The Google and Facebook Advertising "Snippet Tax", What's It Really About?

Mish

Australia cracked down on Facebook then relented when Facebook pulled the plug. Let's check in on events in the EU.

Advertising War

Australia and the EU are not happy with US technology companies in general, but in particular Alphabet (GOOG), Facebook (FB), Microsoft (MSFT), and Apple (AAPL). 

This discussion regards advertising giants Alphabet and Facebook. 

Australia and the EU believe the advertising giants are stealing money from other publishers, especially news print,  and/or are unfairly driving such companies out of business. 

Crackdown in Spain

In 2015, Spain decided to tax Google simply for linking to other content. 

Google responded appropriately. It told Spain to go to hell and pulled the plug entirely. Rather than pay companies to promote their content, Google pulled out of Spain, and has been out of that market ever since.

Google Tax

TechDirt has an interesting discussion regarding a Study of Spain's 'Google Tax' on News and how much damage the tax did. 

Governments across Europe, generally at the behest of traditional newspaper publishers, have been pushing for what they call an "ancillary copyright," but which is much better referred to as a "snippet tax" or a "link tax." Belgium was the first country to try it, and Google responded by removing complaining publications from Google News. 

When it came time for Spain to try to appease its misguided and angry publishers, the government sought to avoid the tactics that Google had done in the past and thus made it mandatory to pay, saying that sites themselves couldn't even opt-out of getting payments, even if they didn't want them. In response to this, Google broke out the somewhat surprising "nuclear option" and shut down Google News in Spain entirely. 

After the law went into effect, the Spanish Association of Publishers of Periodical Publications (AEEPP) commissioned an economic study about the impact of the new Spanish ancillary copyright law -- and found (not surprisingly) that the legal change (and the shuttering of Google News and other aggregators) was absolutely harmful to the Spanish news media and innovation in general. 

Google Threatens to kill Google News in Europe

Undaunted by the dismal results in Spain, the EU nannycrats still want to crack down on Google and Facebook. 

In 2019, NiemanLab reported Google Threatens to kill Google News in Europe Over "Snippet Tax".

The European Union is considering a set of changes to digital copyright that are, well, quite controversial. One of those would require Google and other platforms to pay publishers for the right to display anything more than the tiniest snippet of a story in its search results or elsewhere. 

It’s true that — despite a decade’s haranguing from publishers that might lead you to think otherwise — Google doesn’t make much of its money from news-related content in search. It makes money when you search “dry cleaner in Boston” or “what’s a good toaster oven,” not "events in Syria."

In 2014, Spain passed a “snippet tax” not unlike the one being considered by the EU. A 2017 study into what happened as a result found "the shutdown of Google News reduces overall news consumption by about 20% for treatment users, and it reduces page views on publishers other than Google News by 10%."

Win-Win

If anything, the study results suggest Google ought to demand a price to link to stories not pay for the privilege of promoting other content.

It's a bit more complicated because everyone benefits from the links including Google.

So let's call it a wash, with everyone benefitting, including consumers. If everyone wins, what's the beef?

With that, let's flash forward to 2021.

Alphabet in Talks with Spanish Publishers to Bring Google News Back

On February 22, 2021, Reuters reported Alphabet in Talks with Spanish Publishers to Bring Google News Back.

Alphabet’s Google is negotiating individual licensing deals with a divided Spanish news industry that could allow the U.S. tech giant’s news service to resume in the country, three sources close to the matter told Reuters.

Google News, which links to third party content, closed in Spain in late 2014 in response to legislation which meant it had to pay a mandatory collective licensing fee to re-publish headlines or snippets of news.

Now the thorny issue is back on the table as Spain prepares to implement the 2019 European Union copyright directive by June. While that requires Google, Facebook and others to share revenue with publishers, the government could allow the companies to negotiate individual deals with content providers.

A spokeswoman for Google Spain said publishers should be free to choose their own business model. “The copyright law should not make it mandatory to put a paid license in place,” she said.

The EU rules, do not force online platforms to pay for links posted to their news site by publishers, the main grievance for Facebook in Australia, so their implementation could pave the way for a series of deals.

Publishers Free to Choose Their Own Business Model

Bingo. 

That is exactly the way it should be and exactly as I proposed in my previous article, and I had not seen Google's response to Spain when I wrote it.   

Facebook vs Australia, Who Wins the Debate?

Let's recap Australia with a look at my previous post Facebook vs Australia, Who Wins the Debate?

Australia passed a law that would force advertising giants such as Facebook and Google to pay media companies for monetizing their news content when it’s posted to their social media platforms. Facebook responded with an Overly Broad Content Block [Just as Google did in Spain].

In the wake of Facebook’s unilateral censorship of all sorts of Facebook pages, parliamentarians in the country accused the tech giant of “an assault on a sovereign nation”.

The discussion was entirely one-sided on Twitter. No one defended either Facebook or Google until I chimed in.

What Copyright Issue?

If a company does not want links to its articles on FB or Google all they have to do is say STOP. Right? 

That led to this silly idea from a "Crazy Realist"

The media companies don't want Google and Facebook to "stop" but they do unfairly demand a "Snippet Tax". 

In response, Google pulled the plug in Spain and Facebook did in Australia.

In Praise of Google's and Facebook's Responses

I cheer the responses of Google and Facebook although the latter was more than a bit sloppy. 

Hilarious Video on Australia's Law 

My lead image is from that video. Please play it. It's a hilarious and accurate take. 

What's It Really About?

The above video hits the nail squarely. I found the video today via TechDirt. 

As I've discussed previously, there's nothing to bargain over when you should never have to pay for links. The links are free. There's no bargaining imbalance, because there's nothing to bargain over. And, it's clearly a tax if the only end result is that Google and Facebook have to fork over money because the government tells them to. That's... a tax.

Anyway, that's why I'm happy to see The Juice Media, an Australian outfit that is famous for making hilarious "Honest Government Ads", usually for the Australian government (but sometimes for elsewhere) has put out a new "ad" about the link tax in which they explain how it was a fight to take money from one set of giant rich companies, and give it to another set of giant rich companies, and not to do anything useful in between.

Fight to Save the Little Guy?

Contrary to the widespread myth the EU and Australia are in a fight to save small publishers, this battle is anything but, as Spain proved. 

A Word About EU and Australian Nannycrats

Companies like Microsoft, Apple, Google, and Facebook could never come to be in the EU or Australia. 

The nannycrats in those countries would destroy them in the name of competition. 

Technology companies exist in the US for a reason: The US has open free markets, freedom of speech, and better tax codes, at least on a relative basis.

Consumers use Google, Microsoft, and Facebook because they like the products. 

Google spawned amazing self-driving technology, Google Earth, and countless other ideas that never would have or could have happened in the EU because the EU would have broken them up in a futile effort to save the local bookstore. 

The local bookstore is doomed, no matter what the EU and Australia do. So are malls and so is newsprint. 

The irony is the snippet tax as designed by Australia and Spain would speed up, not halt, the end of printed media.

Mish

Comments (21)
No. 1-10
Greggg
Greggg

I use Google Chrome most of the time. Somehow, through Chrome, I can watch Sky news Australia right side up rather than upside down. Thank you, Google.

bluestone
bluestone

The evolution of ARPANET to the internet itself comes from an EU government funded institution, CERN. That aside, historically and mainly true today you can't buy a computer and say you don't want Microsoft Windows 10. You have to buy it.

"The complaint centered on the license practices at the time which required royalties from each computer sold by a supplier of Microsoft's operating system, whether or not the unit actually contained the Windows operating system."

wikipedia Microsoft_Corp._v._Commission

The assertion that these companies haven't benefited from inherent monopolies doesn't hold water for me. Facebook does not allow merging in the feed of competitive services, whereas other communication providers conform to compatible standards. Is the incumbent Verizon free to prevent calls to a new telecoms provider?

-Only- Apple may sell mobile apps for their phones. Alternative stores are not permitted. The take? 30%. Where is this USA competitive market?

etc etc

Anda
Anda

It's almost funny...I just went to catch up on how this has played out in Spain . Starting with

they point out that revenue from the measures introduced in 2015 reached 10 thousand euros a year, where it was supposed to bring in 80 million. Apart from a large loss of traffic to media due to aggregators not facilitating their usual service, only one remaining aggregator paid its fees. As google was the main target to bring in the 80 million this left the whole project dud. In 2018 the law was actually struck down and not rewritten, of all things because it was considered unfair to large families ? The 2015 law was introduced by PP (right) opposed by PSOE (socialists).

So why didn't google start up again in Spain. Firstly I expect they just don't like being messed around, but that is only one facet... because the PSOE now is having its turn at trying for the jackpot, and of course they set their sights higher at 1.2 Billion. A new tax was introduced to this end...

which by some strange coincidence was approved also in 2018. This is a 3% tax on advertising revenue, on companies that are sales intermediaries, and on data sales , applicable only to companies with global revenue of 750 million, or Spanish revenue of 3 million. The government is saying it is only following EU proposals and celebrates being first to implement them. EU might come up with a similar regional law. Payments only kicked in last year I think.

Rene_FPV
Rene_FPV

It was never a problem when Google just provided links with a little bit of descriptive text.
Now in some cases they provide the entire article without actually linking to the source website. The point of creating great content is to attract viewers to your site, but when someone completely copies your work without giving you the payoff of attracting new users then how is it a win win anymore.

Zardoz
Zardoz

Do those places really NEED Google and Facebook? They've been around for centuries without them.

Casual_Observer
Casual_Observer

Truth be told kicking out these companies oit countries is better for that country. The world existed before the internet. Many igen and millenials cant imagine this.

nzyank
nzyank

Not sure if Mish's take is correct? Australian media companies are signing deals with Facebook and Google. Without knowing the terms of these deals, we don't know who got the upper hand. Presumably the Australian media companies are better off than they were before, in which case the Australian government won?

Given the importance of media to healthy democracy, I'm not comfortable blindly relying on the free markets to sort out what happens with respect to media. This is an area in which governments need to be proactive.

Doug78
Doug78

I learned something new today. I never knew that Google News existed before Mish mentioned it so I looked it up. A quick ask-around revealed that it is not used much if at all. I can live without it as I live without Facebook.

KidHorn
KidHorn

Google has been going downhill for a while now. Their search results are no longer based on best fit for your search. They clearly prioritize commercial sites and sites that fit their politics. There are pages that google completely blocks due to inconvenient facts. I frequently have to use alta vista to get better results. Similar to how Bing heavily prioritizes microsoft.com.

Johnson1
Johnson1

I am thinking about telling Facebook they need to pay me every time I post something or upload a picture as that is my content. I wonder if they will ban me. I wonder if I can add a watermark saying this is copyrighted and if you share it you must pay me. 1 cent. LOL


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