Google Caves to Regulators, Will Pay Link Tax to Publishers

The link tax got a major boost recently. Google is backing down from regulatory pressure and is agreeing to pay the link tax.

It’s not the outcome most were expecting out of the link tax debacle. Google is saying that it will negotiate with big publishing to come to an agreement on what it must pay for an otherwise free service.

For a small amount of background, Google operates a free, ad free service known as Google News. Google, of course, doesn’t make any money for this service. Instead, they just operate it as a sort of a bonus to its suite of services. The benefits of this service for publishers is, of course, immense. Google collects links for news and offers snippets and thumbnails to better entice people to go to those news sources. In turn, news services get a major boost in traffic simply for publishing news stories. Publishers, of course, have to actively get on board with this service and must submit, among other things, their site map, so the inclusion is far from automatic.

For years, the service acted as a symbiotic relationship with publishers. The more publishers are on board with this service, the better the service becomes. The better the service becomes, the more people want to use it. Finally, the more people use the service, the more traffic gets sent to publishers which generally means more revenue either through ads or subscriptions. No one had a problem with it and publishers clamoured to get in on the action.

More recently, however, big publishing started getting greedy. They wanted more money anywhere they can get their hands on. One of the targets for siphoning money out of the system is Google News. It seems as though that they decided that Google should pay for the privilege for sending traffic to them. Basically, a sort of “have my cake and eat it too” demand.

The first thing they did is completely distort the reality of news aggregators. So, they changed the narrative to say that he big evil corporations like Google and Facebook are “stealing” from the poor innocent little publishers that are on the verge of going bankrupt. Yeah, that’s the ticket. Does it have any bearing on reality, absolutely not. Still, they wanted to push that narrative anyway to make it more palatable for politicians and the public to get suckered into a false crisis.

Unfortunately for big publishing, there are many experts in the field of technology who are more than happy to weigh in. Weigh in they did. As a result, they pushed the narrative much closer back to what it really was by calling it a link tax. It is, after all, being mandated by law. Additionally, it is forcing private companies to pay money that would otherwise not be paid out. Very quickly, big publishing lost their social license to push through it. Of course, this is big publishing we’re talking about. They don’t need a piddly little thing called “social license” to push through their agenda.

So, they did what many big corporations do, lobby the living daylights out of politicians. In Europe, it got to the point where they were sending political death threats to politicians that had the audacity to not buy into their false narrative. Unfortunately, after procedural trickery, Europe passed the link tax law.

France, for it’s part, quickly got to work to activate the laws. Google defended itself by saying that publishers can opt out to remain included, but otherwise, publishers that demand free money from them will simply become excluded from their results. The move, of course, is perfectly legal. Google isn’t necessarily legally obligated to host their content in the first place. French publishers shot back by calling the perfectly legal move “unacceptable“. After all the goal was to get free money out of the deal, not to lose traffic thanks to unreasonable demands. So, big publishing went running back to regulators to force Google to put their articles back and force them to pay for it too.

French regulators sided with big publishing and ordered Google to not only put their friends in big publishing back in their results, but also, pay for the privilege and pay retroactively for the time that they deleted their snippets too. From a regulatory perspective, the development is stunning partly because big publishing is effectively calling all the regulatory shots here. When big publishing tells regulators to jump, regulators basically ask, “how high?” That’s the conclusion one can easily get out of all of this.

Faced with attacks from all sides on the matter, it seems that the only logical course of action is to simply pull out of the respective countries. Many observers expected Google to make that kind of move for some time and it was really surprising that this wasn’t the immediate reaction. After all, you have a country that is giving you a hostile environment to work in from a regulatory perspective, what’s the point? There’s plenty of other countries you can still operate in and regulators and big publishing will see their revenues drop with such a big player like Google leaving the ecosystem. They did this in Spain as well, so it seemed like a foregone conclusion that history will repeat itself here.

Now, it seems that Google is reacting – and in a way that was entirely unexpected. Google is saying that they will cave to the pressure and pay the link tax. Late last month, Google started saying as such with. From CNBC:

Google will now pay news publishers directly to license their content, in a change of tack for the internet giant.

The company said Thursday that it would introduce a licensing program that pays publishers for “high-quality content” to be posted on a new service expected to launch later this year. The service will launch on Google’s News and Discover platforms.

It will initially include local and national news publications, such as Germany’s Der Spiegel, Australia’s InQueensland and InDaily, and Brazil’s Diarios Associados. Google said that, where available, it would also offer to pay for free access to paywalled articles on news sites.

“We are currently engaged in discussions with many more partners and plan to sign more in the coming months,” Brad Bender, Google News’ vice president of product management, said in a blog post Thursday.

More recently, big publishing began declaring victory over these developments. Reiterating the anti-Google propaganda, publishers are effectively saying that the so-called era of “free news” is coming to an end. From Bloomberg:

Facebook and Google have for years operated like shop windows for news stories, plying their billions of visitors with free snippets and information from articles across the web. An antitrust tussle that’s coming to a head in Australia is set to change that.

Australia’s competition regulator will this month publish draft rules forcing the two U.S. tech giants to share revenue generated from news with the original publishers, including Rupert Murdoch’s News Corp. A final version of the code, the first of its kind in the world, is due to follow soon after.

Between them, Facebook Inc. and Alphabet Inc.’s Google have a dominant position in the online advertising market and that has been under intensifying regulatory and political assault in the U.S. and Europe, with Australia now adding another front of attack.

“This would be a major shot across the bow from a regulatory perspective,” said Dan Ives, an analyst at Wedbush Securities in New York. “It could open up a Pandora’s box around monetization and sharing of data.”

The idea, of course, is that the big publishers will get to have that nice wad of free money for nothing. After all, that’s the way you do it: money for nothing. What about smaller publishers like Freezenet? That will probably be a problem that mysteriously gets shuffled off under the rug and forgotten. So, what does this do for the so-called “free market”? In short, it creates market distortions. Big players get wads of free cash while the smaller players are left to fend for themselves.

In fact, a much broader possible threat is that big publishing will then start hunting down smaller players and saying that the existence of links means that they have become copyright scofflaws. Would it really matter if the links simply point to other pages on the same site? Probably not. So, if a Pandora’s box is opening, it’s a potential weapon to suppress the competition in ways thought unimaginable just 10 years ago. If we were a small European or Australian news outfit, I would have reason to be nervous of what this really could mean in the long run. After all, unintended consequences do happen, do you think big publishing cares if a few smaller players get pushed into oblivion? Probably not.

Then there is the knock on effects of all of this. Publishers from other countries are going to be incentived to run to their respective governments and demand that they be given free money too. After all, if the effort worked in a place like Australia, why wouldn’t it work here too? In fact, big publishers in Canada already are pushing for a link tax law.

There’s a lot of ways that this whole thing can go south with no way that this will actually improve anything. There’s a very real possibility that the consequences of this aren’t even going to even begin to be felt here. We’ll continue to monitor the situation and look for any developments should they arise.

Drew Wilson on Twitter: @icecube85 and Facebook.



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