Link Tax
When a law is written such that only two companies can be taxed to bailout an industry there is something fundamentally wrong with that approach
On 12 March 1989, a British man who would go on to be knighted was working at the Conseil Européen pour la Recherche Nucléaire or CERN as it is more commonly known. He implemented the Hypertext Transfer Protocol and enabled the communication between a client and a server. Sir Timothy John Berners-Lee created the World Wide Web and by extension the internet as we know it.
His initial idea was that every hyperlink that was visited from a page would be compensated a certain sum and had thoughts of a micropayment system long before cryptocurrency was even dreamed up. Then an American came along and trampled all over that idea. His name was Marc Andreessen and he had created a software he called Mosaic. Such software would eventually be called Web Browsers.
Mosaic opened up the web to everyone and made it possible for anybody to access the web and consume the content on it. The internet itself would not have grown as quickly as it did if it was to work the way Tim had imagined. The free nature of the web resulted in explosive growth and ensured many rags-to-riches stories.
Today, we take a link for granted. To research this article, I would have clicked over 100 links. Some of those clicks could have been avoided but it cost me nothing so why not?
A product like Google was possible because links cost nothing to put on the page. Imagine if Google had to pay every website whose link was clicked on its page instead of charging them in most cases! Or imagine the expense that Facebook would incur given the number of links users post on their platform.
Over the last 5 years, news organisations have been lobbying governments that they need to be paid a percentage of the income generated by companies like Google and Meta because their links make these two platforms valuable. Their argument was that a lot of people come to Google and Facebook to read news. Without the links to the news sites, Google and Facebook would not be able to generate as much income as they manage to.
What is up with the News Media?
Source: Pew Research
The Internet has eviscerated their business. They did not see it coming and they did not even adapt to it. Even 10 years ago, most of them were still trying to see how to expand their paper circulation and did not really focus on their online offerings.
Most importantly, the targeting that is possible on Google and Facebook is not possible on newspapers. Advertising in a newspaper is like throwing spaghetti on the wall and hoping something sticks.
As companies leave politicians show up!
Source: Pew Research
This has in no small part contributed to news outfits becoming more polarised since they depend more and more on political advertising to keep the concern going.
Hence news organisations are going after precisely the two companies that have been eating their lunch.
What are they asking for?
This story is years old. In 2014, Alex Springer introduced the idea that Google is valuable because it can show snippets of their news in search results and without that Google would be much less valuable and would lose users.
When Germany’s biggest news publisher, Axel Springer, tried to block Google from running snippets of its articles in 2014, it backtracked after just two weeks once traffic plunged. When Spain tried to force Google to pay for news in 2014, the search giant just left—blocking Google News in the country for seven years.
Source: Wired
The EU had been having several skirmishes with Google and Facebook. Their argument - we supply free traffic, so why should we be asked to pay for that traffic when others pay us for the traffic. In the case of Facebook, it is not even links placed by Facebook. It is being generated by the users, how could Facebook be held responsible for links it was not placing.
Also, singling out Google and Facebook meant that they were not creating a law, in fact, they were trying to force two companies to subsidise an industry.
News-gathering organisations play an important role in society. We all make decisions based on what information is available to us including which political party to elect. Their work is important and if you want to subsidise them for that work, you should. Ideally, this should be done by taxing the rich to finance them or by setting aside a piece of the entire tax pie for them. Singling out two specific companies is unprincipled.
I cannot believe I am siding with Google and Facebook but that is how stupid this is.
In this “Stupid Olympics”, Australia took the gold medal and passed a law.
According to Fletcher, the code was Australia’s answer to a problem that was first and foremost about competition. The argument was simple—Australia’s news industry should be compensated for helping Google and Facebook attract eyeballs. “What we're trying to do is replicate the ordinary commercial dealings that would occur in a market where there wasn't a huge imbalance of bargaining power,” he says.
But others suspect the code was really an attempt to subsidize the media industry, which was suffering from intense online competition for advertising. Out of every 100 Australian dollars spent on advertising in 2019, AD$53 ($38) went to Google, AD$28 to Facebook, and AD$19 to all other websites including media outlets, according to Australia’s competition watchdog. If this was the reason for the code, Bloomberg editors described it as a misdiagnosis in an op-ed. “Journalism’s business model wasn’t broken by digital platforms,” they said, “[the internet] offered consumers a wealth of free news and opinion and gave advertisers options and audiences that traditional publishers haven’t been able to match.”
Source: Wired
First of all, this was not a competition issue at all. Facebook and Google are not news-gathering organisations. Besides they have got cause and effect upside down.
Australia passed the bill in 2021. And then Google and Facebook did something really stupid…
Australians experienced this standoff through their Facebook feeds. For eight days, the site featured no news. Then, at 1 am on February 26, 2021, news content started to reappear, reversing users’ feeds to how they always looked. But behind the scenes, tech’s relationship with the media had permanently shifted.
Google and Facebook did not leave; they paid up, striking deals with news organizations to pay for the content they display on their sites for the first time. The code was formally approved on March 2, 2021, writing into law that tech platforms had to negotiate a price to pay news publishers for their content. If they didn’t, an arbiter would step in not only to force the platforms to pay but also to set the price. One year after the media code was introduced, Google has 19 content deals with news organizations and Facebook has 11, according to Fletcher.
Source: Wired
Australia is a desert island in the middle of nowhere with 26 million people. It would have been a perfect case to make an example out of. For some reason, both companies thought, a penal colony in the back and beyond, who cares!
Both companies made a terrible call. They agreed to make deals with the media organisations.
The criticism of Australia’s system focuses on its lack of transparency, which means that media companies cannot compare notes on the deals they are offered and there is a lack of clarity on which outlets are entitled to negotiate.
Misha Ketchell, editor at The Conversation Media Group, says he’s happy with the deal he struck with Google. But when the outlet approached Facebook for a deal, the platform refused to negotiate, even though The Conversation says it fits the criteria set out in the code. “I think Facebook made a decision about the minimum number of deals they could do to stop the government from designating them under the code,” he says. The Conversation is yet to try collective bargaining, he adds, which gives smaller outlets the option to band together and provides more negotiating weight with the platforms.
Source: Wired
They knew who had the money to create a nuisance and who did not; they picked and chose.
News organisations who are in cahoots with political parties across the world have been salivating ever since. Imagine being able to reach into the bank accounts of Google and Facebook and getting some money out for actions taken by users!
Canada was the next 20 million odd people country to follow suit.
The Canadian Parliament has passed a law that will require technology companies to pay domestic news outlets for linking to their articles, prompting the owner of Facebook and Instagram to say that it would pull news articles from both platforms in the country.
The law, passed on Thursday, is the latest salvo in a push by governments around the world to force big companies like Google and Facebook to pay for news that they share on their platforms — a campaign that the companies have resisted at virtually every turn.
[…]
“A strong, independent and free press is fundamental to our democracy,” Pablo Rodriguez, the minister of Canadian heritage in Prime Minister Justin Trudeau’s government, wrote on Twitter late Thursday. “The Online News Act will help make sure tech giants negotiate fair and equitable deals with news organizations.”
Tech companies feel differently.
Meta, which owns Facebook and Instagram, had previously warned lawmakers that it would stop making news available on both platforms for Canadian users if the legislation passed. The company said that it now planned to do just that.
Source: New York Times
This is a bit too close for comfort. For an idea to leech into the US from Canada is a lot easier than the same happening from Australia.
Long before the bill was passed, Meta warned the government that the only way it could comply with the law was to “end news availability” in Canada, effectively blocking Canadians’ ability to post and view links to news sites, including non-Canadian outlets. Many news companies warned the government that C-18 would devastate an already struggling industry. The Canadian government doubled down, saying that Meta should support the news industry it helped decimate.
Canada believed it could play hardball and win, as Australia had done the year prior with its news media bargaining code. With the world watching, Canada rushed C-18 through before breaking for summer vacation. It hoped the legislation would set a precedent others could emulate. And then the wildfires struck.
Now, government officials and news outlets caught in the crossfire are now learning a lesson in the hardest way possible: Meta does not bend to governments, even when lives are at stake.
Source: WIRED
Amid the worst fire season that Canada has seen, there is no easy way to disseminate news in Canada. Fires can move quickly and they can burn down an entire town in a matter of hours as it did in Lahaina. Having credible news sources reporting about these incidences and sending out warnings would be valuable but thanks to this situation it is absent.
Facebook has completely blocked all new organisations from posting links on its site because that is the only way to comply with the law. Doing what they are doing might really show us who is hurt in the long term by the absence of news links. I doubt it will be the social network.
I also doubt that Google and Facebook would be willing to settle as they did in Australia. Either way, this is not over yet. EU is also working on what has been called the “Link Tax”. The UK and the USA might also buck the trend. If they successfully repel Canadian lawmakers, the repercussions will be felt 10,000 miles away in Australia.
Meta's (META.O) decision to block news links in Canada this month has had almost no impact on Canadians' usage of Facebook, data from independent tracking firms indicated on Tuesday, as the company faces scorching criticism from the Canadian government over the move.
Daily active users of Facebook and time spent on the app in Canada have stayed roughly unchanged since parent company Meta started blocking news there at the start of August, according to data shared by Similarweb, a digital analytics company that tracks traffic on websites and apps, at Reuters' request.
Source: Reuters