Facebook pulls the plug

The Nutgraf is a 10-min newsletter sent at 10 AM IST every Saturday. It connects the dots and synthesizes one big event in business, technology and finance that happened over the week in India. In a way you’ll never forget.

This is a free edition of a paid newsletter that’s available exclusively to The Ken’s premium subscribers.

Just 10 mins long Synthesis not analysis Sometimes memes
A paid 🔒 weekly emailer that explains fundamental shifts in business, technology and finance that happened over the last seven days in India. In a way you’ll never forget. Someone sent you this? Sign up here
Good Morning Dear Reader,

Social media is going through a tough time.


Ever since the TikTok ban in India, a move which we labelled as the beginning of the ‘splinternet’, all kinds of weird stuff has been going on. The latest in this saga happened in a land, far, far away, in Australia.


A couple of days back, when Australians woke up, checked Facebook, and attempted to share news articles with their friends, they found out that they…couldn’t.

It wasn’t just news organisations. In its zeal, Facebook restricted sharing across a range of non-news organisations as well. 


People weren’t just upset, they were livid


Scott Morrison, the Australian Prime Minister called the move akin to Facebook ‘unfriending Australia’, described it as ‘arrogant’, and said that his government would not be intimidated. 


A director at Human Rights Watch's Australia called it a "dangerous turn of events". The head of the British parliamentary committee overseeing the media industry, described it as "bullying” and “staggeringly irresponsible”. 


Other sections of the media decried the move as ‘censorship’. 

As a member of the news media which is affected by this, let me state this as plainly as I can, because I don’t say this very often. 


Facebook absolutely did the right thing.

The link tax

So, here’s the backstory. 


Australia is on the verge of introducing a law, described as the ‘Media Bargaining Code’.


The code requires companies like Google and Facebook to ‘negotiate’ and enter into agreements with news publishers for the right to display links to news on their apps and websites. So each time a user posts a link to, say, The Sydney Morning Herald on Facebook, Facebook would have to pay The Sydney Morning Herald some money. 


Yes. Take your time and read that again. 


Here’s the argument, from the perspective of the news publishers. For a long time, news publishers were doing well. Then, the internet came along, so news companies went online and tried to figure out how to make money through digital advertising. Eventually, Google and Facebook exploded into the scene, and all digital ads dried up, because all the advertisers went to them. So now, Facebook and Google must pay news publishers whenever they ‘use’ their content on their platforms — it’s like a royalty licensing deal.


Except, if you think about it for two minutes, the argument is nonsensical at best, and disingenuous at worst. 


You don’t need someone as storied as Ben Thompson of Stratechery to describe how ludicrous this is, but here it is anyway.

This is what happens when you don’t understand how your own business works: you create a myth wherein Google and Facebook decimated the news business, when in reality they came along years after the business — already not a franchise — had been decimated by the Internet. That Google and Facebook became hugely profitable by virtue of helping users make sense of infinite content — Aggregators focus on discovery, not distribution — meant that their responsibility for the state of news, to the extent it exists, is exactly what they say it is: directing huge amounts of traffic to publisher websites.
Publishing is back to the future, Stratechery

So Facebook and Google have been sending millions of users to publishers every day, for free. Users whom publishers monetised by making them navigate an ocean of pop-up ads, banner ads and other trackers...and now they’re asking to be paid for it. Oh, also, the legislation has provisions that insist that Google and Facebook share the details of their ranking algorithms with publishers. 


This is a good time for some context on why the Australian Parliament is...enthusiastic about this. 


The answer is a company called News Corp, owned by the billionaire Rupert Murdoch. 


The News Corp media empire, which stretches across multiple continents, is a powerful, influential, and well-entrenched force to reckon with in Australia. According to a multi-part story that appeared in The Guardian, News Corp was responsible for ending the careers of not one, but two Prime Ministers of Australia. 


Despite this, I’m sure this has nothing to do with the fact that the Australian Parliament has introduced this code, which can be described as a thinly veiled extortion attempt against Facebook and Google, to favour news publishers in Australia. 


When faced with this choice, Facebook and Google took two different decisions last week. 


Google decided to pay up.

Google struck a deal with the Murdoch family owned media conglomerate News Corp. as proposed legislation in Australia threatens to jeopardize the tech platform’s future operations in the country.
Under the three-year deal announced Wednesday, News Corp. brands in the U.S., U.K. and Australia like The Wall Street Journal and New York Post will be featured in the Google News Showcase. The companies will enter into an ad revenue-sharing agreement, develop a subscription platform and YouTube will invest in video journalism as part of the deal, according to a press release

News Corp.’s stock popped on the news before settling later.
Google will pay News Corp for the right to showcase its news articles, CNBC

And Facebook decided...nah, this wasn’t worth it, and decided to shut shop. 


And everyone lost their collective minds. 


Censorship. Stealing. Bullying. 


This entire saga brings a few things to the fore. 


First, if news publishers were unhappy that Facebook was, in effect, ‘stealing’ money from their table by sending all that traffic their way, surely Facebook pulling out would be welcome? But it isn’t. Publishers want the free traffic, and now they want to make it paid. 

The logic is something like this.

Of course, one of the more delightful aspects of this saga is that it’s now resulted in a couple of ironies. 


Facebook thought it had a fake news problem on its platform. Now it has a real news problem. 


Facebook is prone to disinformation. 


However, on a serious note, the Australian example is quite important, because it attempts to dismantle a fundamental rule of the internet—it attaches a value equation to linking, something which, until now, was seen as free. 


Linking is the connective tissue of the internet. Links are what take users from one place to another, from a social media feed to a publisher, from a Google search to Wikipedia, and from a newsletter to, say, a podcast. Links are ways to hop from one place to another. Sometimes links are created because it’s a core value of the product—like in Google Search. Sometimes, links are created because it’s a form of discovery. You see something. You like it. You click, and you are transported somewhere else. And sometimes, like in this newsletter, links are created as a way to acknowledge primary sources, and for reasons of credibility and citations. 


What Australia has done is, it has said that links are not free. And that if a link is created by a user, it needs to be taxed. And paid to the publisher. 

If this is making your head swim, here’s what Tim Berners Lee, the creator of the world wide web has to say about this new construct.
Specifically, I am concerned that that code risks breaching a fundamental principle of the web by requiring payment for linking between certain content online
If the code is deployed globally, it could 'make the web unworkable around the world
Tim Berners Lee

Maybe the link tax will make the web ‘unworkable’. 


But the threat of the link tax does something worse. 


It forces big tech to make big payouts to big media as a form of ransom, because like many things, the fact that the idea of the link tax exists as a way to extort companies like Facebook and Google is worse than the outcome. 


And there’s a good reason we should all be worried about this.


When Facebook shut down link sharing of news content, Australian PM Morrison made a few calls to seek out support. 


One of those calls was to someone we know quite well.

Morrison said the legislation -- due to be debated by Australia's Senate on Monday in the next step towards it becoming law -- was garnering interest from other world leaders.
The law was raised in a Thursday call with Indian Prime Minister Narendra Modi, he said
"There's a lot of interest in it," he told media. "People are looking at what Australia is doing."
Discussed Facebook news ban with PM Modi, says Australian PM Morrison

Of course, I’m not implying that India is going to go ahead with this. Maybe it will. Maybe it won’t. Maybe PM Modi just listened to Morrison politely as a courtesy and promptly forgot about it. It’s in Scott Morrison’s interest to play up an international interest here. 


But what worries me is that if the link tax is wielded as a threat in countries like India, the winners won’t be the independent, small publishers. It won’t be outfits like The Caravan, or Scroll or Newslaundry. Google isn’t going to march into their offices to strike deals with them. 


Instead, in all likelihood, the ones who’d win would be the big boys. The Times Group. The Hindu. HT Media.


In fact, all small publishers will suffer. 


Just like how they’re suffering in Australia right now. 


Like Michael West, an Australian journalist who runs MichaelWestMedia, an independent news website specializing in investigative journalism in the areas of business, finance, tax, and energy.


 Here’s his post on Facebook yesterday. 

We’ll fight on. 


Thanks as always for your support. 

That's about it from me.


Here's the link to this edition for you to share. Or you can use the easy share buttons below
Take care.
Praveen Gopal Krishnan
The Nutgraf is a paid weekly emailer that explains fundamental shifts in business, technology and finance that happened over the last seven days in India. In a way you’ll never forget.
Know someone who would like The Nutgraf?
Want to receive The Nutgraf every week?
The Nutgraf is published by The Ken—a digital, subscription-driven publication focussing on technology, business, science and healthcare.
Follow The Ken on Twitter, Facebook, and LinkedIn
This email was sent to [%email%]
Something wrong? Tell us at [email protected]
Want to unsubscribe from our weekly newsletter, The Nutgraf? Click here. Or set your email preferences here
© 2021  The Ken