Prepare to see more wins over Facebook
It has been a week since Facebook Inc. abruptly cut off its 13 million Australian users from their Facebook news feeds. That was Facebook’s method, arrogant even by Facebook standards, of opposing a new Australian law requiring social media to pay for the journalism that appears on its platforms.
But Facebook lifted the ban on Tuesday, agreeing with the Australian government that it would comply with the new law.
That was quite a climbdown. Facebook CEO Mark Zuckerberg’s first attempt to bully a G-20 country into submission failed. The Aussies earlier stared down a similar threat from Alphabet Inc. subsidiary Google.
There is much more at stake here than compensation for content creators. World leaders fixated on the drama playing out in Canberra are now emboldened, finally, as they plan their own measures to rein in the social-media giants.
The Australian dispute has given new impetus to long-sought reforms in social media.
With their algorithms, social media enterprises decide what users see. They amass personal data about users, doing with it what they alone choose, in ways they don’t disclose. And they have a
complaisant regard for malevolent use of their platforms.
With this week’s reversal by Facebook, Australia has achieved a breakthrough in imposing the first meaningful regulation on a social-media industry that has been lawless since its inception more than 20 years ago.
The Australian precedent opens the door to more important antitrust, content monitoring and user-privacy regulation of social media.
Recognizing that precedent as a threat to their business model, Facebook and Google fiercely opposed the Australian content-payment initiative.
Google threatened to shut down its core search service in Australia. But it recently caved, settling the issue by cutting revenue-sharing deals with Australia’s largest news providers.
Facebook, by contrast, chose what Australians are calling the “nuclear option.” On Feb. 17, the California-based firm disabled the news feed on which Australia’s Facebook users rely for news about their country and the world.
Approximately 29 per cent of Australians rely on Facebook’s news feed for general news, and 49 per cent count on it for news about COVID-19, according to a 2020 study by the University of Canberra.
It must be said that the Australian law on content payments, which Canada, the European Union (EU) and other jurisdictions are poised to emulate, is imperfect.
The new law extracts money from Facebook and Google and gives it to Australia’s biggest media enterprises, including Australia native Rupert Murdoch’s News Corp.
The law leaves smaller community, regional and specialized publications as cash starved as ever.
That shortcoming needs to be addressed in Ottawa’s own pending legislation on socialmedia revenue sharing.
It’s also the case that most Australians are less concerned about revenue sharing than the toxic mix of other problems with social media, noted above.
That, too, should command the attention of Ottawa policymakers.
Meanwhile, money managers are becoming less enamoured of social media investments.
Facebook and Google are among the world’s most valuable companies, with combined total shareholder value of more than $2.6 trillion.
That sky-high stock-market value is based on two factors.
Facebook and Google are near-monopolies.
Facebook and its Instagram and WhatsApp subsidiaries account for about 70 per cent of the world’s social-media users outside China, where the services are blocked.
Google has more than 60 per cent of the global internet search market. And its YouTube subsidiary dominates the video-sharing world.
With that overwhelming size comes unrivalled pricing power over advertisers; application developers and other suppliers; NGOs seeking a presence on social media; and governments with health, travel advisory and small-business-assistance messages they convey on social media. Their enormous size also enables Facebook and Google to underprice some rivals and acquire others, which is how Instagram, WhatsApp and YouTube disappeared as alternative socialmedia services.
The other factor is ubiquity. The several billion people using Facebook and Google services generate an unprecedented number of targeted advertising opportunities for marketers.
And that, in a nutshell, is why the two social-media giants are reluctant to take content moderation seriously.
Banishing from their platforms conspiracy theorists and other messengers of malignance who command large audiences is seldom done. Those enormous audiences translate into higher traffic levels and more ad revenues.
In sum, the business model that has made Facebook and Google among the most lucrative enterprises in history relies on maximum traffic activity and being the only game in town.
Investors are beginning to wonder if that model is sustainable.
Antitrust actions are pending against Facebook and Google in the U.S. and the EU, which has imposed fines on Google for its monopolistic practices. Google and Facebook treat such fines as a mere cost of doing business.
As for content regulation, the EU has imposed a “disinformation code” on social media, which Australia also means to implement.
That’s a start. But it’s a squishy measure that still requires self-compliance by social media firms, something they’ve shown they’re incapable of.
Disinformation spread by social media has been implicated in major anti-social behaviours worldwide, including the fomenting of ethnic hatred and the current anti-vaxxer campaigns.
Never has the global political environment been more hostile to the social-media giants.
Munro Partners, a Melbourne fund that manages $3.7 billion, dumped the last of its Facebook shares after Facebook tried to boss around Australia. But not for that reason.
For Nick Griffin, chief investment officer at Munro, Facebook now faces “thousands of skirmishes” with government authorities worldwide.
“It’s that issue around hate speech, extreme content and fake news that’s making Facebook public enemy number one for every single government on the planet,” Griffin told the Melbourne Age.
Investment managers are also mindful that Facebook and Google will not be highgrowth companies indefinitely, the basis of their current status as stock-market darlings.
The Facebook growth engine is slowing down. Annual revenue growth at Facebook has declined in each of the past three years, from 37 per cent to last year’s 21 per cent.
Investing in Facebook and Google now means taking a chance on companies facing profit-eroding regulations, and that are candidates to be broken up by trustbusters. Facebook, Google and their antitrust successors seem destined to become regulated utilities with stable but modest growth rates.
For now, Australian Facebook users have had a short break from being spoon-fed news selected by Facebook’s algorithms.
Many have been “unfriending” Facebook and downloading free apps of credible news sites, including the Australian Broadcasting Corp.
Facebook’s 25 million Canadian users can do the same. They can visit their phone’s app store for free apps of trustworthy news providers, including the CBC, CTV, Global News, Yahoo News, CNN, PBS, the U.K. Guardian and the Toronto Star, among scores of others.
This episode has given Australians a head start on taking control of their news consumption. Let’s hope that this enlightened practice spreads far and wide.