Facebook unfriends Australia - a war with a sovereign nation that might yet boomerang back on it around the world.

Profile picture for user slauchlan By Stuart Lauchlan February 18, 2021 Audio mode
Summary:
An attack on a democratic nation that might well turn out to be a huge tactical error for Facebook - and not before time.

Facebook
(Pixabay)

These actions will only confirm concerns that an increasing number of countries are expressing about the behavior of 'BigTech' companies who think they are bigger than governments and that the rules should not apply to them. They may be changing the world, but that doesn't mean they run it.

Those words from Australian Prime Minister Scott Morrison, directed at Facebook following the social media giant’s decision to block the country’s users from accessing and sharing news on its platform, may yet come back to haunt the firm’s CEO Mark Zuckerberg if they encourage others to emulate Australia’s actions. With fellow politicians saying that Facebook has “attacked a sovereign nation”, the Prime Minister warned Zuckerberg that other world governments are watching the clash carefully.

The conflict in Australia stems from a piece of legislation - the News Media Bargaining Code - that is awaiting final approval in the country’s Senate. The law will force the likes of Facebook to compensate news outlets and publishers for stories that they host or share on their platforms and news feeds.

Facebook CEO Mark Zuckerberg, who’s long pleaded with governments to stage an intervention and regulate his firm, last month insisted:

I think it would be much better to have just a clearer guidance and clearer rules for the internet. So, that’s going to be something that we continue to advocate for.

But there are rules and then there are rules and Australia’s rules are not what he had in mind.

So Facebook - along with Google - has led opposition to the move, arguing that it is unfair to it business models and is supposedly unworkable. (That ‘unworkability’ hasn’t however stopped Google signing deals with a number of publishers, including News Corp, this week.) William Easton, Managing Director, Facebook Australia & New Zealand, says Australia is the loser here:

We were prepared to launch Facebook News in Australia and significantly increase our investments with local publishers, however, we were only prepared to do this with the right rules in place. This legislation sets a precedent where the government decides who enters into these news content agreements, and ultimately, how much the party that already receives value from the free service gets paid. We will now prioritise investments to other countries, as part of our plans to invest in new licensing news programs and experiences. 

There’s a theme here. That sort of ‘back off or we take the money elsewhere’ tactic is the same one that Facebook used on Matt Hancock, when he was in charge of the UK’s Department of Digital, Culture, Media and Sport. On that occasion, it was Zuckerberg himself who made the threat after the politician had pledged to get tough with Facebook, which resulted in Hancock immediately collapsing from ‘hard man’ posturing to wittering on about “collaborative working” and the need for “proportionate” legislation.

Australian politicians may be made of tougher stuff. Certainly Facebook has found itself forced into more obviously open conflict with legislators than has been seen before. The company, which has come under fire for so long over its dithering and obfuscation around moderating and removing hate speech and other controversial pieces of content, showed that it can act quickly and decisively when it wants to- all it takes is a threat to its revenues! - and cut off the news feeds to Australian users.

Easton claims that it’s been left with no choice here:

The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content. It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.

Poor misunderstood Facebook and its heavy heart...

But in a spectacular mis-step, the US social media giant’s heavy-handed actions also resulted in the blockage being extended to information from the likes of the Bureau of Meteorology, updates from the West Australian fire and emergency services, political leaders home pages, a site dedicated to the urgent and ongoing hunt for a missing toddler and the websites of a variety of health organizations, the last being particularly crass during an ongoing global health crisis. Facebook’s explanation for this:

The actions we're taking are focused on restricting publishers and people in Australia from sharing or viewing Australian and international news content. As the law does not provide clear guidance on the definition of news content, we have taken a broad definition in order to respect the law as drafted. 

Show us the money...and more

At the end of the day, while revenues come into this - for all his righteous posturing, Zuckerberg still runs a commercial organization that is only used to seeing the bank balance going up - that’s not really the main driver for this conflict. Australia isn’t a hugely lucrative market for Facebook in its own right. The firm states that the Average Revenue Per User [ARPU] in 2020 in the United States & Canada was more than 11 times higher than in the Asia-Pacific region. Business data provider Statista pitches that as meaning that, in Q4 2020, North American users were monetized at $53.56 each compared to $4.05 for their counterparts in Asia-Pacific.

But there’s a lot more at stake than just money. The actions that Australia has taken with its new legislation are ones that have been widely discussed around the world. In its most recently10K filing with the US Securities and Exchange Commission, Facebook acknowledges the legislative threats it faces:

There are a number of legislative proposals in the European Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our business, such as liability for copyright infringement. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.

There will be Eurocrats in Brussels today with their trigger fingers itching to follow the Australian lead. Toes have been dipped in the regulatory water before now. Back in 2014 Spanish law required publishers to charge Google News for the headlines and snippets of their stories, while France last year included a demand for Google to pay for news content into its implementation of the EU Copyright Directive. Meanwhile in Canada - where the ARPU matters a lot -  the government already has a Bill tabled for later this spring focusing on the question of compensation from social media firms to news publishers.  

Google gives way?

While Facebook has escalated the conflict/taken a stand - delete as applicable based on personal like or otherwise - Google appears to have blinked, agreeing to pay for content from Rupert Murdoch’s News Corp - owner of The Wall Street Journal in the US, The Times and The Sunday Times in the UK and Sky News in Australia - as well as fellow Australian publishing giants, Nine Entertainment and Seven West Media. 

That’s going to be seen as a big, precedent-setting win by News Corp, whose CEO Robert Thompson set out his firm’s stall earlier this month when he declared:

We're at a pivotal moment of those discussions in Australia, where new regulations and new terms of trade will be introduced. But that debate now extends across the globe. There is not a single serious digital regulator anywhere in the world who is not examining the ampacity of algorithms, the integrity of personal data, the social value of professional journalism and the dysfunctional digital ad market.

We expect that the new tech topography will benefit our company's financial fortunes. That is for certain. And it will also have a material impact in not only the countries in which we operate, but in every country. An ambitious inspired young woman starting a digital news site in Nigeria or in Birmingham, England or Birmingham, Alabama, now has a far better, a far, far better chance of sustainable success.

It may be a good deal for News Corp and Google, but it leaves Facebook exposed in terms of support from its peers. Over at Microsoft, there’s no comfort to be had as the firm has firmly endorsed Australia’s move, committing to keep its Bing search service open and stating that it is ready to share revenues with news organizations. President and Chief Legal Officer Brad Smith explained why the firm approves of Australia’s actions:

The ideas are straightforward. Dominant tech properties like Facebook and Google will need to invest in transparency, including by explaining how they display news content. Even more important, the legislation will redress the economic imbalance between technology and journalism by mandating negotiations between these tech gatekeepers and independent news organizations. The goal is to provide the news organizations with compensation for the benefit derived by tech gatekeepers from the inclusion of news content on their platforms.

It’s an idea that some governments have pursued in parts of Europe, but with only limited success. The reason is that it’s hard to negotiate with a monopolist. With only one or two whales on one side of a nation’s table and dozens or hundreds of minnows on the other, the result is often a lengthy and expensive negotiation that leaves the minnows short on food.

It's time for that to change, he added, firing a warning shot over the new Biden administration in the US:

These are now pressing questions for the Biden administration. Facebook and Google persuaded the Trump administration to object to Australia’s proposal. However, as the United States takes stock of the events on January 6 [when a mob of Trump supporters stormed the Capitol], it’s time to widen the aperture.

The ultimate question is what values we want the tech sector and independent journalism to serve…This a defining issue of our time that goes to the heart of our democratic freedoms…The United States should not object to a creative Australian proposal that strengthens democracy by requiring tech companies to support a free press. It should copy it instead.

My take

Zuckerberg has drawn his line in the sand, but starting a war in a country far, far away could end up being an enormous tactical error. The Facebook founder has tried to play the ‘we create a greater good’ card for so long to justify so much of the firm’s questionable strategy, but banning an entire country from sharing news articles in the middle of a global pandemic just to avoid paying some money to publishers is a PR challenge too far, one that Apologist-in-Chief Nick Clegg will struggle to spin.

Clegg will certainly be short of allies in any propaganda war. No-one should realistically be under any illusion that Google has changed its mind about its opposition to the Australian law through its palling-up with News Corp, but it suggests that pragmatic self-interest will be the order of the day from that camp. And while I may suspect that Microsoft’s firm line contains a streak of competitive mischief-making, it’s a powerful endorsement of the need for action that will be heard in Washington and Smith’s argument is, as it always is, cogent and persuasive.

There is, as Smith notes, a balance to be struck here. The Australian legislation isn't perfect. But at the end of the day, Facebook’s actions in Australia are indicative of an out-of-control monster of an organization, a monopolistic behemoth that isn’t capable of coping with being told what to do, whatever platitudes Zuckerberg obediently mouths in pursuit of regulatory flagellation.

#DeleteFacebook is trending. You want a fight, Zuck? Maybe you just got one. It's a bleak joke that Facebook started life as a tool for Harvard nerds to gossip about how good-looking fellow students were. Now, like a jumped-up totalitarian regime, it’s a global machine openly committing to censoring access to news in a democratic country because of a corporate hissy-fit at not getting its own way. 

Zuck’s chosen to pick this fight Down Under, a long, long way from Washington, but the consequences of this might well lead to a global reaction from legislators taking a similar stand to their Australian counterparts, including back home. As David Cicilline, Chair of the US House of Representative’s Sub-Committee on Anti-trust, Commercial and Administrative Law, commented on seeing events unfold in Australia:

Facebook is not compatible with democracy. Threatening to bring an entire country to its knees to agree to Facebook's terms is the ultimate admission of monopoly power.

Cicilline will not be alone in such a view.