Australia’s relatively small size combined with its affluence and sophistication makes the country where global marketers try out products and strategies.
In the case of social media giant Facebook, Australia also seems to be the place where it is firing the first salvos in what could become a global war between publishers, platforms, and regulators — with a countless number of small organizations as collateral damage.
No simple unfriend
Last week’s move by Facebook to stop distributing news content in Australia, however, is not as simple as the Australian Government suggested when it said the company had “unfriended” the whole nation.
Yes, Facebook blocked Australian news content in protest at imminent Australian Government legislation to impose a code that would require social media platforms to pay media companies for the news content.
And yes, Facebook’s action came as the other big tech behemoth, Google, almost simultaneously negotiated deals under the code with a raft of Australian media companies.
But between these two developments, there is a multitude of nuances that fall through the cracks.
A code for new giants
At its most basic, the dispute comes down to this: news organizations are losing advertising revenue which they say is going to the tech companies, which benefit from distributing the news and content they create.
It makes sense superficially. But the Government code mostly helps large media companies, not the many small community newspapers and local media organizations who rely on sharing among their followers to distribute their message. Many of these are neighborhood operations with minimal revenues but significant local followings.
These organizations were also caught up in the Facebook ban. A host of other organizations such as the Bureau of Meteorology, charities, and health organizations used Facebook, not for profit, but for distributing information.
Then there are the digital native marketing and content companies whose business model is almost entirely built around Facebook.
One of these is Pedestrian.tv, which went from a startup to being acquired by major media group Nine Entertainment due to its stunning success and growth.
Pedestrian is perhaps 75% reliant on Facebook for its entire business model in marketing to its millennial and Gen Z market. If you try and go to their page today, you’ll see it says “no posts yet,” where previously there were tens of thousands.
So, suppose the dispute cannot be resolved, and Facebook continues with its blanket and somewhat indiscriminate ban. In that case, a whole generation of new media companies will be forced to reconfigure their business model, and some may not survive.
Innovation would be stifled, and the SEO industry will be devastated. Going back to emailed newsletters, as many publishers are doing this week, may not be enough.
The dirty work
Sure, this is not necessarily Facebook’s responsibility.
It is a private company, not a government utility. It also claims that it relies far less on news content than Google does and that news is not intrinsic to its business model, even if it is to those who use its platform.
At the same time, however, Facebook is a company that grew so fast it outpaced regulation and is now flexing its muscles in displeasure at the very idea of being regulated.
In this dispute, no party is entirely wrong or entirely right, and both are using blunt instruments.
The Australian Government has been charged with doing the dirty work of Rupert Murdoch’s News Corporation, which complained for years about the tech companies as its advertising revenues have dwindled. It has turned to alternatives, such as the paywall and algorithms, to bolster revenue.
Facebook has copped it for being a bad corporate citizen, a reputation exacerbated by the fact that it pays only around AUD 40 million in tax and yet receives advertising revenues of AUD 1.7 billion.
While it is a private company, Facebook is also a monopoly in that Google, for all its dominance, is not.
Microsoft’s Bing may not have Chrome's popularity, but it is backed by a global tech giant and could fill a gap if Google refuses to play. Facebook operates in a very individual way and is the only company in its space.
The way to look at this is that Facebook has fired the first shots in what will be a protracted war.
Already there are reports it has re-opened discussions with the Australian Government on the issue. For its part, the Government says it won’t advertise on Facebook, which would have been a key distribution channel for the upcoming rollout of the COVID-19 vaccine.
Any solution has to have a result for everyone. Otherwise, it won’t be sustainable.
Facebook needs to realize that it should surrender a portion of its current profits to help the digital ecosystem grow, on the understanding that its profits will grow with the ecosystem. Its danger is that a more powerful government in a much bigger market, such as the U.S., will enact anti-trust laws and break it up.
The Australian Government also needs to understand that while major media is important, they are not the only game in town. There is a whole sub-stratum of smaller companies who are also constituents and need to be represented and protected because they are also the future of media and content.
So, while the Bureau of Meteorology Facebook page has been restored and can now inform people of severe weather conditions, the 351,000 young Australians for whom Pedestrian.tv was their daily news feed are still going without.
That is not a good result for anyone, not even for Facebook.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and HR&DigitalTrends, and the editor of NextGen Connectivity. His fascination is with how businesses are reinventing themselves through digital technology and collaborate with others to become completely new organizations. You can reach him at [email protected].
Image credit: iStockphoto/kennykiernan