We can't afford to wait: Governments drop a tax bomb on Big Tech's trillions
A tax hammer is being added to antitrust and fines as global governments end the boiling frog era with powerful attacks on tech's trillions
Future Media comes to you today from London where I’m at Reuters’ glittering Canary Wharf HQ to keynote media leaders on the challenges and opportunities of AI.
More on that later, but first, let’s offer our traditional warm welcome to new subscribers from Apple, Yahoo UK, video streaming platform Brightcove (another partner of my video AI business Oovvuu), streaming video ad giants Connatix, the Victorian Country Press Association, the UK’s Ping News and Tindle Newspapers, and more. 🙌
Let’s begin with big news from Canada…
A tell-tale sign of unchecked power is when monopolies write down multi-billion-dollar fines, and admit illegality, and see it as just the cost of doing business.
That’s been Big Tech’s reality for a decade, and it’s easy to accuse its leaders of arrogantly believing they’re above the law.
However, the harder truth is that governments, regulators, courts, and media leaders, have taught them through their actions and inactions, that they are.
Decades later, with news and democracy on fire, that parlous path has finally led to antitrust across global jurisdictions, and most meaningfully in the US.
As I prepared for London, a group advising a global government approached me and asked what punitive actions I’d recommend against the platforms.
This is what I said:
In my view, the world’s fallen victim to boiling frog syndrome.
It started with two decisions. One was to weaken a law, the other to strengthen one, but both went the wrong way. Those laws were copyright and Section 230.
When the US adapted copyright to include fair use, it gave platforms free rein to scrape the web for free to create new products. Search and Google followed.
Section 230 then removed legal liability for platforms over content posted by their users. The outcome was social, and Meta.
The intentions were good. Lawmakers wanted to start and accelerate the web for the benefit of all.
But 25 years on, they’ve perverted the market to such an extent that the traditional economics of supply and demand have been broken.
Meta and Google began as platforms to build communities, and organise the world’s information, but now both share a single mission: To sell ads.
This has sucked the air out of news’s revenue, leaving the creators with least, and empowering the trillionaire paperboys to bag the spoils, without legal liability.
The benefits of fair use and Section 230 were never made available to professional publishers.
They were left high and dry to create and police quality content in a global market that they were doomed to fail in.
I was triggered.
These two laws have contrived to empower every loon with a keyboard to pretend to be a journalist and post at scale.
The outcome has been an explosion of misinformation, yet somehow smart people, politicians, and many in the media, seem to have been caught by surprise.
How can that be?
These policies are every bit as much to blame for the situation as the platforms themselves because they made scale, not quality, the fast lane to profit.
I shared an anecdote from my Fairfax days.
A board member brought my video team a box filled with camera phones and told everyone to film everything so we could get into video at scale.
I asked him: “If that’s the plan, why don’t we just give all our readers a pen and ask them to write the paper?
Scale without skill is dangerous.
But the question was what the government of this country should do. I said:
Let’s overlook poor policy and government inaction. Let’s ignore the news industry’s blind belief that platforms were friends. Let’s focus on the here and now.
Fair use is a US law. It has no power in your country, so why do you allow it? If you stood firm on your own copyright law, then the free scraping and usage of publisher content would be illegal, and you could act.
Section 230 is also a US law. It has no legal standing in your country. That means your domestic laws on contempt, defamation and hate speech stand. That means you have the power to sue at will.
You don’t need new laws. You need to stand by the laws you have, and the centuries of case law that created them.
You’re victims of boiling frog syndrome. Use the laws you have.
Later, the discussion shifted to taxation.
Australia and Canada have been the canaries in the coalmine, the first to try to force tech to pay publishers.
Meta just pulled out in Australia and Canada barely got started. More are slated in California and across Europe, sending tech into full attack mode.
That has sent governments into attack mode too, and they are putting tax back on the agenda.
Microsoft paid an effective tax rate of 13 per cent last year.
Alphabet doesn’t call it out, but I bet it’s a lower rate than you.
Global talks on an international treaty on Big Tech tax has been dragging on for years, and this week, Canada announced it had waited long enough, Reuters reported.
Canada will now press ahead with a digital services tax on Big Tech, raising US$4.3 billion right away.
“Canada cannot afford to wait," the finance ministry said, as it backdated the tax liabilities to 2022. Expect to see Australia and others follow suit.
Two more signals of Google’s Hail Mary pre-antitrust era emerged this week.
First, researchers identified a surge in Google referral traffic to Reddit, which Google just paid $70 billion $60 million (error rectified thanks to the alert from Danielle at the NY Times) a year to train its Gemini AI. The deal’s already under regulatory investigation.
The second is Google’s decision to combine its Android software and Pixel hardware teams.
It sounds innocent enough, but it unravels a long-held Google policy, with the Washington Post reporting:
Not long ago, Google insulated Android development from the hardware division, saying it wanted to avoid giving its phone designers an unfair advantage over the other major smartphone makers who used Android - including Samsung and Motorola, as well as Chinese companies such as Oppo and Xiaomi.
The move is to accelerate the integration of AI into Google’s own-made phones, which has been on the cards since the multi-billion deals with Apple, Samsung and others were revealed during the antitrust trial.
If the judge rules the Apple deal and others must end, Google will lose half its mobile traffic, and this is the beginning of an insurance policy.
On the off chance they win, Apple and Google are ignoring regulators and planning to integrate Google into iPhones.
Chirag Dekate, an analyst with Gartner told The Post: “Google wants to dominate AI, essentially by infusing AI everywhere and by connecting it.”
The Verge added: “This is a huge change for Google, and it likely won’t be the last one.”
With antitrust coming, and investors demanding continued growth, the gloves are off.
It feels like the end of the world, but at the risk of badly-quoting Churchill, it’s really the beginning of the end of Google, so hold tight.
This one’s going to hurt. Google’s effort to replace cookies is being blocked by UK privacy regulators.
I reported in February:
You’ve heard about the cookie apocalypse, where billions of code snippets used to stalk you around the internet to help advertisers are being deleted.
Now, Google’s plans to kill cookies have hit a roadblock, with Britain’s competition regulators ordering them to freeze work until they answer privacy concerns.
The UK fears that Google’s replacement for cookies, called Privacy Sandbox, will increase its monopoly and further hurt publishers and advertising rivals.
Now The WSJ reports a draft report from the Information Commissioner’s Office warning that Privacy Sandbox leaves gaps that can be exploited to undermine privacy and identify users who should be kept anonymous.
Errr, like the time Google used Chrome’s Incognito mode to stalk users while promising them privacy?
The Journal reported:
“The UK Competition and Markets Authority won’t let Google block cookies until it deems the replacement technologies to be acceptable.
“If the CMA requires Google to alter its technologies, it may delay Google’s timeline for deprecating cookies to allow time to overhaul the Privacy Sandbox.”
This is just so much fun…
Google has fired 28 staff for protesting over a cloud contract with Israel.
CEO Sundar Pichai said: “We have a culture of vibrant, open discussion that enables us to create amazing products and turn great ideas into action. That’s important to preserve.
“But ultimately we are a workplace and our policies and expectations are clear:
“This is a business, and not a place to act in a way that disrupts coworkers or makes them feel unsafe, to attempt to use the company as a personal platform, or to fight over disruptive issues or debate politics.
“This is too important a moment as a company for us to be distracted.”
Have you ever wondered what happens when you return your iPhone to Apple to be recycled? Bloomberg has gone deep with a fascinating investigation.
Sticking with the environment, AI demand means data centres will use more energy than India by 2030, according to another shocking report.
Meanwhile Atlassian co-founder Mike Cannon-Brookes is aims to build the world’s biggest solar farm in Australia, and an undersea cable to pipe energy to Singapore.
Finally, London’s just how I remember it. Grimy, old, and chock full of culture. I love it.
I’m here to speak at Minds International, a consortium of the major global news agencies including Reuters, Bloomberg, AP, AFP, Australia’s AAP and others from France, Germany, Japan and dozens of other countries.
We’re talking about AI and how we’re stronger as an industry than we are negotiating individually. There will be more to say on this later, but this is a good place to start 👇
That’s all for today. See you later in the week. I’m off for a pint 🍻