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4 March 2021

What Nick Clegg isn’t telling us about Facebook’s fight with Australia

Clegg fails to acknowledge the debt Facbook owes to professional journalism, or the competitive advantage it enjoys over news providers.

By Dominic Ponsford

Ten years ago, Nick Clegg enjoyed a brief surge of popularity after the first televised UK prime ministerial debate. The phrase everyone remembered from the night was “I agree with Nick”, repeated by rival candidates in an attempt to align themselves with the Lib Dem leader’s confident and persuasive performance.

Press Gazette: Facebook Australia to restore news after deal on payments to publishers Part of New Statesman Media Group

This week, in Clegg’s role as PR supremo for Facebook, it has been his job to defend the tech giant’s decision to switch off news on its platform in Australia, apparently as part of a strong-arm negotiating tactic to ward off forced payments to news publishers.  

I strongly disagree with Nick.

In a post for Facebook, Clegg wrote: “When ads started moving from print to digital, the economics of news changed, and the industry was forced to adapt. Some have made this transition to the online world successfully, while others have struggled to adapt.

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“It is understandable that some media conglomerates see Facebook as a potential source of money to make up for their losses, but does that mean they should be able to demand a blank check?”

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The implication here is that the demands on Facebook are being made by a few print dinosaurs who deserved to be wiped out because they couldn’t move with the times. To stretch a metaphor, this is rather like the six-mile wide asteroid that hit the earth 65 million years ago arguing that the established fauna on planet Earth did not get out the way quickly enough.

In 2012, UK national and regional news brands made around £3bn in advertising revenue. Total digital advertising in the UK that year was around £5bn. Facebook’s entire global revenue was around $5bn (compared with $86bn in 2020), a small fraction of which was made in the UK.  

In 2020, the duopoly of Facebook and Google shared more than £10bn of digital advertising in the UK alone (80 per cent of the digital advertising total, and 50 per cent of all UK ad spend), versus a little over £1bn in total advertising for the news brands. So, in the UK alone, the pair now have a market share that is ten times bigger than every national and local news brand combined (print and online).

In the intervening period there is not a single national or regional newspaper publisher that has avoided making redundancies and severe cuts, despite booming online news readership. Even fast-growing, digital companies such as Buzzfeed, Vice and Quartz have made cutbacks in recent years.  

Nearly every news publisher that relies on advertising for revenue has struggled to adapt, because of the ever-greater dominance of two digital monopolies: Facebook on social media and Google on search.

You can adapt all you like, but when the total revenue going to your segment of the market is a third of what it was, you can whistle if you are going to beat Google and Facebook for advertising.

News publishers cannot compete with Facebook because its content is provided for free, created by other people, and protected under the EU e-commerce Directive, which gives tech platforms immunity from prosecution for libel or contempt of court over what appears on their websites.  

When this directive was set up in 2000, regulators had no idea what a huge, distorting impact it would have on the media economy. It is a similar picture in the USA, where tech platforms that make their money from selling advertising against free content are protected by section 230 of the Communications Decency Act 1996, which gives immunity from prosecution over third-party content.

According to Clegg, asking Facebook to pay money to news publishers is “like forcing car makers to fund radio stations because people might listen to them in the car – and letting the stations set the price”.

This simile conveniently ignores the fact that both Facebook and news publishers conduct the same business: showing people content and selling advertising space around it.

The current situation is more like if two new auto manufacturers came to dominate the market by offering their cars for free, provided customers allowed them to collect data about every place they visited and every penny they spent when they did so, and then used the radios to serve them with marketing content throughout their journeys. Whereas existing car makers relied on staff to build their cars, FaceCar and GooCar had persuaded customers to build the cars for free.

Everyone thought this was fantastic until FaceCar and GooCar started squeezing all the existing manufacturers out of business, even though these new players were less safe and more polluting than the existing car brands.

The Australian government is saying that one way of preserving market diversity is to levy a sort of tax on the two dominant players, to ensure that squeezed existing brands can survive.

Facebook would survive without professionally produced content on its platform, but it would become a less interesting and lower-quality experience when compared with other sites.  

Let’s also remember that local news is the product which is being most squeezed by Facebook, both in terms of advertising and eyeballs.  

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Clegg said Facebook objects on principle to “being forced to pay potentially unlimited amounts of money to multi-national media conglomerates”.  

But in the same article, he revealed the social media giant’s announced plans to spend $1bn over the next three years buying favour with, ahem, “multi-national media conglomerates”.

There is an argument for saying that its payments to the news industry should be regulated in some form, otherwise it could just pay big bucks to the most politically troublesome news publishers and sprinkle peanuts among the rest.

Press Gazette: What two decades of digital disruption did to the British press Part of New Statesman Media Group

In his conclusion, Clegg states: “There are legitimate concerns to be addressed about the size and power of tech companies, just as there are serious issues about the disruption the internet has caused to the news industry. These need to be solved in a way that holds tech companies accountable and keeps journalism sustainable.  

“The internet needs new rules that work for everyone, not just for big media corporations. By updating internet regulation, we can preserve what’s best about it – the freedom of people to express themselves and entrepreneurs to build new things. New rules only work if they benefit more people, not protect the interests of a few.”

On this last point, at least, I can still say: “I agree with Nick.”