QUENTIN DEMPSTER. Google vs News Corp in Australian algorithm war

Nov 1, 2018

It’s Google versus News Corp Australia in a battle over the way algorithms can be controlled to drive internet search engine traffic.

Billions in ad revenues are at stake.

It is now a war of competing submissions before the Australian Competition and Consumer Commission (ACCC) into alleged market dominance of digital platforms by Google, the ubiquitous global search engine,  and Facebook, still the most popular social media portal.

It is all about the eyeballs of Australians now clicking more than ever on their digital devices to access local and global content by search or social media. Each click can be turned into cash through a nearby display advertisement or link.

In its latest submission posted on the weekend in response to a News Corp extra submission posted on September 18, Google Australia rejected outright a News suggestion for an “Algorithm Review Board” to regulate the search engine in Australia.

“The proposal is unnecessary because Google has no incentive to change its algorithms to harm news sites”, the Google submission said.  “The fact that Google sends many users to news sites – last year Google sent more than two billion visits to Australian news websites – suggests that Google is not attempting to reduce referral traffic to news publishers and has no incentive to do so”.

In its latest submission News Corp Australia argued Google Search was the primary way people find news.  And a separate ad-free Google News site was merely “a tool to drive more traffic to Google Search” to Google’s  advantage where it could monetise its services through mining user browsing data and targeting relevant ads at those users.

The ACCC inquiry, expected to deliver an interim report before Christmas and a final report next year, was initiated after Australian publishers complained Google and Facebook were “hoovering up” more than $4billion in ad revenue, making no local content and disrupting Australia’s  mainstream media causing more than 3000 journalists’ jobs to be “vaporised” over the last 10 years.

“Google may claim that it cannot harm competition or vertical players because any content is ‘just one click away’, but Google’s conduct ensures that any ‘clicks’ keep users within the Google ecosystem,” the latest News submission said. Google’s role as both the gateway to the internet and news content, and as an “intermediator”  between readers and publishers ensured that any “clicks” resulted in revenue generation for Google, at the expense of publishers.  The cost to publishers came in the form of erosion of margins by increasing the cost of their own digital distribution efforts, reducing the ability to convert readers to paid subscriptions and to retain readers on publisher websites to generate data that would improve the sale of targeted advertising and revenue “to continue to invest in content and innovation”.

Google denies it unfairly profits from displaying links to news sites in search results or favours news sites that provide free content over pay walled sites. It denies  it misuses “snippets of news articles” so that users do not click on links of news websites. Google says it has been working with news publishers to address changing consumer behaviour, also by sharing at least 70% of ad revenue when they display ads from Google, partnering with publishers to promote quality journalism online through the Google News Initiative and Google News Lab.

But it is unlikely that News Corp and other Australian publishers  will be mollified.

ACCC head, Mr Rod Sims, will have to decide if regulation of either search engines or social media is warranted after the competition commission has used its coercive powers to get behind commercial-in-confidence constraints to prove or disprove there is unfair algorithm manipulation in the Australian market.  Mr Sims is understood to now have a full understanding of just how much Google and Facebook earn in revenue from domestic advertising derived through user aggregation and precision ad targeting techniques.

Google told the ACCC: “Certain comments suggest that Google does not provide enough information about how its algorithms work.  These comments do not recognise that Google is constantly engaged in finding the right balance between providing transparency about how Search works while playing a cat and mouse game against sites that try to ‘game’ Google’s algorithms without providing any benefit to users”.

Google rejected submissions that it should be regulated as a news publisher and required to verify the accuracy and legality of news content.

“Google cannot serve as a fact-checker for every news article on the Internet. Google’s search engine systems have seen over 130 trillion web addresses.”

While it was true that Google’s algorithms determined the order in which links to news sites were displayed, Google did not manually “curate” news articles.

In its submission News Corp Australia said Google had become an “unavoidable trading partner” and was exercising its dominance to thwart original publishers’ attempts to monetise their own content.

News suggests that Google should be broken up.

“In order to prevent the further erosion of incentives to invest in quality content and sustainability of journalism, a number of legislative or regulatory interventions should be considered. However, Google’s prior conduct suggests that more permanent and possibly structural interventions would better preserve the incentives for continued investment in journalism”.

News Corp, which enjoys more than 60 percent of Australia’s newsprint market and is top ranked in online news, often editorialises against any regulation.

In spite of the heavy losses from its failed MySpace social media acquisition in the un-regulated US market, News Corp Australia is rejecting claims of hypocrisy in now seeking enforced regulation here.

According to Irwin Stelzer, a business strategist and lifelong confidante of Rupert Murdoch, the $US580million McSpace acquisition was a disaster when News Corp’s management culture intruded ‘to professionalise’ the operation and flooded the site with ads to gouge more revenue from users.  Users switched off, closed their MySpace accounts and went to rival Facebook.

Writing in his book The Murdoch Method (Atlantic Books 2018)  Stelzer reported at page 92: “In 2006 MySpace surpassed Google as the most visited website in the United States, and until 2008 it was the most visited social networking site in the world – value, $12billion. Enter Facebook and exit News Corp. from MySpace, which it sold in 2011 for $35million”.

Over to you …  Mr Sims.

Quentin Dempster is contributing editor of The New Daily. This is an extended version of his article first posted on 30 October 2018. 

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