On Tuesday, Facebook announced that it would "restrict publishers and people in Australia from sharing or viewing Australian and international news content." The move is in response to Australia's efforts to force Facebook and Google to pay publishers for links to their content shared on their respective platforms.
In a blog post, William Easton, Facebook's managing director for Australia, wrote:
The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content. It has left us facing a stark choice: Attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.
Interestingly, Google had previously threatened that the law could result in the company blocking the use of its search engine in Australia altogether. Instead, Google has entered into an agreement with several large publishers ahead of the expected passage of a law that would require the tech giants to negotiate a fair rate for use of news content.
I'll come back to this idea that there's some fair rate that tech companies should pay for "use of news content" in a minute. For now, what is clear is that Facebook is taking the exact opposite approach.
Make no mistake, this is the nuclear option. Facebook has blocked publishers in Australia from sharing links to their content, restricted Australian users from viewing links to news from any publisher, and even blocked international users from seeing Australian news content.
It would be easy to say that Facebook's hardball approach is indicative of the menace the social media platform has become in our lives. The problem is, Facebook's bet just might work because, well, it's right. At least as far as the part about how the law misunderstands the relationship between Facebook and publishers.
Facebook isn't "using" news content to profit. News publishers share their content on Facebook. Users share news articles on content. Journalists and bloggers promote their own articles on Facebook. In most of those cases, Facebook has absolutely no control over what links are shared, but Australia wants to force them to pay those publishers.
The thing is, to really understand what's happening, you have to separate out the way you might personally feel about Facebook, and dig a little deeper into what is actually happening here. It's absolutely true that there are very real problems with Facebook's business model that monetizes people's personal information.
It's also true that Facebook has capitalized on the shift in how people use the internet in a way that has left publishers behind. To that end, I think everyone can agree that robust, healthy news organizations are worth supporting.
Yes, Facebook and Google are reporting record profits at a time when many publishers are seeing their advertising revenue fall to a fraction of what it once was. However, just because two things appear to be correlated, doesn't mean one caused the other. Facebook and Google aren't why publishers are struggling.
Publishers have been struggling for years since they first recognized that the internet meant they could reach an almost infinite audience. So they did the obvious thing and made their content available, largely for free, online.
The problem is, once you do, content becomes a commodity and the expectation becomes that it is free. That was fine because the revenue generated by selling digital advertising against that increased traffic turned out to be more profitable than selling door-to-door subscriptions.
At the same time, all of the other things that publishers depended on for revenue--like classifieds, for example--became niche sites like Cars.com, Indeed, Zillow, and eBay. Now of course, those sites compete for advertising spend.
Eventually, Facebook and Google realized that they could leverage their scale (billions of users every day), and their technology, to make digital advertising far more effective, and far more efficient than all of those sites could on their own.
I don't think there's any question that Facebook is betting that cutting off Australian publishers from one of their biggest sources of traffic will cause them to reconsider the media code altogether. It's a risky bet because, in reality, Facebook needs their content.
That content, along with all of the other things posted and shared on Facebook, is what keeps people engaged. The more people are engaged, the more time they spend on Facebook, and the more ads they see. That's how Facebook makes money.
It's also a risky bet because Facebook could very well be inviting even more scrutiny. If the company's restriction has a material impact on the traffic to publishers in Australia--which it most certainly will--it only highlights just how much power tech companies have over the way people discover content.
Publishers have already started to push back in a very vocal way. The move drew ire from Australia's Prime Minister, who posted a message, of all places, on Facebook:
Facebook's actions to unfriend Australia today, cutting off essential information services on health and emergency services, were as arrogant as they were disappointing.
All of that is likely to raise even more concerns and cause regulators to step up efforts to rein in that power.
Facebook is making a calculated decision that it doesn't need news content in Australia as much as those publishers need Facebook. It's also betting that it will hurt publishers enough in the short term that the pressure will end up on the government to make whatever changes Facebook wants made to the law.
That's probably true, which is why it might work.