Why Facebook was right to block Australian news content

The Australian government's demands on tech giants are unjustified and anti-competition. Now Facebook has called their bluff.

This week, Facebook blocked news articles on its apps for all Australian users, and is blocking Australian news articles for users worldwide. This is a drastic step, but it is probably the least bad option the company has left. The Australian government has forced it into this position, with an attempted shake-down of Big Tech that leaves Australians worse off.

Last year, the government proposed a mandatory bargaining code to address alleged “power imbalances” between Australian media groups and tech companies. The government’s position was that simply by allowing users to link to news articles, Facebook and Google (the only tech companies singled out so far) were exploiting their market power and freeloading from news websites’ content. To fix this, both sides would be required to reach an agreement about payment, and send it to binding arbitration likely to favour the news publishers if they could not. The rules would also require companies to give advance notice of any changes to their algorithms. 

There is little rationale for the proposed measures from a consumer perspective. The argument for the algorithm notice was that changes can be disruptive and unfair for publishers that get less traffic as a result. But algorithmic changes are made to improve results for users, and if one publisher suffers, another benefits. 

In 2013, Facebook had become near-unusable because of a site called Upworthy, with headlines such as “This amazing kid got to enjoy 19 awesome years on this Planet. What he left behind is wondtacular” that persuaded users to like and click, but were devoid of any real content. Changes to the algorithm fixed things and prevented Upworthy from dominating user feeds with such low-value content. If these changes had been disclosed to these sites, making it easier for them to game the system, you won’t believe what would have happened next.

As for paying for links, again the Australian government’s justification is faulty. While it is undeniable that the revenues of many big news publishers have suffered from the rise of the internet, they and the tech platforms mutually benefit from web links shared between them. Search engines and social media websites send traffic to news sites, and themselves benefit from being places users can find the sort of content they need. Most websites want to be linked to.

It is not credible to suggest that a lack of payment in either direction is evidence of anti-competitive market power. It is a longstanding principle of the internet that links are free. There is no example, anywhere, of a search engine or social media site paying third-party websites to be able to link to them – Scott Farquhar, co-founder of Australian tech giant Atlassian, called the idea “a fundamental threat to the open internet, not just Google”. 

This debunks the accusation that lack of payment to news sites is down to Facebook and Google exploiting outsized market power: smaller platforms with less market influence like Twitter and DuckDuckGo do not pay publishers for links, nor does Facebook pay for user-posted links to the sites of giant companies such as Amazon. Absence of payment is not evidence of an imbalance in market power which governments must address.

[see also: Revealed: The army of Big Tech lobbyists targeting Capitol Hill]

You do not have to like Facebook to recognise that making it pay for links to specific other websites is not about restoring competition to the market. The purpose of the news code appears to be giving cash to politically influential media companies. Google has acquiesced, signing pay-off deals with a number of media companies. This includes News Corp, which has been waging war on Big Tech in the pages of its newspapers in Australia and further afield, including Britain. Now that Google has agreed to pay these critics, Australia’s treasurer Josh Frydenberg has suggested the code might not apply to the search engine giant after all.

Facebook, though, has chosen to hit the off switch on Australian news links, opting out of the whole process. For this, it has been condemned. Frydenberg has called the move “wrong” and “unnecessary”. US congressman David Cicilline, an influential Democrat, responded to the news by tweeting that “Facebook is not compatible with democracy”, and its actions are akin to “bringing an entire country to its knees” – all because it has chosen not to agree to a punitive link tax. 

There is little justification for this hyperbole. Facebook is not an essential facility for Australians accessing the news: more Australians use the TV and other online sources for news than get it through social media, and everyone with access to Facebook can also visit news websites directly through a browser.

Nor is Facebook’s rise the direct cause of the news industry’s relative fall. Much of the decline in media revenues, especially local news, comes from the shift of classified ads online, to sites such as Rightmove and Gumtree. As analyst Benedict Evans notes: “Perhaps two thirds to three quarters of money spent on Google and Facebook is money that was never spent on traditional advertising – it’s coming from SMEs and local businesses that might have spent in classified at most but probably wouldn’t have done even that.”

The internet has introduced competition to advertising markets that were previously dominated by a few big news outlets that acted as bottlenecks between advertisers and consumers. Now, anyone with a blog or YouTube channel can carry ads themselves. But though legacy news publishers have lost market power, they have retained political influence, and their cries of being “hurt” by the tech giants tend to be listened to by governments.

Recognising this does not mean we should be sanguine about the decline of some parts of the news media. But Australia’s approach used these concerns as a fig leaf for crony capitalism. It has ended messily. The rest of the world can learn from this debacle – and do better.

[see also: What the term “Big Tech” tells us about the future of Silicon Valley titans]