The New Era of Tech’s Kickbacks to Publishers: The Information’s Weekly Newsletter

A year ago, when I asked Thomas Laffont, co-founder of Coatue, why his firm invested in TikTok owner ByteDance, he said: “If the first generation of investing in China was investing in the U.S. equivalents, you could argue that ByteDance is really a Chinese original, and you are starting to see that in many more [Chinese] companies. They are truly unique.”

Laffont, whose brother is on the board of ByteDance and is deeply involved in the current controversy, captured why it has been fascinating to watch the rise of ByteDance and TikTok. At a time when tech in the U.S. can feel so copycat, Chinese tech companies have offered creative examples for how technology can change consumer lives.

I can’t help but feel sad that the ultimate East-West crossover app, TikTok, remains in total limbo, chaos and drama. I’m not blind to the security concerns. I just haven’t seen enough evidence to believe it should be banned.

But whatever the outcome (and please, please, please, let’s end this drama), I hope U.S. tech investors and business leaders keep looking East, where massive tech companies are sprouting up by the day. Another important one, Kuaishou, is preparing a $50 billion initial public offering, Yunan and Juro were the first to report this week.

How Publishers Are Playing Into Tech Companies’ Hands

For years, news publishers have been clamoring for Facebook, Google and Apple to pay for the news content that gets distributed through their services. Well, they have gotten what they wished for—sort of. And it’s troubling news.

This week, Facebook and The New York Times announced that they are going to work together to build augmented reality lenses on Instagram. As best I can tell, this means users of the tech will be able to see cool features on top of New York Times stories in Instagram.

The New York Times is setting up an AR lab with more than 12 people. The funding for the multiyear partnership is coming from Facebook, according to Axios. A Times spokeswoman said that she couldn’t disclose the financial terms but that the collaboration helped “make our journalism better.” Facebook would have no control over “each published effect,” she said.

Facebook is also paying The New York Times and other leading publications millions of dollars for their articles to appear in its News tab. While the paper declined to comment on how much Facebook is paying it, this summer it said in a filing that the fees were helping to offset major advertising declines—so the amount can’t be small.

The two are hardly alone in joining forces. Apple and The Wall Street Journal have partnered up for the Apple News’ subscription service in a deal that justified the paper’s hiring of 50 new reporters. The Journal recently renewed that deal.

Amazon and The Washington Post are inextricably linked through Jeff Bezos, who owns both. Google seems to be the only major tech platform without a major, direct publisher alliance.

Now, you may stop me here and say, “Jessica, don’t you think that news is valuable and that the tech companies profiting off it should pay for it?”

Of course. But not this way. Establish licensing fees tied to the direct, measurable value of the content. Strike normal advertising partnerships. But as structured, most of these secretive deals feel too much like kickbacks that aren’t tied to a clear value exchange. Publications owe their readers more clarity into how much money they are taking from these companies and why.

Since none of the news companies will disclose the terms, I cannot know for sure. But common sense makes me worried. There is simply no way to accurately establish how much articles are worth to the platforms because the services they are partnering on with news organizations don’t exist or are nascent.

You may also ask, “But Jessica, what is wrong with taking free money from the tech companies, particularly for the noble cause of saving news?” Well, plenty.

Money, especially “free” money, can easily distort the priorities of the news organizations. And “free” money never lasts. Remember the tale of the news site Mic, which collapsed when Facebook stopped paying it to make videos for Facebook Videos?

I have said it before, and I will probably be saying it again and again and again: Tech companies and news organizations have very different priorities, values and opinions about the purposes of news business. You don’t need to look far to find examples of these same tech companies refusing to pay publishers around the world for their articles, even while they are striking these one-off deals with the largest publications.

And while I respect the journalists and editors at these news organizations too much to imply that they are going to ease up on their tough coverage because of a deal, it would be absurdly naive to assume that stronger financial ties between publishers and tech platforms won’t change coverage eventually.

It’s the business side of these operations that decides where to hire and what to focus on. Priorities come from the top. And strategies dependent on payouts from tech companies—divorced from the direct value of news content—are dangerous.

News publications should know better. The New York Times withdrew from Apple News because the newspaper’s content was worth more to The Times than it was to Apple. If The Times wants to experiment with AR articles, it should fund those experiments itself and work with Facebook only on the technical side.

Let’s remember why this is all happening.

Tech platforms, which are clearly culpable in the demise of local news and other parts of the news industry, are eager to make amends and to change public opinion about their actions.

Under intense and deserved scrutiny from the public and politicians, they have never been more desperate to influence major news organizations through any means necessary.

More than at any other time in history, it is essential that publishers don’t let them.

This Week's The Information Articles:

• Amazon No Longer a ‘Low Single-Digit’ Share of Retail After Pandemic Ecommerce Surge by Paris Martineau
• The People With Power at TikTok Owner Bytedance by Yunan Zhang and Juro Osawa
• How China’s ByteDance Avoided Worst-Case Scenario for TikTok by Juro Osawa, Yunan Zhang and Shai Oster
• Alibaba Eyes Stake in Online Jobs Classifieds Company Zhaopin by Juro Osawa
• Five New Software Stocks: Why Investors Love Some and Hate Others by Ross Matican
• Zoom Invests in Big Messaging Upgrade in Challenge to Slack by Kevin McLaughlin
• With TikTok Deal, Oracle Could Gain Billion-Dollar Cloud Customer by Amir Efrati
• Bustle’s Goldberg Says Media Firm Is ‘Logical Candidate’ for SPAC Merger by Tom Dotan
• ByteDance Rival Kuaishou Seeks $50 Billion Valuation in Hong Kong IPO by Yunan Zhang and Juro Osawa
• Airbnb Opponents Take Fight to SEC Ahead of IPO by Cory Weinberg
• In Ironic Twist, Google’s Pro-Privacy Move Boosted U.S. Antitrust Probe by Nick Bastone
• The Information’s 411 — Laurene Powell Jobs and Jenna Lyons (2020 WTF Summit) by Tom Dotan