Google's War on Publisher Paywalls

(BIG issue 8-9-2019)

Hi,

Welcome to Big, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…

Today I’m going to write about Google’s change to its Chrome browser, which is ruffling a few feathers in the publishing world.

Some housekeeping. This issue is shorter than normal, because I’ve been working on a much longer paper on advertising markets which is taking up most of my time. So sorry about that. Also, I’m changing the name of the newsletter slightly, from Big to BIG. All caps, baby.

But before I get to Google and paywalls…

News Update

  • The Trump administration is quietly gutting the Cost Accounting Standards Board, which sets accounting rules for military and government procurement and saves between 5-10% on contracting costs. This change will allow contractors to inflate prices. Wheee!

  • The latest round of tariffs may not increase prices to consumers as retailers and suppliers go to war with each other. Said one industry consultant, “Other than extremely strong brands, the consumer will not be accepting price increases… I expect virtually all of the cost to be absorbed by either the retailer, or in the supply chain.”

  • Boeing spent $43 billion on stock buybacks since 2013.

  • Boeing is having serious problems at its South Carolina production plant. Aerospace analyst Scott Hamilton laid it out: “Boeing Commercial Airplanes clearly has a systemic problem in designing, producing and delivering airplanes.”

  • The New Republic has some useful history on how the politics of pharma changed in the 1970s as a result of economist George Stigler and the Chicago School.

And now…

The War on Paywalls

What is Google? One way to think about it as a technology company, another way is to imagine it as an advertising company or a search company with a bunch of different properties helping users find what they need.

But I think of it the way Australian enforcers did, which is as a multi-faceted conglomerate whose power comes from its ability to direct traffic between users and businesses. In this framework, Google is not a tech company, but a financial holding company that manages a bunch of different independent divisions. These divisions include YouTube, Maps, General search, Analytics, Ad services, Chome, Android/Play, Cloud, and so forth. (Incidentally, I’ve been searching for a general org chart, and weirdly, I can’t find one. So if you have one, send it my way.)

What Google CEO Sundar Pichai and his boss Larry Page largely do is (a) set rules by which those divisions interact with one another to exclude competitors (b) engage in mergers and acquisitions to maintain their existing monopoly and attempt to enter and control new markets and (c) find ways to direct revenue and power to their own divisions. My colleague Sally Hubbard has given this self-preferencing a name: platform privilege.

One of the more obvious ways Google structures its divisions to privilege one another is through its use of Chrome, the browser with a dominant share in web browsing (roughly 60%). The News Media Alliance, which is the lobbying group for the newspaper industry, argued that Google is changing its browser’s incognito mode to destroy the ability of news publishers to attract subscribers. Basically, if you are a web site, you will no longer be able to tell if someone is using incognito mode, which has a big impact on paywalls.

Here’s the News Media Alliance:

Currently, many news publishers use so-called “soft paywalls” that allow readers to access a limited number of articles per month for free without subscribing. This provides readers with reliable and easy-to-access information, while allowing publishers to attract new subscribers who want to support high-quality journalism. This arrangement only works, however, if publishers can accurately determine that their content is being consumed. The planned changes to Chrome’s incognito mode would make such data impossible to obtain and force publishers to adopt a subscription-only model.

Here’s how Google recommends publishers deal with this change.

Sites that wish to deter meter circumvention have options such as reducing the number of free articles someone can view before logging in, requiring free registration to view any content, or hardening their paywalls. Other sites offer more generous meters as a way to develop affinity among potential subscribers, recognizing some people will always look for workarounds.  

In other words, Google wants publishers to get rid of its paywalls, or to have absolute paywalls with no freebies. In general, Google does not like paywalls or any friction on the web at all, because it means less ‘flow’ through its search engine and thus less ad money for its business.

Now, there are probably legitimate reasons to get rid of this loophole in incognito mode. But there’s also a long history of Google imposing standards on the web to privilege its search business. For a long time, the company had a “first click free” policy of downgrading any publisher in its search ranking that didn’t allow Google users to bypass paywalls. This had the effect of punishing paywall sites like the Wall Street Journal. Google argued it was simply helping Google users. From their naive and predatory perspective, it was just too bad if Wall Street Journal’s business model of making people pay money for content was unfriendly to consumers.

As another example, Google built a standard called Accelerated Mobile Pages (AMP), which allows the company to structure the mobile web in ways that privilege its data collection and curation. Sure AMP gave Google control of much of the mobile web, but this technical change helped serve pages faster and prevented annoying non-Google ads. Sure it’s bad for publishers, perhaps, but it was good for consumers. Or so went the thinking.

Google’s lobby shop even attempts to weaken copyright laws so it can have more to search or place on YouTube without having to deal with content companies or artists. From one perspective, it doesn’t make sense to have ‘ownership’ over a song. That’s just greedy, unlike those wonderful Googlers, who want Google users to be able to listen to what they want without being disrupted by evil artists who want something as prosaically tacky as money for doing work.

At any rate, I’m sure Google has a bunch of arguments for why restructuring Chrome makes sense. But it is convenient how what seems to make technical sense to Google always seem to align with Google’s business interests.

Now, I’m not 100% convinced that the Chrome change is that meaningful. Only a third of newspapers use these kinds of metered paywalls. It’s possible this isn’t a big deal, and Google wants to just look like it’s doing something on privacy. Fixing this ‘bug’ in Chrome might be a public relations move, and there may even be technical ways to get around what Google’s Chrome team is doing.

But don’t let that obscure the reality that Google has the power to decide how publishers manage paywalls. This company can organize whether prospective customers find publisher content, as the ACCC noted. And it can structure its browser standard to force publishers to choose hard paywalls or no paywalls, and stop them from giving our free samples. It does this using one division, Chrome, to potentially help drive revenue in another division, Search.

Google is an online ad monopoly, but in this case, Google’s paywall management has little to do with whether publishers get advertising revenue. It has to do with how the financial holding company called Google sets the terms of conditions for how publishers relate to their subscribers.

And that, my friends, isn’t just power. It’s governing power.

Thanks for reading, and if you enjoy this newsletter, please share it on social media, forward it to your friends, or just sign up here.

cheers,

Matt Stoller

P.S. This one’s from the mailbag. I wrote last issue of BIG how the U.S. health care system is hyper-concentrated and also unregulated. Here’s one response.

I have to agree our medical system is completely broken. 

I am one of several thousand people who has kidney disease.  I am on the UNOS wait list for a kidney transplant.  I live in the SF Bay area, where wait lists are among the worst in the country (and perhaps the world.)  I am a relatively young person for a transplant and someone who arguably contributes to the world.  I am employed as senior engineer at a start up, so I do OK financially.

Different parts of the country have different wait times for kidneys.  In some parts of the country, I would be at the top of the list or would already have received a kidney.  I can afford to travel for this transplant (just got back from taking my girlfriend to Paris!) and have the support of my employer to temporarily relocate anywhere in the country if it gets me healthy.

Further, medically, survival rates are higher for transplant recipients than they are for dialysis patients -- nothing beats a working kidney.

So, why haven't I temporarily relocated to one of these places where I can get the transplant?  Blue Cross of California -- the employer provided health insurance.  It will only cover the transplant at a "Center of Medical Excellence" which is an Orwellian term meaning a place where they have a contract.  All of them are places with long waits.  I offered in a couple places to pay cash, but hospitals won't risk it.  I looked overseas, but places where I'd trust the procedure require you to provide a donor, and if I had a donor, I'd get it done here.  (A number of friends have stepped forward, but been declined.  It is harder to be a donor than one would think.)

Anyway -- this is another example of how a business monopoly puts lives at risk.