Meta draws first blood in unfriend war

Chris Pash
By Chris Pash | 4 March 2024
Credit: Specna Arms via Unsplash

The Meta war, which appears to have just erupted but started years ago, has gone public again with more bloodshed foreshadowed over the worth of news.

The social media giant, second in the league of digital advertising platforms in the world,  says it won’t renew its agreements to pay local publishers for their news appearing on Facebook. They can continue posting but they won’t get paid. 

The publishers have responded by calling in political heavy artillery and urging a ban on advertising on Facebook.

"The idea that one company can profit from others’ investment, not just investment in capital but investment in people, investment in journalism is unfair," says prime minister Anthony Albanese. "That’s not the Australian way.”

This is a conflict being played by sides armed with deep pockets and principles: Meta with tens of millions of dollars it refuses to give to creators of news; and publishers backed by a sovereign nation, Australia.

The principles on the publisher side: If you use someone’s property to make money, you should pay for it.

Meta sees the point of Facebook as social interaction, not a news platform. Why pay for news?

And besides Facebook users aren’t interested, according to Meta. ”The number of people using Facebook News in Australia and the US has dropped by over 80% last year,” says Meta.

The trouble with that is a lack of transparency of the algorithms used to select what users see. 

Many smaller, and larger, publishers have in the past created sustainable audiences by posting to Facebook but something has suddenly changed in the makeup of the platform.

Traffic to news sites from Facebook fell 48% in 2023, according to the latest trends report from the Reuters Institute for the Study of Journalism. 

Regional publisher ACM has called on the federal government to cease advertising on Meta's platforms by government departments and agencies as well as individual MPs and senators. 

"And it should be urging all other Australian advertisers who care about public interest journalism’s vital role in our democracy to do the same,” says CEO Tony Kendall.

This may well be a tough call for a boycott. Media agencies have long loved the fine advertising targeting ability of the Facebook platform. 

But the big weapon held by the publishers is the law. The news bargaining code, enshrined in legislation, can apply fines of up to 10% of annual turnover for failing to bargain in good faith. 

And it’s a big stick. At last report, according to financial statements lodged with corporate regulator ASIC, Meta’s Facebook had annual advertising revenue in Australia of $1.25 billion. 

"It would appear they (Meta) see Australia as the canary in the coal mine, and if they make a stand here they may stop similar regulation in other countries," says Ben Willee, general manager and media director at Spinach.

"This is a genuine turning point for our society.  We restrict most legacy media companies in Australia and regulate things like Australian content.   Yet we allow a largely unregulated, foreign company to extract billions, pay very little tax, probably harm the health of teens, spread misinformation and nobody cares because it’s an effective advertising platform. 

"Perhaps it’s time we stopped doom scrolling and engaged in a genuine debate?"

Market analysts have long seen this showdown coming and have factored Meta’s impending withdrawal of funding for news into their valuation of major media, including Nine Entertainment, Seven West Media and News Corp.

Meta in late 2023 did the same to the UK and some European countries. There was no way Meta would renew its content agreements in Australia. 

Investment bank UBS recently removed from its valuation of Nine a Meta content deal due to be renewed by the end of June,. The impact, the analysts estimate, a negative $10 million.

The payments to news publishers started in 2021 but only after Facebook suddenly pulled news content from its platform in response to the news media bargaining code.

Google also did deals with publishers and Industry insiders say Google, unlike Meta, has been actively engaged. Nine and Seven West Media agreements still have two years to run. 

The size of payments from Meta and Google is commercial in confidence but are said to be collectively worth more than $200 a year, a big injection of zero overhead dollars into the news ecosystem.

The importance of the cash shouldn’t be underestimated. While advertising spend on digital is growing in Australia (2% in 2023, according to SMI, and 3.7% to $14.7 billion according to the IAB), news publishing ad dollars are sliding, down more than 14% for newspapers and -7% for digital. 

Many see this latest move by Meta as a repeat of earlier skirmishes, or more a new front in a long running war which started a couple of decades ago when news publishers got their first taste of the crack pipe that is social and digital media.

Meta has started a game of chicken on the digital advertising revenue highway. It is daring the Australian government to make a move or get off the road. 

“As we saw in 2021 when news for Australians on Facebook was blocked overnight in a major dummy spit over introduction of the code, today’s decision makes clear Meta’s contempt for its Australian users and their trust in news from their local newspaper,” says  Kendall at ACM.

Then Facebook blocked users from reposting news articles, and by mistake some emergency services, and the media platform has been preparing for this moment ever since.

The resulting federal government intervention in 2021, in the form of the news bargaining code, saw Meta close 13 content agreements with publishers, said to be valued at $70 million a year.

Australian publishers will use all their clout to move the political will to their side.

Communications minister Michelle RowlandIt sees Meta’s move as another blow to publishers feeling stress from digital platforms.  

“Unfortunately, Meta has made this decision,” she says. “It's a decision which suits their commercial interests and imperatives, but it is inconsistent with the government's overall aim of ensuring that we have strong public interest journalism in this country, that it is properly compensated, and that we have a healthy media ecosystem that supports a strong democracy.

“It is of great concern. There are significant revenue impacts that are involved here, and even though we know that these commercial deals are confidential, we are aware of reports that it's some $200 million that will be impacted.

“So that does have an impact on Australia's news media at a time when it has been under increasing stress from the digital platforms.”

The first move expected is to have Meta "designated" under the news media bargaining code.

This is done at the discretion of the treasurer, currently Jim Chalmers.  He must, according to competition watchdog the ACCC, consider whether there is a significant bargaining power imbalance between the platform and Australian news businesses.

The federal government is seeking advice from the Treasury and ACCC on next steps.

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