"Hey Google - What's this Dispute About"

Unless you've been completely distracted with the politics of the US this last week, you may have seen something in the news about Google and the growing dispute with the Australian government. It caught my attention this week and, in my opinion, is a much bigger deal than most realise. This view was at least partially vindicated through a conversation with my Mom this weekend. Allow me to explain.

At the risk of sounding like a complete Mommy’s boy, I must confess that I speak to my Mom each and every Sunday morning and have done for the last 12+ years since moving to Australia. Mom just turned 82, stills lives in Chicago and really looks forward to our weekly chats. Today, just as she picked up the phone, she asked “what’s going on in Australia with Google?” She said she heard something about the government and Google having a spat. After explaining the situation to her and realising that if Mom has heard about it from her Google Assistant (we bought her one for Christmas a few years ago, she loves it…), there may be something more to the story.

So, what is this all about?

The Basics of the Dispute

Back in February 2018, Australia announced an inquiry into Google and Facebook’s impact on the news media in Australia. The Australian Competition and Consumer Commission (ACCC) was looking to determine whether news aggregators like Google, Facebook and Apple news were impacting the creation and funding of “quality news and journalistic content”. 

The inquiry centered around the belief that organisations like Google, through the search results presented to end-users like you and me, generate advertising revenue which they could be sharing with the creators of the original content - news agencies such as Channel 9 or the AFR.

Google, of course, does not see it this way.

From Google’s perspective, they provide a public service through search along with countless other services at no charge to consumers. A good example is my Mom’s Google Assistant – she pays nothing for the basic service and ability to chat with what she calls “her friend Google”. 

During this week, the dispute has gone into overdrive when Melanie Silva, Google’s local boss, issued a not-so-thinly veiled threat that Google would be forced to halt service in Australia (that’s right – www.google.com would result in a 404 Error) if Australia pressed forward with the proposed media barging code. The controversial code would require Google, Facebook and any other aggregators of news content to pay publishers for journalism that they re-share on their platforms.

Prime Minister Scott Morrison shot back in response to the threat by saying that “Australia makes its own rules through the Authority of Parliament” and is likely to continue to respond poorly to the perception that Australia can be held hostage by a commercial organisation.

The Tip of the Iceberg

This would be interesting enough if it ended here but there is a bit more to this Iceberg than what’s visible at the surface.

The US Chamber of Commerce has waded into the matter and has warned that the proposed code may be “explicitly targeting and discriminating against a US company” – a no go zone under the Australia-US Free Trade Agreement. 

With the Trump administration on its way out and the incoming Biden administration keen to reset relations around the globe – including with Australia – it will be interesting to see how the new administration plays this. Keep in mind that newly sworn in Vice President Harris was a senator in California before taking the office of Vice President, so one may reasonably assume she’ll have a sympathetic ear for her Silicon Valley constituents. 

Sprinkle in the recent Trump ban from Twitter, First Amendment rights complaints and the lingering questions around what role social media played in the political craziness we’ve witnessed over the last 4+ years and you have a real scorcher brewing here.

What’s Really at Stake Here?

Fifteen years ago, I read a great book called “Ruling the Waves” by Deborah L. Spar. The book examined a series of historical technology innovations, starting with the compass through to the Internet and digital music, and how each innovation impacted business and politics as they matured. 

For each innovation, the book looks at how the new technologies first carve out a space and then claim that the ‘old rules’ no longer apply, which appears to be the case for a period of time. However and through the fullness of time, for each technology she examined, the existing governments, businesses, and mounting political pressures ultimately lead to new laws and regulation that reset the old rules of the game to the match the new realities of the given technology.

This feels like a similar moment.

Sure, on the surface this is about the inquiry here in Australia, but it may actually be much bigger than this. I seriously doubt Google cares about the 25M people or the $4.3B in ad revenue (or 2% of their market cap) they generate here in Australia. This is about the precedent that would be set because of an adverse ruling. Google had a different yet similar dust up with Denmark over music publisher payments where Google simply cut the Danes off when they could not come to an agreement taking the revenue hit to maintain the global status quo. Anything is possible and it doesn't stop at revenue sharing around news content.

Let’s face it, technology, social media and the big tech companies have fundamentally changed the way we consume media and data regulation simply hasn’t kept pace. How many reading this has witness or been party to a spat on Facebook resulting in family member or friend being 'unfollowed'? Is “Fox News” actually news or entertainment/opinion?  Google owns Youtube and Fitbit. Between having access to the data of 95% of searches worldwide, knowing what people watch and collecting the health data on millions of people gives Google the ability to steer users toward any content they choose; e.g. - they directly or indirectly control your “filter bubble” (read this or this on the ‘filter bubble’ – scary stuff).  

Just as was the case during a the last big innovation revolution in the early 1900s (railroads, cars, airplanes, telephone, radio) that saw the Sherman Anti-trust Act used as a tool to break up organisations alleged to be in restraint of trade, the battle that’s playing out here in Australia today feels like an early skirmish in a larger war to realign the world's biggest and most powerful commercial organisations and their use of data. 

Even reminds me (a little) of the battle that played out in the 90s when Microsoft bundled Internet Explorer into Windows touching off a decade-long battle with the US Department Justice. 

One thing is for certain - this is anything but about revenue sharing between Google and some Australian news agencies - so pull up a seat, settle in and let's watch this play out over the next few years. It’s going to get very interesting.

Jeffery Eberwein is a senior partner at EY in the Advisory practice focused on digital technology and its implications for business. He can be contacted at [email protected]