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By Thomas Baekdal - February 2021

Facebook vs publishers: What is really going on? And why is it bad?

Last week, Facebook decided to do what it had been telling Australian publishers it would do since August 2020, which was to remove them from their site if they move forward with their demands to be paid for links.

And so, on February 17, every news site in Australia was removed from Facebook, and now after convincing the Australian government to make some changes to the legislation, it is in the process of restoring them. But I'm not going to talk about this. If you want to know how that played out, there are already a gazillion articles about it. Just go to Google (*wink*) and search for "Facebook blocks newspapers in Australia", and you will find more articles than you ever care to read.

What I'm going to do in this article is to give you a bigger perspective. What is really the problem here? Because there are problems. And why are the different players acting the way they do? And most importantly, what should we be doing?

But before we start, I want to explain something critical.

The link economy

One thing that many people in traditional media don't seem to understand is that the link is the single most important thing that we have, and this is especially true for smaller independent publishers (like me).

Every single thing I have ever built, whether it was the first online magazine I launched in 1999, or Baekdal Plus today, only happened because of the link.

Another thing the link enables is publishers without borders. Again, take this site. I have subscribers from 32 different countries across the world. None of this would ever have been possible if it wasn't for sharing. Every single person who has ever visited this site, every person who has signed up for a free trial, and every person who has decided to subscribe has done so because of a link. The link is our very existence. The link equals money, it equals independence, it equals growth, and it equals being able to put food on the table every night.

If we did not have the link, Baekdal Plus and thousands of other independent journalists would not exist today. This is the simple reality of the world.

And so, the big established and entitled newspapers come along, with their old mindsets, and national focus, and they say that they don't like the link, and that they should be paid if someone links to them.

This is offensive. These newspapers not only fail to understand the basic functionality of the open web, they are attacking us. They think they are only attacking Google and Facebook, but they are not. The idea they have and the world they are pushing for is an attack on all of us. You are attacking every single independent publisher in the world. You are attacking me!

You are telling me that you want a world where every single thing I have ever built should not have been possible because you, as a big established company, want to be able to control the world again. Because, if the internet had worked the way you want it to, there would be no blogs, no newsletters, no independent Substackers, and no magazines like mine. We would not exist!

And then on top of this, you have the audacity to claim that Facebook is undermining democracy by not paying for links.

No!!!

It's not Facebook who is undermining democracy. It's Murdoch and every single newspaper who has joined his destruction of linking. But the worst part of this is that this crusade by old media companies is based on lies and misconceptions.

And for what? What is the outcome?

Even if publishers manage to force Google and Facebook to pay for linking to them, the amount of money you can make from that is negligible (per publisher). It's so little money that it basically makes no difference in the world of media.

You are not going to save newspapers by doing this. You are not suddenly going to get 100s of local newspapers to come back from the dead. You are not going to convince advertisers to go back to advertising next to stories about people being murdered, or immigrants being found dead on the beaches.

You are destroying what every single independent journalist relies on ... for nothing!

And no, don't say: "but it only applies to tech companies", because that's a lie. This is not about what happened last week in Australia. This is about the path the traditional press is pushing towards and what may happen in other countries later.

So, as an independent publisher myself, and more so as a media analyst, I'm deeply concerned about the future of journalism, and I have only one thing to say:

Stop!

Stop this nonsense. Stop destroying what we journalists need to build new things. Stop undermining the single most important element that helps get people to engage with us.

For the love of kittens and puppies ... JUST STOP!

But, there are problems we need to talk about too.

Let's talk about the real problems

There are a lot of problems with the big tech companies. Personally, I am no longer using Facebook because it has no value to what I do. After they decided to change their algorithms, the quality and value of the traffic I was getting dropped to basically zero. And so, for me, I don't care about Facebook.

The same is true for many other publishers, for instance, Peter Wolodarski, the Editor-in-chief of Dagens Nyheter (Sweden), told me this:

Conversion rates from FB are in our experience subpar. It has a very low impact in our subscription business - we moved away most of our advertising from FB and saved a lot of money.
I was surprised how little we lost and how much money we saved after scrapping most of our paid presence on FB. Last year we saved SEK 30m in sales costs by moving from external channels like FB to our own ecosystem, and at the same time opening up our site to free trials.

Back in 2018, there was another story. A TV station from my country tried, as an experiment, to see what happened if they stopped using Facebook. The result was fascinating.

The first thing that happened was they lost 27% of their users, which is similar to the 20% we now hear from publishers in Australia.

But there were also very good things. For starters, the value of their traffic went up quite a bit. People spent 42% more time reading their articles, and read 12% more per session. When using Facebook, the traffic pattern was usually very polarized around a single article, but without Facebook all the articles got a more equal share of views.

That's really good.

So think about this.

Which one should you focus on? As a media analyst, the answer seems incredibly clear. But in Australia, they have chosen the first option, and now that Facebook has banned them, they are yelling to be let back in so that they can continue to do it even more.

I'm reminded of a tweet by Casey Newton:

Congratulations to the human pretzels in my timeline arguing that Facebook is both uniquely evil AND should be the primary news source for all Australians.

But, you say, Facebook and Google are stealing our market and our money.

Okay... let's talk about that.

The politicians

I was interviewed about this whole thing last week, and the journalist asked: "why are the politicians so interested in this?" This is a good place to start.

There is one seriously good reason why politicians are going after Google and Facebook, and that reason is taxes ...especially outside of the US.

Let's go back to before the internet. Back then everything happened within each country, which also meant that all the taxes were paid within the same country. They paid sales tax, they paid corporate tax, the employees all paid income tax, and they even paid things like green taxes, and car taxes, etc.

It was taxes bonanza because all parts of the advertising ecosystem happened within the same country.

But then Google came along, and they brought with them this amazing thing called a 'search engine' that everyone desperately needed, and it was really good. It helped the public find just what they wanted, and it helped brands reach people in a far more focused way.

But the problem is that Google is a foreign company, and so when brands buy from them, they are buying from a company in another country (in Ireland if you are in the EU), which means fewer taxes paid in each individual country.

Even more so, because brands are now paying Google, the newspapers are suddenly making much less money, and with less money comes downsizing. That means journalists are losing their jobs, which means that they can't pay income tax. But not only that, they also need social security, which is an expense the politicians have to pay.

This is a problem. And I don't just mean for the politicians, this is a disaster for the media industry, and it is potentially a problem for society as a whole. It is never good to have money channelled out of a country, because it means that you end up poorer.

And so, the politicians look at this and say: "OMG... we need to do something."

And they are right. We do need to do something, the question is just how.

But here is where things really start to fall apart because, the media industry, who are already seriously angry at Google for 'stealing their market' (which is not true), see this as an opportunity.

And so the media goes out to the politicians and says:

Hey politicians, we have an idea. If you ... you know ... could force Google to pay us for 'using our links', and, perhaps, also change the tax laws so that Google has to pay more taxes ... and then also give us that money... then we could hire some journalists again and things would go back to the way it was.

And the politicians go:

Ooooo... that's a good idea. Let's do that!

So why isn't this a good idea? Well, because it doesn't solve anything, and you haven't earned it.

First let's look at it from the public's perspective.

The public and Google

Why do people go to Google Search instead of to the front pages of newspapers? The answer is simple. They do this because they are looking for something specific in that exact moment. This is a service that newspapers have never provided.

Let me give an example. Imagine you are in the market for a new car, and you have heard about this new electric car from Volvo. So, you go to a newspaper, you try to find the search box (which many newspapers have hidden away from the front page), then you type in "Volvo electric" ... and you get this:

I'm not kidding. This is the exact results that I got when I searched for "Volvo electric" on one of the largest news sites in my country. This is monumentally useless.

Instead, if you go to Google and search for "Volvo electric", you instantly find what you are looking for. This is why people use Google Search.

So think about this. For what possible reason should Google be forced to pay that money to the newspapers? Why should newspapers get money from something they never provided?

As a newspaper, this is not your money to have. You never earned the traffic, you never provided what the public needed, you have invested no money in creating this service. You have done nothing!

Why should you get any money from search?!?

But, you say, Google is using our links. No, they are not. Google is providing you with traffic that you wouldn't get otherwise. Even before Google, people would not go to newspapers to try to find something specific, because you could never find that.

Newspapers are in the market of people flipping through random pages. That's your market. You have never been in the search market. If people in the past wanted to learn about a new Volvo, they would not look it up in the morning newspaper, instead, they would walk to the nearest dealer.

This, in fact, is what Google provides. If you search for 'Volvo electric', Google sends you to... Volvo.

This traffic, this market, and this money is not yours. It was never yours.

Brands on Google

It's the same thing for brands and advertising. Why do brands use Google? They do it because they want 'purchase intent' (which is what you need to sell more products).

Okay, so let's take the same example as before. When I visited the newspaper above and searched for Volvo, it also showed me ads. Specifically, it showed two banners ads (worst format in the world), one for a paper calendar, and another for some jewelry.

Why newspapers? Is this really the best you can do? This is the least useful thing I have ever seen. I searched for an electric car, so why would I then suddenly be interested in buying a paper calendar instead?

In comparison, let's try Google. If I go to Google and I search for the exact same thing, I now get an ad for a dealer in the area I was connecting from.

In this case, I was connected from an area in the south of the UK (via VPN), and look at what it did. It showed me an ad from a Volvo car dealer, for an electric Volvo, from the exact areas that I was in.

So, think about this from the perspective of this car dealer. Where would you advertise? With Google, where you can reach people at the right time and right place? Or in the newspaper where ... uhm... you wouldn't even reach people if they specifically looked for the product you had to offer?

But then again, let's talk about taxes. The newspapers are saying that Google Search should be taxed on their advertising income, money from which should then go to the newspapers.

But why? The newspapers did not help this car dealer sell any cars. You provided no leads, no sale, no nothing. Why should you get a cut of the money brands are paying to Google?

And this is a critical point. Even if newspapers manage to convince politicians to do this, brands are not going to leave Google. Google provides a service that is more valuable to them than the newspapers.

Google Search ... but for news

But wait, the newspapers say. This is not all Google Search is doing. What about when people search for news? Isn't Google then using our content?

Okay, let's talk about that. In fact, let's do an experiment.

Let's say you are living in Australia and you want to know how many people died during the last forest fire? This is a very 'news-focused' topic.

So, first we go to the newspapers. We find the search box, and we start to type in "number of people died australia fore ... " ... uh... wait...

So I tried doing this on news.com.au (as you can see below), but I couldn't. It turns out that this news site has limited the number of characters that I can type into the search box, and when I reached "fore" I simply could not type in anything more.

Who the frak thought this was a good idea?

Anyway, I turned to another Australian news site, and here I could type in my request, and the result was this:

I mean... "the high price of gold" and "Girl Guides sew 'mumma wraps' for baby bats"?!?!?!?

Whut?!?!

This is what happens when people try to specifically search for news. And every newspaper knows this because if you look at your own internal analytics, you can very clearly see that almost nobody ever uses your on-site search bar.

It is so useless that it might not even be there. It has no purpose, it attracts no traffic, it generates no audience, no nothing!

Meanwhile, if I go to Google and search for the same thing, I get this:

First of all, Google is providing me with the answer front and center. Then underneath this answer, they link to the official source. So if I want to know where the data is from, it's right there!

Underneath these are links to news articles, which I can then visit if I want a deeper understanding and perspective ... which in this case is actually needed because, while only 71 deaths were linked to the fire directly, hundreds more died as a consequence of it days or months later.

This is what Google Search is all about. It's a place for people to find answers to specific questions. This is what the public needs ... and not a single newspaper is providing it.

And then the newspapers have the audacity to tell the politicians that "Google is stealing our traffic and our links". No they are not. This traffic wouldn't even exist if it wasn't for Google. This is new traffic that Google makes possible for us.

Google is giving you traffic!

The part about Facebook

It's the same story if we look at Facebook. As a platform, Facebook is very different from Google. They are not even in the same market. Facebook is like a café where friends meet to share sticky notes on a wall (kind of).

So, let's start with the brand perspective. Brands love this. Sure, they might complain sometimes about Facebook promoted posts (which they would rather get for free), but overall, they love it.

The reason they love it is because of the 'amplification rate'.

What Facebook is doing is helping brands amplify the reach and the exposure to their products. Many brands even have specific calls to action on their websites where they encourage visitors to "tell a friend".

It's the same with YouTubers, after every video they encourage their viewers to subscribe and share it with their friends. And it's the same with independent publishers.

For instance, at the end of every one of my newsletters, I write this:

This is the link economy I talked about in the beginning. By encouraging people to post links, they are boosting my amplification rate, which creates extra traffic.

So when I started hearing publishers tell politicians that this was a bad thing, and that Facebook was 'stealing your links', and that they should be punished and forced to pay every time they did so ... I went, "Uh... whut??!?"

Everyone else in the entire known universe loves amplification rates, but here traditional publishers are saying they only want it if they can get paid for being linked to.

Have you gone mad?

Well, you see, there is actually a problem here, and the problem is that publishers do sometimes lose money because of this. So let me explain.

One of the fundamental problems with advertising on traditional newspapers is that it is designed to be as inefficient as possible. Yes, the least efficient.

The way it works is like this. First you get a person to come to the front page, then they scroll around a bit to find something, during which you have a lot of time to create 'ad views'. Then they click on an article (another ad view), and then they might go back to the front page (yet another ad view), scroll some more (even more ad views) and then click on a second article (it's ad view bonanza here!!).

This is the consumption model that every single newspaper is designed for. It was the same thing in print. Here the consumption model is 'paging'. Get people to sit down and just slowly page through article after article after article ... and then you show people a shitload of ads while doing so.

For instance, many years ago, I did a study about what was actually in a print magazine, and here is what Vogue Magazine looked like in 2009.

The red lines are ads, the green lines are articles, and the blue lines are photo pages. And just look at this. Think about how many ad views you get if you can get someone to just sit down and casually flip through this.

Mind you, Facebook works the same way. When you go to Facebook and you just scroll through the newsfeed, you get exactly the same thing. The Facebook newsfeed is like a print magazine, except they are showing you links to articles instead.

So what happens to a publisher when people share a link on Facebook? Well, instead of getting slow news consumption through the front pages, now people go directly to just that one article ... and then they leave.

In other words, traffic from Facebook looks like this:

Well, this is bad ... this is really bad!

And so you can kind of see what happens here. Publishers look at this traffic, and instead of getting multiple ads viewed during every visit, now they just get one. And on top of this, the conversion rate (as mentioned earlier by Peter Wolodarski) is terrible.

So, when you compare people going directly to a newspaper to when people visit the news via Facebook, per visit, then newspapers are actually losing money because of it.

At the same time, Facebook is making a ton of money from people scrolling through the newsfeed, which is what people used to do when they were scrolling through their front pages.

And suddenly you can understand why publishers say what they say. Facebook is massively benefitting from the links people post on Facebook, while newspapers are not.

And this is a very real problem.

But, even this is not necessarily accurate. In fact, the whole thing is way more complicated.

First of all, you have to be extremely mindful of who your audience on Facebook is. Are they your existing readers who are now reading your news via Facebook instead of interacting with you directly?

If so, that would be really bad. You do not ever want your regular audience to come via Facebook. The reason is not just the problem we see above, but also that Facebook creates lower loyalty.

You always want your core traffic to come to you directly!

However, if they are 'new people', meaning people who have never visited you before now do so because of sharing, then that's ... good. Again, this is the amplification we talked about before. Amplification is good because it drives extra traffic that you would otherwise not get if Facebook didn't exist.

We want amplification. Amplification is awesome!

But there is also a third element, and that is frequency. Because of how connected we are, the way people interact online today is dramatically different from anything we did in the past.

Think about Vogue Magazine again. It was published once per month, and then people would sit down with it for 20 minutes. And sure those 20 minutes were amazing, but what about the other 29 days of the month?

So, let me ask you a question. Imagine if someone visits your newspaper and reads three pages (including the front page). And then imagine that someone visits you via Facebook, only sees one page per visit, but comes back four times.

Which one is better?

This is the challenge we face. And mind you, it's not just Facebook that is doing this, newspapers are doing this too. When newspapers do notifications, you are creating exactly the same type of news behavior. You are creating micro-snackable moments where people are just 'reacting to something'. They will click on that one article, and leave.

So, if you think Facebook is bad for doing this, and for optimizing their platform this way, then why are you doing it yourself?

But here is the thing. None of these things can be solved by trying to force Facebook to pay for links.

None!

If you force Facebook to pay you, as a publisher you are even more incentivized to push things to Facebook, while Facebook is incentivized to reduce your amplification rate. This is the opposite of what you want.

Why would you ever do that?

As a newspaper, you should be incentivized to create a direct relationship with your audience, while Facebook should be incentivized to give you as much extra traffic as possible. Paying for links does not do that!

But more than that, the whole model is wrong.

As Mike Masnick over at Techdirt wrote:

But here, a bunch of lazy newspaper execs who failed to adapt and to figure out better internet business models not only want the traffic, they also want to get paid for it.
This is like saying that not only should NBC have to run an advertisement for Techdirt, but it should have to pay me for it. If that seems totally nonsensical, that's because it is. The link tax makes no sense.

Or as Lea Korsgaard, the Editor-in-chief of Zetland wrote:

Old media: 'We have neglected to create an up-to-date business model, so Facebook has to pay for our sins. Even if it will affect media that actually *have* an up-to-date business model.' Is there something I missed, or is it just obviously stupid?

They are both right. None of this makes any sense.

We need a very different discussion

But remember, there are problems we need to focus on. The problems about taxes I mentioned in the beginning are very real. We do need to find a way to change international tax law. It just cannot be solved the way publishers think.

The main problem is that most publishers are national, so your approach to tax laws is 'everything happens within the same country'. For international companies, this is simply not true.

As mentioned earlier, this site has subscribers coming from 32 different countries. So should I have to create separate companies with separate tax accounts for each country? And then also pay taxes in my own country?

That would be ridiculous. It would effectively mean that I would end up paying taxes twice, have a huge cost in terms of accounting, which also means that I wouldn't be able to compete with national publishers (who only pay taxes once).

But this is what publishers are saying Google should do. This model doesn't work.

It's also about where you spend the money. For instance, while people from all over the world can subscribe to Baekdal Plus, I only have expenses in three countries. I have expenses in the US (where my site is), the UK (where my editor lives), and Denmark (where I live).

It's the same for Google. Sure, they sell to every country in the world, but their employees are largely clustered in certain countries.

So this is far more complicated than the media makes it out to be, and the suggestions I have seen from the media are all nationalistic. They punish companies for being global. And again, publishers think this only applies to Google, but it doesn't. Every single podcast, every YouTuber, most new journalists creating newsletters, most niche sites ... all of these are global by default.

So the way publishers talk about taxing Google is basically saying Google should be taxed twice. As a publisher, you wouldn't agree to this, in fact, publishers are constantly talking about the fact that they should not have to pay any taxes.

But, you say, it should only apply to 'big companies'. Okay, sure, then I'm in the clear. But you are still suggesting a model that doesn't work and that punishes companies for reaching people across the world.

This is nationalism. It has no place in a connected world.

We also have problems on Facebook, with the algorithms, with their focus, etc. But remember, only 4% of the Facebook newsfeed is news related. So, we can't say that Facebook should just optimize their algorithms for newspapers, and then to hell with the other 96% of what is on Facebook.

It's the same problem. The press is so singularly focused on just their own world that they are perfectly willing to destroy the world for the other 96%.

In the US, for instance, we see this with the discussion around Section 230. The press are pushing to end it because it thinks it can hurt Facebook. They don't seem to realize that it will also hurt them. More to the point, Section 230 is the reason why thousands of new companies have been formed.

What it is doing is to enable anyone to start something new, using the platforms to boost their growth, and they don't have to partner or ask permissions to do so first.

And when I say new companies, that includes journalists. If you are an independent journalist, and you want to start a new podcast, Section 230 is what allows you to do this on any platform without asking the platforms for permission first.

To give you a personal example. Last week, after Facebook blocked publishers in Australia and every newspaper and politician in the world started yelling about it, my mom started a new Facebook group.

It's about flowers, which she sometimes sells and is very passionate about. And she did it without asking Facebook first. She just created the group, and started posting pictures, links, and started building up an audience.

My mom doesn't call herself a publisher, but that is essentially what this is. She is doing what a garden magazine might also do.

And then I see big traditional newspapers, spearheaded by people like Murdoch, who says that Facebook is bad. It undermines society, they should pay for all the links, and Section 230 should be abolished. They also say that Facebook should be taxed and that money should be given to the newspapers because what if a brand places an ad next to one of my mom's posts!? They say that because they used to place all the ads in the traditional press, but now do it here, then Facebook is stealing from you.

You also interview politicians who say that "without news" Facebook would just turn into a cesspool because, again, you can't seem to look beyond the 4% of Facebook that is about news.

No, newspapers. Just no!

Yes, there are problems on Facebook. There are bad groups and bad people. I'm sad to say that within my own family there are people who have become anti-maskers, and who are encouraged by anti-mask groups on Facebook.

This is bad, and Facebook absolutely needs to do more about this. But you don't fix this problem by telling Facebook to 'pay for links'. You don't fix anything by doing that.

So what is happening in Australia (and beginning to happen in so many other countries), is fundamentally flawed.

 
 
 

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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé

 

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