Should Facebook Finally 'Share' Their Revenue; Australia Says Yes!


The Australian government’s decision to mandate a code that obliges Facebook and Alphabet (Google’s sister company) to give news media outlets a cut of advertising revenue - revenue generated by these media outlets’ content - is very significant. This decision could have significant ramifications for traditional media, social media giants and how advertising revenue is generated on the internet. While it is not directly connected with the Covid19 pandemic, it does appear to have been accelerated by it. It is therefore worth examining in some detail.

The code will be devised by Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC). The ACCC had been in negotiation with both Facebook and Google to agree on a voluntary code, but these negotiations had stalled, and the Australian treasury therefore decided to legislate a mandatory code. The code will oblige Facebook, Google and other social media, software and AI giants to share data (data which can be converted into targeted advertising and therefore revenue) with traditional print and broadcast media companies. Moreover, when these companies’ content feature on Google, Facebook etc, they are entitled to receive a cut of the resulting advertising revenue.

The idea seems fair. In the words of the Australian treasurer Josh Frydenberg; “It’s only fair that those that generate content get paid for it”. When the content that traditional print and broadcast media produce, either in the form of feature pieces, breaking stories or opinion pieces, generates traction and interest online, and is shared liberally in social media platforms, then it is only fair the the originators of this content, the journalists and the platforms they work for that invested the work into producing them, get some reward for the revenue they generate.

The Australian Treasurer Josh Frydenburg with his Prime Minister Scott Morrison

However, I do have some question and I look forward to seeing and analysing the code in extensive detail; The first and most obvious question is; why should the new arrangement only apply to broadcast and print news media? Surely, if a home-baking video or a freelance writer’s blog about their favourite films generates considerable traction online, and, as a result, generates revenue, they are just as entitled to be paid? This is why the context of this code, in the midst of an emergency pandemic, is important; emergencies cause legislators to panic and rush to insulate and protect their country’s traditional cultural, commercial and intellectual assets - and you can certainly rank news media giants like Australia’s ABC, America’s CNN or Britain’s BBC in that category. However, does it make for fair and good law?

I am also interested to see how this works in practice. Facebook and Google generate revenue through PPC (pay per click) and PPM (pay per impression); every time a visitor to Facebook, for example, clicks on an ad, the company that posts the ad gets charged. This is called the Pay Per Click model. For larger display advertising, the model is different. Every time a user receives an ‘impression’ (an ‘impression’ is when a user sees the ad or pauses over it for several seconds) the company advertising are charged. As the internet evolves, these revenue mechanisms become increasingly more sophisticated (see my blog on Micro-Moments for one little slice of this increasingly arcane world). However, it is not immediately clear to me how the revenue owed to the news outlets will be calculated.

Thirdly, one could argue that YouTube, owned by Google, in allowing third-parties, the original creators of content, to share in the website’s revenue surplus, is a better model. On YourTube, users who post videos, including large media giants like ABC, BBC and CNN, can moneterise by including advertising content on their videos, and thus receive some revenue. This model creates a healthy competitive market, where content creators are incentivised to produce better and more creative content. The Australian code may not incentivise such good results, as it appears only some media agencies are entitled to this revenue and data. Moreover, it remains to be seen whether they are entitled to them by course, as opposed to by virtue of the quality of the content they produce; remember, if Facebook and Google are mandated to share more user data with media outlets, these news outlets will have an enormous advantage in the market over other outlets, that may, for one reason or another, not qualify.

Of course, I’m sure many of these questions will be answered in course, and I am looking forward to seeing the code in detail. The principle behind it is very sound; people who create content, whether it is a freelance blogger working out of his or her basement or a multinational broadcast media giant, deserved to be rewarded for it.

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