Facebook vs Australia feud escalates as government pulls ads

The Australian federal government will withdraw all advertising on Facebook Inc (NASDAQ: FB) in a move that could cost the platform tens of millions.

Last Thursday, the social media giant blocked viewing and sharing of all news for Australian users as retaliation to the government’s News Media Bargaining Code.

Over the weekend, health minister Greg Hunt declared his department would no longer spend ad dollars with the social media firm.

Then on Monday, finance minister Simon Birmingham told Radio National the ban would apply to all areas of the federal government.

“My expectation is that we will pull back from advertising while they undertake this type of terrible activity of pulling down sites inappropriately, seeking to exert power or influence over our democratic systems,” he said.

“We won’t tolerate that.”

According to the ABC, the federal government spent $42 million on digital ads in the 2019-20 financial year.

Using the Australian Competition and Consumer Commission’s guidance that about 25% of all digital ad spend goes to Facebook, this could mean the platform will end up tens of millions out of pocket.

How has it come to this?

Australia’s world-first News Media Bargaining Code is an attempt to induce digital platforms like Facebook and Alphabet Inc (NASDAQ: GOOG)’s Google to pay publishers for the content they provide.

Google had also threatened to pull its services from Australia during negotiations but has since relented and made revenue-sharing deals with News Corporation (ASX: NWS) and Nine Entertainment Co Holdings Ltd (ASX: NEC).

But Facebook last week hit the ‘nuclear’ button, in a sign of how worried it is about the precedent Australia might set for other larger markets.

The social media platform faced a public relations disaster soon afterwards, with its news-blocking code also censoring out emergency services pages.

“For the life of me I can’t understand why they go and block, you know, NSW Fire & Rescue or the Royal Children’s Hospital or access to 1800RESPECT which provides, you know, services and support to people in need,” treasurer Josh Frydenberg told 2GB on Friday.

“They were heavy-handed, they were unnecessary. I mean, the code hasn’t even come into law.”

The government and Facebook have confirmed they have resumed talks since the news blackout.

However, ministers such as Birmingham and Frydenberg have publicly stated they will not budge on the code as it currently stands.

“The government’s committed to it. It’s been work that we’ve had underway for 3+ years through the good work and analysis of the ACCC,” said Frydenberg. 

“It’s world-leading. The rest of the world is watching us. And our resolve is hardened.”

More reading

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• What ‘Facebook vs. The Rest’ means for you
• Facebook bans Aussies from sharing, viewing news
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool Australia has recommended Alphabet (A shares) and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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