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What we can learn from the Facebook-Australia news debacle

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Democracies around the world are all mired in one crisis or another, which is why measures of their health are trending in the wrong direction. Many look at the decline of the news industry as one contributing factor. No wonder, then, that figuring out how to pay for journalism is an urgent issue, and some governments are pushing ahead with ambitious plans. Big ideas for ways to funnel billions of dollars back into newsrooms are rare, but it’s time to take a gamble on more than one. 

Such an idea rose to the world’s attention this week: an Australian law that would compel search and social media platforms to pay news organizations for linking to their content. Google has decided to comply with the law and is doing deals with major companies such as News Corp, Nine, and Seven West Media. But Facebook took the other route—rather than pay for news to appear on its platform, the social media giant blocked users from accessing and sharing Australian news entirely. 

Reactions have been swift. Some commentators pounced on Facebook’s actions as proof of its monopolistic intent and lack of concern for civic discourse. Others blame the Australian government for bowing to the protectionist interests of media cronies such as Rupert Murdoch, and putting tech companies in an absurd position. 

What else can be done to push billions of dollars back into journalism?

Australia’s approach is now being considered by lawmakers and regulators in multiple other governments. Reuters reports that Canadian heritage minister Steven Guilbeault said Canada will model its own legislation on the Australian law. There are also some similarities in a bill proposed by US congressman David Cicilline of Rhode Island that would “provide a temporary safe harbor for the publishers of online content to collectively negotiate with dominant online platforms regarding the terms on which their content may be distributed.” 

In general, these measures seek to boost the bargaining power of news organizations and help them extract value from tech giants for the content that newsrooms produce. The Australian model’s novelty lies in its arbitration mechanism, a kind of membrane between the parties intended to help them arrive at a fair exchange of value.

The Australian law will likely pass, so this grand experiment in pushing capital back to the news media will soon be under way. We’ll get to see how it works out, and whether opponents’ concerns bear out—if larger news organizations are privileged over small ones, for instance, or whether the money actually ends up being spent on producing more journalism. 

But in view of the objections to this approach, what other options exist? If new subscription models are not enough to sustain the media industry, what else can be done to push billions of dollars back into journalism?

A raft of ideas can be found in the archives of the US Federal Trade Commission (FTC), which studied this problem extensively in the early 2000s. The commission’s 2010 paper “Potential Policy Recommendations to Support the Reinvention of Journalism” found “reasons for concern that experimentation may not produce a robust and sustainable business model for commercial journalism.” So the authors went on to look for other pots of gold. 

One idea put forward in the report was antitrust exemptions to “allow news organizations to agree jointly on a mechanism to require news aggregators and others to pay for the use of online content,” which sounds a lot like the Australian law. 

But others are more novel, such as:

  • A spectrum auction tax. This intervention would seek not to extract a pound of flesh from platform companies, but rather to mine the profits of mobile operators and broadcasters by taxing the licenses they purchase for the right to operate on specific frequencies, with the proceeds going to some kind of public media fund. This year, for instance, the 5G mobile spectrum (considered a public resource) fetched more than $80 billion at auction. Since the proceeds go to the US Treasury, Congress could decide that some portion of the revenue should be put toward journalism. 
  • Advertising taxes. Rather than forcing tech platforms to pay news companies directly, governments could simply assess a tax on digital advertising. In its 2010 report, the FTC surmised that a 2% sales tax on advertising would generate $5 to $6 billion annually that could go toward journalism. Maryland has just put forward legislation to introduce a tax on digital advertising, which it intends to use to fund another public good—education. (The big tech companies oppose it vehemently.)
  • Taxes on cell phone plans. Another way to pay for public media would be for consumers to pay a small tax on their monthly cell phone bills. In 2010 dollars, a tax of 3% on the monthly fees would have generated $6 billion annually, and there are roughly 120 million more US mobile subscriptions today

The FTC report is replete with suggestions for alternative tax structures, copyright advantages, and other creative mechanisms to sustain journalism, as well as ideas for how to provide more direct subsidies to the news industry. In addition to these ideas, I think there’s another possibility that Congress should consider: funding journalism by diverting fines against the tech platforms for privacy and antitrust violations. 

For instance, in 2019 the FTC announced a $5 billion fine against Facebook for multiple privacy violations, including the Cambridge Analytica scandal. Five billion dollars is double the endowment of the Knight Foundation, one of the most generous philanthropies investing in journalism today. And that same year, Google settled allegations that it violated children’s privacy by paying the FTC $170 million. 

It’s not difficult to imagine a mechanism that could divert fines from privacy and antitrust violations to a quasi-governmental foundation. Over time, that foundation’s endowment could more than sustain the losses to the news industry over the past two decades—the entire industry earned just under $25 billion last year. 

The current political climate in the US and elsewhere makes it likely that governments will increasingly seek to divert funds from tech platforms to the news media. A recent report from the US House titled “Investigation of Competition in Digital Markets,” led in part by Congressman Cicilline, concluded plainly that “the emergence of platform gatekeepers—and the market power wielded by these firms—has contributed to the decline of trustworthy sources of news.” 

But forcing tech companies to pay the news media directly—with all the hazards that may generate—is only one option. If the goal is to recapitalize  journalism at scale, it’s time to get creative. 

Justin Hendrix is CEO and editor of Tech Policy Press, a new nonprofit media venture concerned with technology and democracy. Previously, he was executive director of NYC Media Lab and spent over a decade at The Economist. He’s an associate research scientist and adjunct professor at the NYU Tandon School of Engineering. 

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Tim Hortons marks two years in China with Tencent investment

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Tim Hortons, the Canadian coffee and doughnut giant, has raised a new round of funding for its Chinese venture. The investment is led by Sequoia China with participation from Tencent, its digital partner in China, and Eastern Bell Capital. The round comes two years after Tim Hortons made its foray into China’s booming coffee industry.

Tim Hortons didn’t disclose the amount of its latest fundraise but noted in a social media post that the proceeds will be used for opening more stores, building its digital infrastructure, brand presence, and more.

Tencent, the Chinese social media and entertainment behemoth, first backed the 57-year-old Canadian coffee chain last May. At the time the tie-up was seen as Tencent’s move to counter archrival Alibaba’s alliance with Starbucks to deliver coffee and help the American coffee titan go digital in China.

Tim Horton’s collaboration with the WeChat parent is in a similar vein. It has so far accumulated three million members through its WeChat mini program, a type of lightweight app that runs within the instant messenger. To appeal to young Chinese consumers, Tim Hortons opened an esports-themed cafe with Tencent, China’s biggest gaming company.

Two years into operating in China, Tim Hortons says it has reached storefront-level profitability with a footprint of 150 locations across 10 major cities. It plans to add more than 200 locations in 2021 and reach 1,500 stores nationwide in the next few years.

The dramatic rise and fall of coffee delivery startup Luckin brought the prospects of China’s coffee market to the forefront. Despite the investment frenzy around Luckin and other coffee businesses, coffee drinking still has a relatively low penetration in China compared to countries like the United States and Germany. On the other hand, coffee consumption is growing at a much faster rate of 15% in China, well above the global average of 2%, and is projected to reach 1 trillion yuan ($150 million) in 2025, according to a 2020 report by Dongxing Securities.

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Bessemer Venture Partners closes on $3.3 billion across two funds

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Another major VC firm has closed two major rounds, underscoring the long-term confidence investors continue to have for backing privately-held companies in the tech sector.

Early-stage VC firm Bessemer Venture Partners announced Thursday the close of two new funds totaling $3.3 billion that it will be using both to back early-stage startups as well as growth rounds for more mature companies.

The Redwood City-based firm closed BVP XI with $2.475 billion and BVP Century II with $825 million in total commitments.

With BVP XI, it plans to focus on early-stage companies spanning across enterprise, consumer, healthcare, and frontier technologies. 

Its Century II fund is aimed at backing growth-stage companies that Bessemer believes “will define the next century,” and will include both follow-on rounds for existing portfolio companies or investments in new ones.

BVP XI marks Bessemer’s largest fund in its 110-year history. In October 2018, the firm brought in $1.85 billion for its tenth flagship VC fund. This latest fund is its fifth consecutive billion-dollar fund, based on PitchBook data. 

Despite being founded more than 100 years ago, Bessemer didn’t actually enter the venture business until 1965. It’s known for its investments in LinkedIn, Blue Apron and many others, with a current portfolio that includes PagerDuty, Shippo, Electric and DocuSign. Exits include Twitch and Shopify, among many others.

With more money than ever before available for backing startups, the challenge now for VCs is to see how and if they can find (and invest in) whatever will define the next generation of tech. 

“As venture capitalists, we pay too much attention to pattern recognition and matching when in reality, the biggest opportunities exist where those patterns break,” the firm wrote in a blog post today. “Our job is to make perceptive bets on the future, especially those that others will dismiss and ridicule. We are fundamental optimists and strong believers in the power of innovation; our life’s work is putting our reputation, time, and money to help entrepreneurs realize a different future. They’re the ones pioneering something entirely new and obscure – a technology, a business model, a category.

In addition to announcing the new funds, Bessemer also revealed today that it’s brought on five new partners including Jeff Blackburn, who joins after a 22-year career at Amazon, alongside the promotion of existing investors Mary D’Onofrio, Mike Droesch, Tess Hatch, and Andrew Hedin.

Most recently at Amazon, Blackburn served as senior vice president of worldwide business development where he oversaw dozens of Amazon’s minority investments and more than 100 acquisitions across all business lines – including retail, Kindle, Echo, Alexa, FireTV, advertising, music, streaming audio & video, and Amazon Web Services.  

“Having been part of Amazon for more than two decades, I’m excited to begin a new chapter helping customer-focused founders build breakthrough companies,” said Blackburn in a written statement.  “I’ve known the Bessemer team for many years and have long admired their strategic vision and success backing early-stage ventures.” 

With the latest changes, Bessemer now has 21 partners and over 45 investors, advisors, and platform “team members” located in Silicon Valley, San Francisco, Seattle, New York, Boston, London, Tel Aviv, Bangalore, and Beijing. 

“At Bessemer, there’s no corner office or consensus; every partner has the choice, independently, to pen a check. This kind of accountability and autonomy means a founder is teaming up with a partner and board director who thoroughly understands your business and can respond quickly and decisively,” the firm’s blog post read.

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Daily Crunch: Twitter announces ‘Super Follow’ subscriptions

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Twitter reveals its move into paid subscriptions, Australia passes its media bargaining law and Coinbase files its S-1. This is your Daily Crunch for February 25, 2021.

The big story: Twitter announces ‘Super Follow’ subscriptions

Twitter announced its first paid product at an investor event today, showing off screenshots of a feature that will allow users to subscribe to their favorite creators in exchange for things like exclusive content, subscriber-only newsletters and a supporter badge.

The company also announced a feature called Communities, which could compete with Facebook Groups and enable Super Follow networks to interact, plus a Safety Mode for auto-blocking and muting abusive accounts. On top of all that, Twitter said it plans to double revenue by 2023.

Not announced: launch dates for any of these features.

The tech giants

After Facebook’s news flex, Australia passes bargaining code for platforms and publishers — This requires platform giants like Facebook and Google to negotiate to remunerate local news publishers for their content.

New Facebook ad campaign extols the benefits of personalized ads — The sentiments are similar to a campaign that Facebook launched last year in opposition to Apple’s upcoming App Tracking Transparency feature.

Startups, funding and venture capital

Sergey Brin’s airship aims to use world’s biggest mobile hydrogen fuel cell — The Google co-founder’s secretive airship company LTA Research and Exploration is planning to power a huge disaster relief airship with an equally record-breaking hydrogen fuel cell.

Coinbase files to go public in a key listing for the cryptocurrency category — Coinbase’s financials show a company that grew rapidly from 2019 to 2020 while also crossing the threshold into unadjusted profitability.

Boosted by the pandemic, meeting transcription service Otter.ai raises $50M — With convenient timing, Otter.ai added Zoom integration back in April 2020.

Advice and analysis from Extra Crunch

DigitalOcean’s IPO filing shows a two-class cloud market — The company intends to list on the New York Stock Exchange under the ticker symbol “DOCN.”

Pilot CEO Waseem Daher tears down his company’s $60M Series C pitch deck — For founders aiming to entice investors, the pitch deck remains the best way to communicate their startup’s progress and potential.

Five takeaways from Coinbase’s S-1 — We dig into Coinbase’s user numbers, its asset mix, its growing subscription incomes, its competitive landscape and who owns what in the company.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

Paramount+ will cost $4.99 per month with ads — The new streaming service launches on March 4.

Register for TC Sessions: Justice for a conversation on diversity, equity and inclusion in the startup world — This is just one week away!

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

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