Sharp Tech with Ben Thompson - When AI Moves Faster than Products, Microsoft's Evil Genius, Australian Rules for America's Ad Market, Questions on YouTube/Twitter/Spotify

Episode Date: December 8, 2022

More questions on ChatGPT and what the future of start-ups may look like, Microsoft's success and the added scrutiny that comes with acquisitions in the consumer space, a case against the Australian approach to regulation, plus questions about Alphabet and Ben's Spotify Wrapped list.

Hello and welcome to Sharp Tech. I'm Andrew Sharp, and this is a free preview of today's episode. Let's talk about meta down under. Toby says the Australian Treasury recently released its review of the Australian media bargaining code, stating, quote, the review considered it reasonable to conclude that the code has been a success to date. Over 30 commercial agreements between digital platforms and a cross-section of Australian news business. have been struck, agreements that were highly unlikely to have been made without the code. And Toby asks, do you think this is a fair analysis, or is this review more akin to a mob boss conducting a review of its operations and concluding that its continued shakedowns have been a success to date? It's a good question. And I mean, can you give people an overview of what the Australian rules and regulations were and why they are continuing to be relevant here.

Yeah. I think Toby had a pretty good summary. I think it is a Bob Boss saying it worked very well. I mean, the government compelled Google and Facebook to give money to publishers and they gave money to publishers. I mean, like, what do you want? I mean, of course they would frame it in different words. Oh, there was, you know, they had to negotiate and they sort of had, you know, and they had to sign these deals and they couldn't penalize, you know, results from the publishers in results, XYZ.

All of this is just all really, what bugs me about it is it's all kind of dishonest at its root. The dishonesty comes from this idea that news entities are providing the grist that makes Google and Facebook

valuable. And that's just not the case. Like Facebook showed that and they're threatening to do you get in the U.S. where we'll just stop serving up news articles. And guess what happens when Facebook stops serving news articles? News entities get way less money and Facebook's not affected at all. Like the problem for these entities is not that Facebook did them wrong. It's the fundamental structure of the Internet that favors discovery entities that people go to directly, what I call aggregators, and do.

newspapers that attract people directly, where they go directly to them, and then they can monetize that direct relationship. The New York Times, obviously, being the preeminent example, but at Stecke is in the same boat, they do very well as well. If you're stuck behind, if you're, if you need to show up in a Google news result, you're already screwed. Like, you're just, like, you're a pure commodity. And it turns out pure commodities don't monetize very well.

You're certainly screwed today. You definitely could have made hay, background. around like 2010, 2011 when people were buying in on the future of digital media? Well, that's what it's, no, no, no, well, digital media maybe because what, so this, this timeline is actually very interesting because people want to blame Facebook for like the news media's decline. The news media's revenue had plummeted to like a tenth of its former level or, or maybe a 20th or even more before Facebook ever made money.

Like, like, like, now Google's did play a role. Craigslist was actually of a huge, you know, classified ads were a major driver of newspaper revenue. But there's this, did Facebook get a bunch of advertising money? Well, newspapers didn't. Yes, but does that mean that they were somehow ripping newspapers up? No, it's conflating two things that sort of happened at the same time. If you want to say, look, we think that newspapers are important. They don't have a good business model on the Internet.

they should, then, okay, raise taxes and give them money, right? But the Australian government didn't want to do that sort of dirty work. So they basically did a tax on tech companies and gave the money to newspapers, but without actually having to get in the middle, just basically like forcing this negotiation with all these things where they just had to sign these deals. And on one hand, it's like, okay, well, I guess, you know, what, you know, the ends justify the means. guess is an argument you could make. There's certainly questions about fairness or unfairness.

Guess what entities are getting lots of money? Lots of like pre-existing entities. Lots of Murdoch-owned entities, which was a major pusher for this bill. And it's interesting. No, it's a huge angle. I wrote a whole daily update about it. Yeah. And so, you know, there's a, I think there's a correlation between vehemence of anti-tech

sentiment by Murdoch home properties and like the passage of this bill and before and after, you know. Look, all I see is a valiant savior of journalism there fighting for truth down under and more power to him. Rupert Murdoch Sharp Tech approves at least one half of Sharp Tech. I mean, well, it's interesting because in the U.S., there's a similar bill that just, you know, is not going to be passed, but it was sort of talked about this week. It's being bandied about and Facebook came out very hard against it this past week. It's bad hosting by me. We should have framed that.

People in the United States want to pass a version of these Australian regulations in the states. And so when you talk about bargaining power, can you explain to people what they're bargaining over? From what I can tell, this allows newspapers to band together and have more negotiating leverage in order to essentially subsidize. their industry. But there's no negotiation. That's the thing. The whole problem with this framing of this being a negotiation is what are we negotiating over? The newspapers are putting their content on Facebook voluntarily. Like Facebook is not going out and harvesting data. Now, Google is a little different because Google news does crawl the web and it puts stuff on their site. The problem is, so you can argue that Google, when you get Google news results, it's because,

Because Google went out and got it. Now, you can put something in your website that tells Google not to crawl your site. No one does that. Why do they not do that? Because if you don't do that and you don't show up on Google, you get less traffic. Gravy train, yeah. Right? And in Facebook, it's even more extreme because Facebook doesn't scrape anything or Facebook doesn't crawl anything.

The only reason why newspaper articles are on Facebook is because either readers put them there, which seems like a good thing from a newspaper perspective, or the newspaper itself put it up there because it hopes people see the links on Facebook and it goes and visits the article. So what are we negotiating over? There's this sense that we're putting this on Facebook and you have to pay us for something we did voluntarily

when you're just, it's nonsensical. There's not even a debate to be had. Now, there is people put for an article that Google in particular, does own a lot of the whole ad stack across the web and the, you know, and they favor themselves. And I think they're actually think that's one of the more compelling potential antitrust cases is really deeing into this. And to what extent is Google favors own ad platform? Do they harvest data from other ad platforms to get signal on on who's what?

It's a very technical, complicated sort of case. So it's a hard thing to make. And so that's interesting. But that's also not really what is that question in, in this particular. issue. I just get the entire debate is founded on a false premise that this that that any that that Google or Facebook all these entities who are willingly putting themselves on their platforms willingly. You're fighting against gravity. Like that's the that's the real issue. Now, if you want to come out and say look, newspapers are screwed, we think they're important. So we're going to give

that money. That's what I was going to ask you. That's a lot. That's a that's a debate we can have. But all this is based on lies and it's really irritating. I know. I really enjoy how worked up you're getting over basically logic that is so misleading, you find it insulting. Is that right? Is that an accurate portrayal? It is insulting. This idea, like, we've seen the,

I don't, I could go through this from top to bottom. I'm leaving that in. I'm leaving that in. Well, okay. Well, okay. What, there's a pause and a sigh. Perfect. Well, one extra point is you could make the argument, just to sort of steal man the case here, that the, in Australia type approach, actually does make sense of the U.S. because of the First Amendment.

Like, you, like getting into the U.S. government distributing money to news organizations potentially raises all sorts of issues. Ooh, very good argument. Yeah. We're going to work around it by compelling private actors to give, like, money. but this idea that they're taking money or again that there's anything to negotiate over is ridiculous. Well, that is fair and it certainly sounds ridiculous here. You explain it. I will say for my part, I would support some sort of regulation that essentially amounts to a wealth transfer from big tech.

Sure, but who decides who gets it, right? That's the other thing. In Australia, all the big news organization gets it. You know, if I was a, if I was a secretary in Australia, do I get money? Who decides? Like, well, the government decides. Oh, that's not bad. We don't know the government decide.

Okay, let's outsource it to big tech to pick and choose the winners in the market. That doesn't sound great either. Yeah, I mean, I just, I look at the social value of news and to the extent that the business model is more or less untenable for most places. Like, you need a billionaire benefactor to operate effectively. That's not true. We, like, there's like, again, like there are, you hate to, you know, the New York Times is obviously shown it can do well. There are there are other entities that I think a subscriptions are a big part of this. Now, there's another question, which is, is it good to have only viable subscription support in media?

Number one, that certainly introduces the sort of catering to your audience problem. But then number two, there's not stuff available to sort of, you know, normal people. Right. And local news is is much harder to sustain now than it was 30 years ago when you still had classified ads and stuff like that that people could use to support the businesses. And now it's just and all of that stuff did serve an important function in American life for like 200 years. To be clear, I'm not denying there's a problem or opportunity. Yeah. Newspaper boy Ben here, you know, just on the other line, reading the newspaper, slacking off on his delivery round.

Yeah, I mean, you're always pro news. That's a good. We'll leave the debate there. I'm glad you could Braddrey for a while. Okay. Well, we'll continue to monitor things. I did enjoy how feisty Facebook became the second that that legislation was mainstream for even a minute there. No, like these people, they get really mad at Facebook and no one puts two and two together.

If Facebook is a huge beneficiary of news, then you should be applauding Facebook not allowing news to post on their platform because they're hurting themselves so badly. The problem that no one wants to actually connect the dots is that Facebook can kick news off their platform. And no one gives shit. I know. No. Honestly, it makes Facebook better. You can argue. The more honest argument is mine, which is that Facebook makes $10 billion in revenue per quarter. And that's fucking ridiculous.

and there's not as much social value to Facebook as there is to news. So if we want to take a little piece of that revenue and transfer it to journalism, let's do it. And society will be better off. Now, finding a legal framework for that or legislative framework. I know what I want to happen. Make me a justification. All right. And that's the end of the free preview. If you'd like to subscribe and receive every episode of this show, you can do so by subscribing to Stratecre Plus.

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