Todays news: Google vs government

Putting Google’s business model at risk by forcing publishers to collect fees, makes the long term outcome of the new Spanish Google-tax highly unpredictable.

Network effects

On January 01, 2015 a new Spanish law comes into effect forcing search engines and third party news aggregates to compensate publishers for linking to their content. The new law, directed primarily at Google is often dubbed the Google tax, so mid December it pulled the plug on its Spanish News service, citing the service did not make any money and therefore it was unreasonable to ask for compensation. In 2008 Marissa Mayer claimed Google News was worth $100 million. Google is a business that wants to make money, not a charity so the service itself does not need to make any money to be valuable as long as it generates traffic for other parts of Google that sell advertisements. The service also increases brand awareness and creates goodwill which Google highly values. Without it, revenues from Google’s other services would probably be lower and leave more room for competition.

Been there done that

There have been several unsuccessful previous attempts to make Google pay for linking to publishers contents in Belgium and Germany but the new Spanish law is different because it makes it mandatory for publishers to collect fees from Google, creating a level playing field of sorts. Publishers worldwide can opt out from being indexed by Google News but for an individual publisher this amounts to suicide, Google will serve users the same information by providing a link to the story written by another newspaper.
Google’s dominant position is a near-monopoly, which allows it to pull its Spanish news service, knowing very well the pain it inflicts on Spanish publications. The only thing it has to do is sit it out. Were there ten competing news services it would not have this luxury and sharing the profits from linking to news stories would have become common practice years ago. Spanish publishers know they are cornered and in their desperation now have turned to a novel and bizarre idea by asking the government and the EU to force Google to keep its news service open. In doing so the publishers admit the old model where people read one newspaper is no more, just like people buying individual music tracks rather than full albums. No matter how the new law works out, publishers better hurry and start thinking how to adapt to this new reality where people consume snippets of news from multiple source. Building another news app for you paper probably won’t do it unless you enjoy the prestige of the New York Times. Engaging in a race to the bottom, writing infotainment stories not even worthy of the term pulp, rather than news people want to read and pay for, did not help either. In many European countries publishers have long enjoyed a sheltered existence because the local language served as a barrier to entry. They carved up the market among them and did not innovate. That era is over.

Staring contest?

The new law is a frontal assault on the fundamentals of Google’s business model and Google will never give in because once it does, other countries will follow and before you know it, governments, always desperate for other people’s cash, will start to tax other Google services. But what if the Spanish government does not give in either and a staring contest begins or even worse get the law implemented throughout the European Union to adopt the law?

Governments are justifiably worried about the decline of their newspaper industry. Forcing the right to be forgotten upon Google perhaps emboldened the Spanish government to take the next step. If a vacuum exists for long enough, somebody will step in. As long as the Spanish government is willing to let its newspapers suffer for a while by denying them access to Google News, there is a chance that some start-up will fill the gap, preferably a home grown one. This law is different, it is compulsory for all Spanish publishers, there is no opt in or opt out. Maybe the Spanish government is not as naive as people claim and is prepared to sacrifice some publishers to claim another victory over Google, a lifetime achievement for any politician. What politician doesn’t dream of bending the almighty Google to his or her will? Until that happens Spanish newsreaders will still be able to read the news, with a bit of extra effort.

Not everything is what it seems

Google is a near-monopolist whose vast power until now have allowed it to dictate terms and giving it a huge edge over its business partners. In no other part of the economy can a company apply its leverage to create a situation where using another company’s intellectual property for free is the best outcome the copyright owner can hope for. That is just one of the reasons the assaults on Google will continue and at some point some law or start-up will begin breaking the strangle hold of Google. That is the greatest threat to Google. It is not just the Spanish publishers who are under attack, Google is too. In the end it does not matter who wins, we consumers will pay for it, the only question is who gets our advertising euro’s.