Repairing what they broke
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talkpoliticsThe big winning innovation that really propelled google and Facebook into a cash-machine status was not internet search, and neither the social linking of millions of users. The core of their success was their sale of ad space around content they were getting for free.
Now, as the regulatory authorities of Europe and the US and in other parts of the world have realised the question of breaking up the monopolies from Silicon Valley, these giants are being compelled to amend their formula. The two companies have started signing agreements with news organisations, and paying for the news content they have been getting. This is meant to not just help them bring their activities in line with the new copyright laws, but also restore some trust from the media industry.
Why Google and Facebook are being asked to pay for the news they use
FB is about to launch a new news section in the UK soon (similar to the one that has been available in the US for two years now), where they will be presenting content from the Guardian, The Economist, and The Independent. And Google has started a news platform of their own, Google News Showcase. In Germany it's already in operation with 20+ outlets, Frankfurter Allgemeine Zeitung, Der Spiegel and Die Zeit among them. The UK, France, Belgium and Australia will be next.
Both these products are setting an important precedent, where tech giants will be paying publishers for the right to dispense their content. Up till now, the revenue that the two companies used to direct to publishers, were coming from a one-time philanthropic funding for new projects, or as part of advertisement income tied to the number of clicks by users (hence, the emergence of phenomena such as "click-bait").
Neither of these models was sufficient to create a sustainable media business. In the meantime, consultant company PricewaterhouseCoopers expects the combined revenue from ads and publishing at the global newspaper market to shrink from 108 billion dollars to 86 billion between 2019 and 2024.
Google's 3-year plan to spend 1 billion on news content amounts to just 5% of the missed revenue that the news industry will lose. Google's revenue itself is expected to reach 273 billion by 2024. The new news license fees are definitely a drop in the sea compared to the scales of the business. Leading news outlets like those in Germany for example are getting a fixed fee of just a few million annually, a meagre 1-2% of their annual revenue.
Given the fact that the online search giant could contribute for 3/4 of their total traffic, this is indeed nothing. Facebook pays similar amounts in the UK. The reason that these outlets are making such huge compromises is that it gives them a chance to establish a connection with their readers, who are already using these platforms, so they could potentially be redirected to their respective websites, so they could read the stories they have chosen.
Except, this principle is not valid for Apple's News+ app, or the Microsoft wesbites. These tools keep readers on their platforms, and blurry the data of the news outlets - while still paying the latter ridiculously low amounts for their content. Now Microsoft is developing a news product for Windows that will be offering articles, and this might give the publishers a stronger position in the future.
The Google News Showcase platform consists of the so called cards, each of them focused on a certain topic like sports, finance, Covid, etc, offering select titles for the users. If a user clicks on an article, they are redirected to an article written by the respective outlet for free, and Google pays that outlet a certain fee.
The contracts allow articles to be used in other platforms made by Alphabet, the mother company to Google, which is quite convenient for the latter. FB's new news platform will similarly be redirecting readers to the news outlet of their choosing.
These products are separate from the materials arriving into the FB newsfeed and Google's search results - for which these platforms will have to pay additionally. The news organisations are hoping, however, that these efforts will just be the first step towards more sustainable and permanent agreements on revenue sharing.
Still, the news organisations remain rather skeptical, as they have been stung by such promises many times in the past. FB has been encouraging data-publishing companies and media to garner extra public through the FB pages for years. Once these organisations have invested an awful lot of their time, money and effort, the social network screwed them up by changing the way of showing the content, and so reaching the same public became problematic, not without paying extra for promoting said content.
This is why of the reasons that some publishers now prefer to get only a small fee from the tech giants, when they could've demanded much more. If the amounts were large, they would've risked becoming hostage to the whims of the big Silicon Valley companies.
The new agreements guarantee Google and Facebook revenue for three years, a large period in the context of the dynamic life-cycles within the tech sector. As enthusiastic as the leaders of the news organisations might be from the precedent that is being set, they should still make sure that these deals will bring them significant results, mainly through attracting new subscribers.
As the anti-monopoly pressure on Google and Facebook increases, it is in their interest to help the news business develop sustainable economic models. This would help mitigate the criticism against them, because it was them who broke the existing media models. It would also spare them the ever mounting regulations in the longer run. News Corp, Rupert Murdoch's company for example has called for new rules in Australia, which would force the tech giants to share a larger part of their revenue from digital advertisement. Paying for news would also vastly improve the quality of these platforms, which have turned into breeding grounds for disinformation.
A healthy news industry is something good for democracy. As for the tech giants, it would also be good for their business.
Now, as the regulatory authorities of Europe and the US and in other parts of the world have realised the question of breaking up the monopolies from Silicon Valley, these giants are being compelled to amend their formula. The two companies have started signing agreements with news organisations, and paying for the news content they have been getting. This is meant to not just help them bring their activities in line with the new copyright laws, but also restore some trust from the media industry.
Why Google and Facebook are being asked to pay for the news they use
FB is about to launch a new news section in the UK soon (similar to the one that has been available in the US for two years now), where they will be presenting content from the Guardian, The Economist, and The Independent. And Google has started a news platform of their own, Google News Showcase. In Germany it's already in operation with 20+ outlets, Frankfurter Allgemeine Zeitung, Der Spiegel and Die Zeit among them. The UK, France, Belgium and Australia will be next.
Both these products are setting an important precedent, where tech giants will be paying publishers for the right to dispense their content. Up till now, the revenue that the two companies used to direct to publishers, were coming from a one-time philanthropic funding for new projects, or as part of advertisement income tied to the number of clicks by users (hence, the emergence of phenomena such as "click-bait").
Neither of these models was sufficient to create a sustainable media business. In the meantime, consultant company PricewaterhouseCoopers expects the combined revenue from ads and publishing at the global newspaper market to shrink from 108 billion dollars to 86 billion between 2019 and 2024.
Google's 3-year plan to spend 1 billion on news content amounts to just 5% of the missed revenue that the news industry will lose. Google's revenue itself is expected to reach 273 billion by 2024. The new news license fees are definitely a drop in the sea compared to the scales of the business. Leading news outlets like those in Germany for example are getting a fixed fee of just a few million annually, a meagre 1-2% of their annual revenue.
Given the fact that the online search giant could contribute for 3/4 of their total traffic, this is indeed nothing. Facebook pays similar amounts in the UK. The reason that these outlets are making such huge compromises is that it gives them a chance to establish a connection with their readers, who are already using these platforms, so they could potentially be redirected to their respective websites, so they could read the stories they have chosen.
Except, this principle is not valid for Apple's News+ app, or the Microsoft wesbites. These tools keep readers on their platforms, and blurry the data of the news outlets - while still paying the latter ridiculously low amounts for their content. Now Microsoft is developing a news product for Windows that will be offering articles, and this might give the publishers a stronger position in the future.
The Google News Showcase platform consists of the so called cards, each of them focused on a certain topic like sports, finance, Covid, etc, offering select titles for the users. If a user clicks on an article, they are redirected to an article written by the respective outlet for free, and Google pays that outlet a certain fee.
The contracts allow articles to be used in other platforms made by Alphabet, the mother company to Google, which is quite convenient for the latter. FB's new news platform will similarly be redirecting readers to the news outlet of their choosing.
These products are separate from the materials arriving into the FB newsfeed and Google's search results - for which these platforms will have to pay additionally. The news organisations are hoping, however, that these efforts will just be the first step towards more sustainable and permanent agreements on revenue sharing.
Still, the news organisations remain rather skeptical, as they have been stung by such promises many times in the past. FB has been encouraging data-publishing companies and media to garner extra public through the FB pages for years. Once these organisations have invested an awful lot of their time, money and effort, the social network screwed them up by changing the way of showing the content, and so reaching the same public became problematic, not without paying extra for promoting said content.
This is why of the reasons that some publishers now prefer to get only a small fee from the tech giants, when they could've demanded much more. If the amounts were large, they would've risked becoming hostage to the whims of the big Silicon Valley companies.
The new agreements guarantee Google and Facebook revenue for three years, a large period in the context of the dynamic life-cycles within the tech sector. As enthusiastic as the leaders of the news organisations might be from the precedent that is being set, they should still make sure that these deals will bring them significant results, mainly through attracting new subscribers.
As the anti-monopoly pressure on Google and Facebook increases, it is in their interest to help the news business develop sustainable economic models. This would help mitigate the criticism against them, because it was them who broke the existing media models. It would also spare them the ever mounting regulations in the longer run. News Corp, Rupert Murdoch's company for example has called for new rules in Australia, which would force the tech giants to share a larger part of their revenue from digital advertisement. Paying for news would also vastly improve the quality of these platforms, which have turned into breeding grounds for disinformation.
A healthy news industry is something good for democracy. As for the tech giants, it would also be good for their business.
