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Right, now this is a biggie. Get a coffee and don your thinking cap because the magnetic field of publishing just shifted…
With Google’s defence against allegations it monopolised the publisher ad market collapsing, CEO Sundar Pichai took to the airwaves overnight for a rare interview.
He took questions from Bloomberg’s David Rubenstein, saying it would take years for the implications of the lost cases, and new innovations, to be known and felt.
He confirmed unsurprisingly that it will appeal and pointed out that other cases had taken a decade to play out, before Google was exonerated.
With his charm on full beam, Pichai used the appearance to send coded messages to investors that no matter what headwinds, he’s focused on building its next monopoly.
It was a masterclass from the CEO of the world’s most famous tech company, as he demurred: “With our scale and size, I think scrutiny is inevitable.
“And I’m confident given that we are focused on innovating using technology, we’ll do well in the long run.”
Hours later, Google announced it was launching AI Overviews in Australia.
Let me explain the timing...
Patent danger
Referrals from Google and platforms including Meta to publishers are down more than a third over the past year.
Last December, I was first to reveal AI Overviews was coming.
It still just looked like an indecipherable patent then, but after a decade as a journalist running an AI company, I could clearly see where it was headed
Who remembers how the SEO geniuses and publisher chiefs scoffed. Cassandra Complex is real. I know.
By May, it was spreading across the world just as I predicted.
By June, I’d measured and shared the impact in a world first global study.
Now AI Overviews are coming to Australia too.
Who’d like a ride in my Delorean to see where that takes us?
So, AI Overviews pivots Google from a search engine into an answers engine, using its AI which illegally hoovers publishers’ premium content from the open web.
With Google boasting AI Overviews would reach a billion people by year’s end, Australia was an odd outlier.
Until last night, and I have a theory.
Roll over
The ACCC estimates Google generates ~$10 billion-a-year in revenue from Australia. It’s just a 2.4 per cent sliver of its global earnings. (It banks $621,000 a minute!)
But the spectre of Australia’s News Media Bargaining Code was significant.
While Australia is a boil on its bum financially, a legal precedent like that would spread across the world like commercial cancer.
The NMBC had real teeth, and Google couldn’t risk that.
Australia’s code ordered Google and Meta to negotiate in good faith with publishers to agree fair payment for the content that they used.
If they failed to do so, then the Government and the ACCC would designate the platforms and order them to pay fees that would be decided through arbitration.
But that’s not what happened. The law was never enacted.
It never got anywhere because before the Government was able to bare its fangs, Seven buckled and took a secret backhander, followed by News, Nine, and others.
Fear, short-termism, and poor strategy took precedence over sense and the first real effort to rattle Big Tech was derailed.
Now’s a good time to smell the coffee on this.
Google and Meta had both threatened to quit Australia. Big Tech was in a dead end. Pay or go.
It was publishers and broadcasters who stepped aside to let them out, in return for a payout estimated to be roughly $200 million - or 322 minutes of Google’s earnings.
The Australian media industry decided that its entire worth is roughly what Google will earn before you sit down to dinner tonight.
So, why has Google decided to launch AI Overviews now? How’s this for an idea…
Empty promises
Publishing’s cowardice took cash over commonsense and in doing so, saved Big Tech from its worst nightmare.
In March this year, in the most predictable outcome possible, Meta pulled out. It had moved on, shifted focus to AGI, and was willing to test Australia’s resolve.
The move enraged publishers (duh) and put the Australian Government on notice to make good on its mothballed law.
The publishers whose actions triggered the crisis in the first place insisted the Government designate Meta and force it to pay.
Months have since dragged by, and nothing. Indignation is still a shitty business model as I’ve been arguing for (like) ever.
Google’s reaction to Meta’s exit was interesting. It leapt up telling publishers it would keep paying.
But as I said at the time, that was a promise it could not make. The reason was because it did not know what would happen with its slew of antitrust trials.
Back when it made that empty promise to publishers, it was in a vacuum, awaiting a verdict from the search antitrust trial which had not gone well, and still six months from the ad antitrust case, which is underway currently.
As a listed company, with fiduciary responsibilities to shareholders and a $2.7 billion valuation, it had to have a Plan B as an insurance policy in the event it lost.
The US Government had been clear from the outset that in the event of a guilty verdict, it wanted Google’s search and advertising infrastructure broken up.
That meant Google simply couldn’t commit to long term deals to pay publishers and be a good fiduciary.
So, what happened?
On August 9, it lost the search antitrust case. On August 22, it informed Australia’s publishers it was slashing the terms of its secret deals from five years to one.
That gave Google the exit gate it needed to satisfy its board’s responsibilities and its shareholders demands if rulings went against it.
Now, Google is pretty certain it’s going to lose the ads antitrust case too. That’s why Pichai was on Bloomberg last night telling twitchy investors not to panic. ☝️
But what does this have to do with AI Overviews and Google’s decision to launch them overnight?
A little bird
I believe Google knows the Australian Government is not going to designate Meta. A little bird has had a whisper in its ear.
It’s not really a surprise.
The political self-interest that led the Australian Government to be so aggressive three years ago does not exist now.
The public’s anger has also dissipated. Publishers distracted by their piss-ant cheques have softened their rhetoric and dropped the ball, and the world’s shifted focus to AI.
There’s also an election around the corner…
Google has done the same math that I did over breakfast at the beach last week with someone who is very very close to this.
We concluded that on a risk reward basis, it’s not enough of a vote-winner to take on Big Tech right now, so it’s no longer in the Government’s self-interest.
Which means Meta is going to get away with not paying publishers, and not be designated.
That means Google won’t either, so it will end all its publisher deals at the first opportunity.
It also removes the Sword of Damocles and any risk of a global legal precedent.
That means Google no longer needs to pretend to play nice with publishers.
And AI Overviews gets greenlit...
Publishers literally brought it on themselves.
Hail Mary
So, what do the next few months bring?
Google is about to see its magic-money-making-monopoly ruled illegal, and will then come under regulatory pressure - and likely legal orders - to dismantle it.
That means Google will shift focus to the monopoly that it still has - which is having all the world’s advertisers on speed dial.
When I analysed its financial results last January, I predicted it would enact a Hail Mary on ads.
By June, I’d dissected its mid-year reports and doubled down that AI Overviews would be the tool it would use.
Now it’s doing it.
Might that be why it just spent $70 billion in a stock buyback? You betcha.
Might that be why it quietly removed a 17-year commitment to being green to focus on profits? Hmm, yes.
Dollars over sense? I’d hazard that’s a yes too.
Boulder-dash
So, you’re a publisher. You’ve made some bad decisions. What do you do?
If you’re taking Google’s pay cheque, it’s the last one. Plan not to have it next year.
If you don’t have Google’s pay cheque, you’re never getting one. Stop moaning.
If you’re either, know for certain that Google is now your full-bore enemy.
AI Overviews ensures that search traffic will follow social’s collapse curve.
Oh, and you’ve blown your window for a Government bail-out. Forever.
What you do have left is the law.
Chatting to a wise friend yesterday, we debated what measures still exist to limit the damage Google can cause to publishing going forward.
We agreed that Big Tech is like a tidal wave that crashes over even the biggest boats, turning them into matchsticks, but the law is a rock.
Google has met its rock in America and Europe’s antitrust courts.
Google knows it. Pichai knows it. Google’s shareholders know it.
That’s why Pichai’s on TV telling them to cool their jets while he uses “our ability to innovate on behalf of our users”.
Innovate is code for AI Overviews BTW.
And who are the users he speaks of? We found out in the antitrust trial yesterday.
Google’s customers are not the public who search. Or publishers whose content search promises to surface.
Nup. Neither. Google’s customers are advertisers.
And not agencies. No, not you either.
The advertisers themselves.
I reported from the dying embers of the ad antitrust trial yesterday:
“Observers in court have noted how much Google’s focus has been on advertisers, and not ad agencies, or ad exchanges.
“Lawyer Tom Blakely, reporting for Big Tech on Trial, said: “Competing ad exchanges seem to simply not be a concern of Google’s - in business, or in this case.
“After all, advertisers are their prized customers because they provide the bulk of the revenue.
“On the other hand, ad exchanges and ad agencies, to an extent, are rivals they’re just not interested in dealing with.”
So…
Finally…
Google’s only advance from here is to use AI to drive higher search volumes at lower yields, and drive traffic and ad supply to its owned and operated sites
Why go to the bother of deprecating cookies if your focus is on O&O inventory?
That means publishing’s access to ads will be further challenged by Google syphoning to its own AI-generated search pages. Publishers will feel it in falling sell through.
Google will do this to increase topline revenue growth, to bridge it through the “years” of appeals that Pichai spoke about on TV last night.
And all the while, it will unleash its unholy hoard of lobbyists to fund, cajole, and coerce politicians worldwide to leave it free rein to create its next monopoly.
Except Australia, where publishers did it for them.
The full interview with Pichai screens on The David Rubenstein Show: Peer to Peer Conversations on Wednesday October 9 on Bloomberg at 9 pm New York time.
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