News Information and Media Site: Byers Market: Thunder Down Under: Facebook threatens to block news in Australia

September 1, 2020

By DYLAN BYERS in Los Angeles &

AHIZA GARCÍA-HODGES in San Francisco

Good morning. ⏲️ TikTok's sale deadline is 15 days away. The Microsoft-Walmart alliance remains in pole position; the Oracle-led consortium is still in the running. Both groups are trying to thread the needle between Washington and Beijing.

🛒 Breaking overnight: Doug McMillon says Walmart's Amazon Prime competitor, Walmart+, will launch nationwide Sept. 15. Its aim is to stem the flight of Walmart customers to Prime.

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🇦🇺 Moving the Market

Facebook threatens to block news in Australia

Facebook is threatening to make it impossible for users in Australia to share news content on both Facebook and Instagram if the government passes a new law altering the financial arrangement between publishers and online platforms. It is a major escalation in Facebook's long fight with one of its most aggressive regulators.

• The new rules, which have the backing of Rupert Murdoch's News Corp, would force Facebook and Google into giving news outlets a bigger cut of digital ad revenue. It is the most aggressive effort yet by any nation to curb Silicon Valley's power over the news business.

As Facebook execs see it, the new law is untenable. It would force them to enter into revenue-sharing agreements with publishers where the final terms would be decided by independent arbitrators — and Facebook would have no recourse to back out of the deal.

• "We tried to make this work," Campbell Brown, Facebook's VP of global news partnerships, told us. "We proposed our version of something workable. ... Unfortunately, there are so many things in this proposed legislation that just make it untenable."

• In a post last night, Brown said Australia had left Facebook with two choices: "removing news entirely or accepting a system that lets publishers charge us for as much content as they want at a price with no clear limits. Unfortunately, no business can operate that way."

• "Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram," she wrote.

Google has previously said that its services could be "at risk" if Australia puts the new code in place, but Richard Gingras, its VP of news, did not respond to a request for comment.

• The search giant has responded to previous efforts by European countries by simply removing their news outlets from Google News, often dealing a blow to the nations' news industries.

For Murdoch's News Corp, which dominates Australia's news industry, the legislation is a win. Murdoch has led the industry's fight against Facebook and Google, criticizing the platforms publicly and launching a much-lampooned news aggregator called Knewz.

• Facebook finally agreed to pay publishers millions of dollars a year to feature their content in a dedicated news tab. Fittingly, it was News Corp chief Robert Thomson who appeared with Mark Zuckerberg last October to announce the news.

What's next: The new Australian rules would establish a panel of arbitrators who would determine the price that Facebook and Google must pay publishers. The platforms would have no recourse to exit the agreement and would face fines as steep as 10 percent of their overall revenue in Australia for each offense.

• While news accounts for a relatively small part of Facebook and Google's overall revenue, the ability to access and share news is seen as part of the platforms' appeal. Depriving users of the ability to share news could thus have larger reputational effects.

• Of course, things would get worse if other countries were to follow Australia's lead. But Brown told me that Facebook is committed to expanding its news efforts globally and that she is not worried about ripple effects: "I think Australia is an outlier," she said.

The big picture: Whether Australia's effort is an overall win for the news industry is still very much up for debate. Many believe harsh regulations are counterproductive and could undermine publishers' ability to benefit from the distribution offered by the tech giants.

• Bloomberg's editorial board says the move will "reduce publishers' traffic, depress ad revenue, erode competition, impede innovation and needlessly deprive consumers of a valuable service." Outgoing New York Times Company chief Mark Thompson is similarly wary.

Bloomberg/Getty

🗳️ Moving Menlo

Facebook to review its 2020 election influence

Facebook is partnering with independent researchers to study its own influence on the 2020 U.S. elections, part of a wider effort to protect elections globally and win back some goodwill after its failures during the 2016 presidential election.

• The research, which will be based off user behavior on Facebook and Instagram, will be led by professors from New York University and the University of Texas at Austin who will not be compensated and will have total control over what they publish.

What's next: Facebook expects 200,000 to 400,000 users to opt into participating in the study, per WSJ's Jeff Horowitz.

🇺🇸 Talk of the Trail 🇺🇸

Republican megadonors like Sheldon Adelson and Bernie Marcus are expected to back a new super PAC bolstering President Donald Trump's re-election bid, Politico's Alex Isenstadt scoops.

What's next: A $30 million ad blitz led by Chris LaCivita, the GOP strategist behind the 2004 Swift Boat takedown of John Kerry.

Bloomberg/Getty

🌁 Big in the Bay

Zoom touts 335% sales growth

Eric Yuan reported a 355 percent jump in Zoom sales during the company's second quarter, far exceeding analysts' estimates and firmly establishing his ability to capitalize on the surge in tele-conferencing brought on by the Covid-19 pandemic.

• Revenue more than quadrupled year-over-year to $663.5 million, and the company now touts 370,200 business customers. Shares rose more than 9 percent on the news.

The big picture: "Zoom has emerged as one of the clearest corporate beneficiaries of the COVID-19 pandemic, which has forced millions of people to remain home to prevent the spread of the virus," Bloomberg's Nico Grant writes.

• In his earnings statement, Yuan said "organizations are shifting ... to supporting a future of working anywhere, learning anywhere and connecting anywhere on Zoom's video-first platform."

What's next: Yuan is focused on international growth, especially in India, Grant writes. He is also looking to "expand spending on sales, marketing, capital expenditures and research and development," and "exploring an entry into the market for virtual events."