The emails that reveal why Google is slashing payments to news

Internal comms show it has no choice but to pull back as it prepares for life after break-up, sending publishers scrambling for a Plan B...

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Today’s update is prompted by breaking news that Google has begun slashing the value and shortening the length of its publisher deals in Australia.

I’ve written again and again that Google’s pledge to keep paying under Australia’s torch-bearing News Media Bargaining Code is a promise it can’t keep.

It has literally no idea what its future holds, as the US Government and the world’s anticompetition regulators work to break its illegal monopoly into pieces.

So, Google’s decision to cut payments by 40 per cent and shorten the multi-year deals should not be a surprise to publishers.

It’s logical, and good stewardship from Google’s perspective, given the uncertainty ahead.

What was more worrying for me then, was the reaction of publishers, which betrays a continuing lack of awareness around Google’s motives and next moves.

So, let’s kick off by reminding ourselves where Google is at, what it can - and can’t -do, and why it’s approaching the end of its systematic 20-year publisher shakedown.

Last November, I revealed Google’s secret plan to throw 4.6 million Australians - and its new multi-billion-dollar partner Samsung - under the bus to protect its anachronistic business model.

When I wrote the article, little was known about the huge backroom deal Samsung had cut with the search giant to hand over the default search position on its phones.

The only facts I had then were a handful of emails between senior Google execs which were initially posted on the US Department of Justice website.

As Google fought in court to keep its internal comms out of sight, the mails disappeared, only to be reposted with key conversations blacked out.

Fortunately, I kept a copy of the originals, which is how I was able to break the story.

Now much more is known about the dealings that a judge has now flagged as part of a deeper investigation to rule Google a monopoly.

It begins in the early hours of November 12 last year, with an alert on my phone…

A friend was monitoring the DoJ website and noticed an anomaly. An email previously posted about Google in Australia had vanished, then re-appeared heavily edited.

It revealed in detail how Google’s most senior decision makers were planning to derail the Australian Government’s news media bargaining code.

A few months earlier, in April 2020, Australia had instructed its anti-competition commission to create a code requiring Big Tech to pay publishers for content.

The code the ACCC devised was a world first, which required Google and Meta to negotiate fairly to pay publishers, or face government-enforced payouts instead.

Google’s reaction was to spit the dummy. Its Australia and New Zealand boss Mel Silva smiled, and then threatened to pull search from the country.

Google was willing to send 22 million Australians back to the web’s Dark Ages to avoid a financial precedent which could be copied by other countries.

“If this version of the code were to become law, it would give us no real choice but to stop making Google Search available in Australia,” Silva claimed.

That was nonsense of course. It wasn’t search that was threatened, it was Google’s $238 billion search advertising monopoly. Top tip: Watch out for jazz hands…

At publishers, media execs and board members prayed Google - and Meta which made the same threat - were bluffing, but as D-Day approached, they buckled.

First Seven, then News, Nine and others, signed secret deals worth ~$200 million a year with Meta and Google, leaving thousands of smaller publishers left behind.

What my November scoop revealed was how Google was working behind the scenes to prepare to sacrifice Australia to protect its monopoly, and how it was going to do it.

Twelve thousand kilometres away at the Googleplex in Mountain View, Google bosses, lawyers, and policy wonks, were in a tizzy over a $2 trillion quandary.

Australia had shown the temerity to call their bluff, and it had become the greatest risk Google had faced in its 25-year reign.

Its choices were simple.

• If it paid Australian publishers, it would open the floodgates for publishers worldwide to demand the same thing, but
• If it shut down Google search in Australia, it would be gambling $10 billion in revenue.

An unemotional analysis could only conclude that quitting Oz was the least bad option, but Google had a much, much bigger problem: Samsung.

Google had just signed a multi-billion dollar, and vitally important partnership, to be the default search engine on Android’s largest phone manufacturer.

What I didn’t know then, but I do now thanks to the antitrust ruling, is just how important the Samsung deal was to Google, and what a tough pickle it was in.

And while publishers probably won’t want to hear this, I think Google would have surrendered if they had just left the Government to hold the line.

I’ll let you judge. These are the facts.

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The emails were among millions of pages, petabytes of data, and 3,500 exhibits collected over four years for the search antitrust case.

Google was determined to keep its dirty laundry hidden, and at first, its lawyers looked to be winning the case to keep it all under lock and key.

That was until Bloomberg reporter Leah Nylen took the judge to task arguing people’s right to know and convinced him to keep the evidence public.

Oddly though, the emails in UPX713 disappeared, and then returned, largely redacted. What could be so secret? What was so vital that it had to be kept hidden?

The answer is that it was the details of Google’s thermonuclear response to Australia’s news bargaining code, designed to protect its monopoly.

The plan was to shut down Google search in Australia. And to keep that secret from its brand new - and vital default billion-dollar partner - Samsung.

It’s late November 2020, and Australia is just starting to win the battle with Covid, but in Silicon Valley, Google’s worried about a different contagion.

It’s just signed a deal with Samsung, completing a 20-year effort to pay-off Apple and all the world’s Android phone manufacturers to default their searches to Google.

But Australia’s plan to force Google to pay for news has thrown a spanner in the works.

Google has decided to turn off search. It’s still two months until it makes its threat public, but the mails reveal that planning is already underway.

And Samsung is going to be kept in the dark.

This is high stakes stuff, so I’ll let Google’s execs lay it all out in their own words…

On November 17, Google product manager Bryan Mao mails colleagues to alert them.

In his mail, Mao refers to a project called Samsung -1. This is important, so more later.

Karen Diamond, who headed Google growth partnerships at the time, chimes in:

Note: The live chat the Googlers discuss was a controversy at the trial. The court was told Google had a long-term policy to delete all live chats within 24 hours.

As preparations were made for the trial, Google was told to stop deleting messages to retain evidence but failed to do so for “more than two years”.

Now Mao wants advice how to handle Samsung, given the new deal, and Google’s senior director of product management Jeff Boortz steps in:

Approaching midnight, Google product lead Simon Tokumine offers a suggestion.

Soon after, Mao confirms the plan: Google will not tell Samsung, and will handle any fall out later.

So what was Samsung -1?

It was how Google planned to block the 4.6 million Australians with a Samsung phone in 2020 from searching. If they clicked the Google bar, they’d get this.

Not good for consumers, but probably worse for Samsung.

And the decision to keep Samsung in the dark is even spicier now we know how tetchy Google’s relationship was with the South Korean giant at the time.

Internal emails between Samsung execs were read in court. One said:

“Google is clearly buying its way to squelch competitors… Outside of a potential antitrust action, I don’t see Samsung refusing these terms.”

When a fellow Samsung exec suggested antitrust might lead Google to loosen up, his colleague replied:

“Actually, the COMPLETE opposite. Google just did a f*ck you to Samsung.

Samsung then wrote off a $650 million investment in a rival search engine.

Phew. So, where are we now?

• Well, Google lost the antitrust case, ruled an illegal monopoly over search and search text ads, and faces a potential break-up.
• The multi-billion-dollar deals like this one with Samsung, as well as Apple and others, were deemed critical proof.
• Google’s $238 billion earnings are now at risk, and that’s why it is pulling back on its deals with Australian publishers.

Was it a monopoly? Yes. Has Google been mean? Yes. Was this inevitable? Absolutely.

Now, too late, and too little, publishers are scrambling for a post-Google plan.

If you want one, listen to my podcast with Peter Bittner on The Upgrade. Listen here ??