmination of a yearslong fight over how publishers make money from their content on the internet, the kind of heady debate that’s too important to ignore. Publishers—News Corp chief among them—are rightly concerned with the fact that Facebook and Google benefit from using their content and don’t pay for it.

But the issue has been deeply frustrating as well, because the solution that News Corp pushed the Australian government into—requiring that Google and Facebook have business deals in place with all publishers whose links appear on their services—is ridiculous. That approach would break the internet as we know it, would strongly advantage big tech and media companies that could negotiate such deals over smaller ones, and is totally untenable.

As you likely know, Google caved and struck deals with News Corp and other publishers, so Google search in Australia will still carry news. Facebook did not. And ahead of the law’s likely passage, Facebook blocked news in Australia.

I understand why both companies, or specifically their CEOs, made the decisions they did. Paying publishers isn’t a big financial hit for Google, whose CEO Sundar Pichai tends to be pragmatic. But doing so would set a horrible precedent for Facebook, whose CEO Mark Zuckerberg tends to stand on principle, sometimes to a fault.

The one thing I really didn’t like about Facebook’s decision was how the company explained it. Facebook blanketed the press with the very disingenuous argument that it was being penalized for news content it “didn’t take or didn’t ask for.”

Yes, I get the point that Facebook doesn’t tell people what to post, whether it’s news or recipes or photos. Yes, it’s true that News Feed doesn’t prompt you to share your favorite news story of the day. But Facebook’s main business is getting people to share content and talk about it. And the company makes billions from that.

Instead, what Facebook should have talked about—and what Google and the rest of us should be discussing—is how the Australia crisis proves that the economics of the internet are utterly broken and in sore need of a reboot.

A world in which tech platforms build massive businesses that use, even in small part, content others have created and funded without paying them isn’t optimal because it will lead to less investment in content over time. That will harm all sorts of premium content and may be the end of journalism as we know it.

At the same time, a world where tech platforms can only distribute content they have paid for directly will be the end of the internet as we know it.

Luckily, things are about to change.

To understand the scope of the coming transformation, you have to realize the tension at the heart of the Australia disaster boils down to one simple fact: Today, the platforms that distribute digital content have far more favorable economics than those who make it.

This happened because the tech companies built amazing businesses that democratized information and made it more accessible. And they found a way to turn that value into exceptional businesses.

Caught flat-footed, publishers were silly enough to believe this model would benefit them too by getting them “scale.” So they relied on the tech companies to distribute their content and then woke up one day when all of their ad revenue had evaporated and said, “Wait, we want to be paid.”

The Australia news battle is a vestige of that old mentality.

Many people are moving on. As I’ve written, smart publishers are using the tech platforms far more selectively and to their advantage.

And, more important, a very big shift is happening. Suddenly, there are scalable models where the company or person who creates content receives more value than the platform that distributes it. On Patreon, OnlyFans and probably soon Clubhouse, individuals can get money from their audience through recurring or one-off payments. And in exchange for distribution, the platform takes a cut.

At the core of these models is the idea of consumers paying content creators directly, whether it’s on the scale of The New York Times or an individual writing on Substack.

That’s a big contrast to the “attention economy” of Google and Facebook and every other ad-based internet platform, where the distributor benefits more by showing ads and those who create the content get very little.

While I’m focused on the benefits to media creators, another tailwind is propelling this new model: consumers’ unease about the use of their data for ad targeting. Apple has somewhat disingenuously made this the crux of its campaign against Facebook. I say disingenuously because Apple gathers plenty of data about its users to improve its service and makes a ton of money from ad juggernaut Google.

I don’t think consumers’ heightened awareness of privacy will cause users to abandon Facebook and Google. The benefits of the services are too great.

But what is clear to me is that the new businesses trying to compete with the old platforms are shunning ads in favor of business models where consumers pay. That’s another big shift.

It won’t surprise you that I think the new model is a far better one for content creators and perhaps even tech platforms. It will force those tech companies who can evolve to focus on what additional value they can provide instead of just milking distribution monopolies that will wither over time.

I’m pretty sure Google and Facebook don’t see it that way. The new approach threatens their core business and also their mission to make information open and accessible. They would likely point out that in a creator economy world, people will more often have to pay for some kinds of content.

But that doesn’t mean that everything will be paid or that it will be expensive.

Look at Apple’s App Store. Millions of apps are paid and the App Store’s thriving business is based on taking a cut of subscription revenue. But apps aren’t an elite thing. It’s very possible to have models that compensate the creator and the platform and that still ensure much content is widely available.

Ultimately I think we’ll look back on this week and the war of words and laws in Australia as the moment when the flaws, and even the absurdity, of old digital media economics became starkly apparent.

The opportunity for all of us now, on both the tech and media sides, is to build what comes next.

Upcoming Events:

September 22 and 23, 2021: The Information’s 2021 WTF: Women in Tech Media and Finance Conference

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• Microsoft’s New Gig: A LinkedIn Freelancer Market Rivaling Upwork, Fiverr by Amir Efrati
• Facebook on My Wrist, Apple on Your Eyes – The Information’s 411 by Cory Weinberg
• The Big Lesson From Google’s and Facebook’s Australia News Crisis by Jessica E. Lessin